1984 (3) TMI 73 - HC - Central Excise

Summary

Issues Involved:
1. Legality and validity of the notice dated 14th April 1975 issued by the Central Board of Excise and Customs.
2. Jurisdiction of the Board to issue the notice under Section 35A of the Central Excises and Salt Act, 1944.
3. Entitlement of the petitioner to claim a refund of excess excise duty.
4. Whether the Assistant Collector of Central Excise had jurisdiction to grant the refund.
5. Applicability of the principles laid down by the Supreme Court in A.K. Roy v. Voltas Limited.
6. Whether the transactions between the petitioner and its stockists/distributors were at arm's length.

Detailed Analysis:

1. Legality and Validity of the Notice:
The petitioner challenged the notice dated 14th April 1975 issued by the Central Board of Excise and Customs, arguing that it was "ex facie bad in law and wholly without jurisdiction." The petitioner contended that the notice did not warrant a review of the order passed by the Assistant Collector allowing the refund. The court held that the impugned notice was based on an erroneous interpretation of statutory provisions and a clear disregard of the principles laid down by the Supreme Court in A.K. Roy v. Voltas Limited. Therefore, the notice was deemed illegal and without jurisdiction.

2. Jurisdiction of the Board to Issue the Notice:
The court examined whether the Central Board of Excise and Customs had the jurisdiction to issue the notice under Section 35A of the Central Excises and Salt Act, 1944. It was concluded that the Board acted without jurisdiction in issuing the impugned notice seeking to revise the order of refund. The court emphasized that the jurisdiction of the Board to issue the notice depended on whether the grounds were sustainable or not. Since the grounds were found to be untenable, the notice was deemed without jurisdiction.

3. Entitlement to Claim Refund:
The petitioner filed refund applications claiming an aggregate sum of Rs. 17,75,564.40 for the period from January 20, 1972, to January 19, 1973. The Assistant Collector of Central Excise allowed the refund based on the principles laid down by the Supreme Court in A.K. Roy v. Voltas Limited. The court held that the assessable value of the goods manufactured by the petitioner could only be determined on the basis of the wholesale prices at which goods were sold by the petitioner to its stockists/distributors. Therefore, the petitioner was entitled to claim the refund of the excess excise duty realized from it.

4. Jurisdiction of the Assistant Collector to Grant Refund:
The court rejected the contention that the successor Assistant Collector had no jurisdiction to grant the refund. It was held that under Rule 11 of the Central Excise Rules, 1944, the proper officer was empowered to refund the duty paid through inadvertence, error, or misconstruction. The Assistant Collector having jurisdiction over the factory of the petitioner was fully empowered to pass the order of refund. Therefore, the Assistant Collector had the jurisdiction to grant the refund.

5. Applicability of Supreme Court Principles:
The court reiterated the principles laid down by the Supreme Court in A.K. Roy v. Voltas Limited, which held that the assessable value should be determined on the basis of the price at which the excisable article is sold by the assessee to a buyer at arm's length in the course of wholesale trade at the time and place of removal. The court found that the principles laid down by the Supreme Court were applicable to the facts of this case, and the Assistant Collector had correctly determined the assessable value and allowed the refund.

6. Transactions at Arm's Length:
The court examined whether the transactions between the petitioner and its stockists/distributors were at arm's length. It was noted that the price lists filed by the petitioner contained details of the prices charged by it to its stockists/distributors and the prices charged by the stockists/distributors to their dealers. The court found that the transactions were at arm's length and in the usual course of business. Therefore, there was no scope for any further inquiry by the Assistant Collector before granting the refund.

Conclusion:
The court concluded that none of the grounds of the impugned notice could be sustained, and it must be held that the impugned notice issued by the Board was without jurisdiction. The application succeeded, and the notice dated 14th April 1975 issued by the Board was quashed. The Rule was made absolute, and appropriate writ was issued. There was no order as to costs.