1986 (1) TMI 115 - HC - Central Excise

Summary

Issues Involved:
1. Classification and computation of excise duty on Kraft paper.
2. Validity of the show cause notice and subsequent order for recovery of excise duty.
3. Inclusion of excise duty in the assessable value.
4. Limitation for issuing show cause notice.

Issue-wise Detailed Analysis:

1. Classification and Computation of Excise Duty on Kraft Paper:
The petitioner, a Limited Company, manufactures Kraft paper classified under Item 17(2) of the Central Excise Tariff. The company availed a concessional rate of excise duty under Notification No. 128/1977, dated 18-6-1977. However, during preventive checks, it was found that the petitioner was recovering excise duty at the tariff rate from customers while paying at the concessional rate. The court upheld the authorities' decision that the excise duty must be computed based on the assessable value declared by the petitioner, excluding the amount of duty of excise as reduced by the exemption notification.

2. Validity of the Show Cause Notice and Subsequent Order for Recovery of Excise Duty:
The Assistant Collector of Central Excise issued a show cause notice alleging contraventions of various provisions of the Central Excise Rules, 1944, and the Central Excises and Salt Act, 1944, demanding Rs. 1,78,862.91. The petitioner contested this, arguing that the excise duty should be computed on the assessable value declared in its price list, which does not include the duty element. The court found that the authorities were justified in their approach, as the company was collecting excise duty at the tariff rate while paying at the concessional rate, thus the excess amount collected was considered part of the value of goods.

3. Inclusion of Excise Duty in the Assessable Value:
The petitioner argued that excise duty, being separately charged, should not be included in the assessable value. The court referred to Section 4(4)(d)(ii) of the Act, which excludes the amount of excise duty from the value of goods for duty computation. However, the explanation to Section 4(4)(d)(ii) clarified that the exclusion is only of the actual duty paid or payable, considering any exemption notification. The court cited the decision in B.K. Paper Mills Pvt. Ltd. v. Union of India, which held that the effective duty of excise, reduced by the exemption notification, is to be excluded from the normal price. Thus, the authorities' stance that the excess amount collected as excise duty was part of the value was upheld.

4. Limitation for Issuing Show Cause Notice:
In Writ Petition No. 2250 of 1983, the petitioner raised a limitation issue based on show cause notices (Annexure II) at Serial Nos. 12 and 13, arguing they were barred by limitation under Rule 10 of the Central Excise Rules. The court found that the authorities had rightly dealt with this aspect, and there was no reason to differ from their view, thus rejecting the limitation argument.

Conclusion:
All petitions were dismissed with costs, and the rule was discharged. The court upheld the authorities' decision to recover the excess amount of Rs. 1,78,862.91 from the petitioner, affirming that the excess excise duty collected from customers formed part of the assessable value. The court also rejected the petitioner's limitation argument, supporting the authorities' stance on the timely issuance of show cause notices.