1987 (10) TMI 64 - HC - Central Excise

Summary

Issues:
1. Interpretation of Rule 96V and Rule 96W of the Central Excise Rules, 1944.
2. Assessable value of cotton fabrics and inclusion of excise duty on cotton yarn.
3. Liability of manufacturers to pay excise duty on cotton fabrics.
4. Application of Section 4 of the Central Excise Act in determining assessable value.
5. Entitlement to relief in case of short levy of excise duty.

Detailed Analysis:
1. The judgment deals with an appeal against the dismissal of a petition under Article 226 of the Constitution of India concerning show cause notices issued by the Superintendent, Central Excise, and subsequent orders by the Assistant Collector and the Collector. The petitioners, a textile mill, applied under Rule 96V of the Central Excise Rules, 1944, for a special procedure regarding excise duty on cotton yarn and cotton fabrics. The Central Government issued notifications fixing the rate of duty payable on yarn under Rule 96W.

2. The petitioners received show cause notices for short levy of excise duty on cotton fabrics due to non-inclusion of the compounded yarn duty element in the assessable value. The Assistant Collector confirmed the demands, which were upheld by the Collector. The petitioners contended that they were entitled to the advantage of the special procedure under Rule 96V and Rule 96W, and thus, excise duty on yarn should be excluded from the assessable value of fabrics. However, the Court held that the assessable value of cotton fabrics should include the value of yarn and the excise duty paid thereon.

3. The Court rejected the argument that excise duty on cotton yarn should be excluded from the assessable value of fabrics due to the special procedure followed by the petitioners. It clarified that the advantage of payment of composite duty does not eliminate the liability to pay duty on the yarn used in fabric manufacture. The Court emphasized that while determining the assessable value of cotton fabrics, both the value of yarn and the excise duty paid on it must be considered.

4. In analyzing the provisions of the Central Excise Act, the Court noted that the definition of "value" in relation to excisable goods does not include the amount of excise duty. However, it clarified that while determining the assessable value of cotton fabrics, the value of yarn and the excise duty paid thereon should be taken into account. The Court upheld the orders of the excise authorities and dismissed the petitioners' appeal, ruling that they were not entitled to any relief.

5. The Court concluded that the appeal failed and was dismissed with costs. It allowed the recovery of duty along with interest, rejecting the request for installment payments due to the mill being declared a sick unit. The Court held that the declaration as a sick unit does not suspend the duty recoveries owed to the Government, affirming the respondents' entitlement to recover the duty along with interest.