1989 (7) TMI 123 - HC - Central Excise

Excess Production Incentive Scheme - Motor vehicles - Exemption notification - Interpretation of

Issues Involved:
1. Levy of excise duty on motor vehicles under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944.
2. Interpretation and application of Exemption Notification No. 198/76-CE, dated 16th June, 1976.
3. Determination of assessable value when the benefit of duty exemption is not passed to the consumer.
4. Validity of the Trade Notice dated 8th March, 1977.
5. Retrospective effect of the Explanation added to Section 4(4)(d)(ii) by the Finance Act, 1982.

Detailed Analysis:

1. Levy of Excise Duty on Motor Vehicles:
The petitioners, manufacturers of commercial motor vehicles, challenged the levy of excise duty on motor vehicles under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944. The duty was chargeable ad valorem, i.e., based on the value of the goods.

2. Interpretation and Application of Exemption Notification No. 198/76-CE:
The petitioners claimed exemption under the Higher Production Incentive Scheme as per Notification No. 198/76-CE, which provided a 25% duty exemption for clearances exceeding the 'Base Clearance'. The petitioners argued that they were entitled to this exemption for the period from 1st April 1978 to 24th February 1979.

3. Determination of Assessable Value:
The core issue was whether the benefit of the duty exemption should be included in the assessable value of the goods. The petitioners contended that the exemption amount should not be included in the normal price of the goods since it was not a consideration for the sale. They argued that their price was always exclusive of excise duty and that non-passing of the benefit to the consumer was irrelevant for determining the assessable value.

4. Validity of the Trade Notice Dated 8th March, 1977:
The petitioners challenged the Trade Notice dated 8th March, 1977, which stipulated that if the benefit of the duty exemption was not passed on to the consumer, the assessable value should be adjusted accordingly. The petitioners started clearing motor vehicles on the basis of the increased assessable value under protest.

5. Retrospective Effect of the Explanation Added to Section 4(4)(d)(ii):
The respondents argued that the Explanation added to Section 4(4)(d)(ii) by the Finance Act, 1982, with retrospective effect, clarified that the assessable value should include the effective duty payable after taking the exemption into account. This amendment nullified the earlier judicial decisions that supported the petitioners' view.

Court's Findings:

On the Levy of Excise Duty:
The court found that the petitioners had been following the self-removal procedure and had filed price lists in accordance with Rule 173B. The duty was chargeable based on the value of the goods as per Section 4 of the Act.

On the Exemption Notification:
The court noted that the exemption was available only on clearances exceeding the Base Clearance. The petitioners had reached the Base Clearance on 24th February 1979 and started availing the exemption from 25th February 1979.

On Assessable Value:
The court rejected the petitioners' contention that the exemption amount should not be included in the normal price. It held that the Explanation added to Section 4(4)(d)(ii) clarified that the assessable value should be determined based on the effective duty payable after taking the exemption into account. The court cited several decisions, including those in B.K. Paper Mills Pvt. Ltd. v. Union of India and Ors., and Central India Spinning, Weaving and Manufacturing Co. Ltd. Bombay v. Union of India and Ors., which supported this view.

On the Trade Notice:
The court upheld the validity of the Trade Notice dated 8th March, 1977, stating that it was consistent with the statutory provisions and the Explanation added to Section 4(4)(d)(ii).

On the Retrospective Amendment:
The court held that the retrospective amendment to Section 4(4)(d)(ii) by the Finance Act, 1982, effectively rendered the earlier judicial decisions inapplicable. The amendment clarified that the assessable value should include the effective duty payable after taking the exemption into account.

Conclusion:
The court dismissed the petition, holding that the petitioners were not entitled to the benefit of the duty rebate since they did not pass on the benefit to their consumers. The assessable value of the goods should be determined based on the effective duty payable after considering the exemption. The rule was discharged with no order as to costs.

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