1985 (10) TMI 99 - HC - Central Excise

Summary

Issues:
1. Interpretation of contract clauses regarding payment and supply of materials.
2. Dispute over excise duty on malleable cast iron inserts supplied by railways.
3. Validity of show cause notice for additional excise duty.
4. Applicability of excise duty on inserts supplied with concrete sleepers.
5. Comparison of legal interpretations regarding excise duty on inserts.

Analysis:

Issue 1: Interpretation of contract clauses
The petitioner, a manufacturing company, entered into a contract with railways for the supply of concrete sleepers. The contract specified that the petitioner would be paid a certain amount per piece, inclusive of labor and materials, except for malleable cast iron inserts. The contract also mentioned that any taxes and duties on the sleepers would be the responsibility of the Railway Board.

Issue 2: Dispute over excise duty on inserts
The excise department demanded excise duty from the petitioner for the malleable inserts supplied by railways. The petitioner argued that they were not liable for the duty as the value of the inserts was not disclosed by the railways despite repeated requests. The department issued a show cause notice for additional excise duty, which the petitioner challenged in a writ petition.

Issue 3: Validity of show cause notice
The petitioner contended that the show cause notice for additional excise duty was time-barred, but the court disagreed, citing the provision allowing a longer period for cases involving willful suppression of facts to evade duty payment. The court found the department's actions justified due to the petitioner's failure to disclose the value of the inserts.

Issue 4: Applicability of excise duty on inserts
The court ruled that excise duty was chargeable on the concrete sleepers containing the malleable inserts, as these inserts were integral to the product. The court rejected the argument that the petitioner did not own the inserts, emphasizing that the value of the final product for excise duty calculation should include the cost of all components, including the inserts.

Issue 5: Legal interpretations on excise duty
The court disagreed with a previous decision of the Andhra Pradesh High Court regarding excise duty on inserts, asserting that the cost of inserts should be considered in determining the value of the excisable product. The court highlighted that the petitioner's statutory right to appeal the valuation of the inserts remained, suggesting an appeal as the appropriate remedy.

In conclusion, the court dismissed the writ petition, stating that it was not suitable for interference under Article 226 of the Constitution. The parties were directed to bear their own costs, and the petitioner was advised to pursue an appeal if disputing the valuation of the inserts for excise duty purposes.