1990 (1) TMI 71 - SC - Central Excise

Whether the distributors were related persons and hence the prices charged by these distributors to their purchasers should be taken as the assessable value? Held that - In view of the fact that the distributors of the appellant were finally held not to be related persons regarding the appellant in cases where excise duty has been levied on the footing that the distributors of the appellant were related persons and hence, the price at which the goods were sold to them could not be regarded as the normal price and the excise duty collected in respect of the difference between the price at which the goods were sold by the appellant to its distributors and the price at which the said goods were sold by the distributors to independent buyers, calculated as aforestated, must be held to be excess levy. The order of the Tribunal is set aside and it is held that the assessee is entitled to refund where excise duty has been assessed and collected from the assessee at a higher rate on the footing that the wholesale distributors of the assessee were persons related to it, that is, in respect of the .other categories of sales, namely, retail sales, sales to dealers, sales to State Transport Undertakings and export clearances.

Summary

Issues:
- Interpretation of Section 4 of the Central Excises Act regarding valuation of excisable goods for excise duty.
- Determination of normal price for levy of excise duty on sales to independent distributors.
- Validity of protests filed by the appellant against excise duty assessment.
- Application of Rule 233B of the Central Excise Rules in cases of duty paid under protest.

Interpretation of Section 4 of the Central Excises Act:
The case involves the interpretation of Section 4 of the Central Excises Act, specifically focusing on the valuation of excisable goods for the purpose of charging excise duty. The appellant argued that only one normal price can be considered for sales to independent distributors, emphasizing the language of Section 4(1) which states that the normal price is the price at which goods are ordinarily sold in wholesale trade to a buyer who is not a related person. This interpretation formed the basis of the appellant's challenge to the excise duty assessment.

Determination of Normal Price for Sales to Independent Distributors:
The central issue revolved around the determination of the normal price for excise duty levy on sales made by the appellant to independent distributors. The appellant contended that the wholesale price at which goods were sold to distributors should be considered the normal price, especially since the distributors were found not to be related persons. This argument was supported by legal precedents, including the decision in Indian Oxygen Ltd. v. Collector of Central Excise, which emphasized the importance of determining value in line with Section 4 of the Act.

Validity of Protests Filed by the Appellant:
The validity of the protests filed by the appellant against the excise duty assessment was a crucial aspect of the case. The appellant maintained that the protests covered all cases where goods were sold to distributors at prices not considered normal due to the misconception that the distributors were related persons. The Court acknowledged the significance of protests in challenging the assessment and upheld the appellant's contention that the protests encompassed all relevant scenarios where excise duty was overcharged.

Application of Rule 233B of the Central Excise Rules:
The judgment also addressed the application of Rule 233B of the Central Excise Rules, which outlines the procedure for paying duty under protest. The respondent argued that the appellant's protests were limited to specific categories of sales, excluding others like retail sales and clearances to retail sellers. However, the Court found no indication of non-compliance with Rule 233B and emphasized that the rule does not mandate a specific form of protest, thereby supporting the appellant's claim for refund.

In conclusion, the Supreme Court allowed the appeal, setting aside the Tribunal's order and granting the appellant the right to a refund for excise duty overcharged on sales to independent distributors. The judgment clarified the interpretation of Section 4 of the Central Excises Act, affirmed the importance of protests in challenging duty assessments, and highlighted the relevance of legal precedents in determining the normal price for excise duty levy.