1989 (9) TMI 118 - HC - Central Excise

Summary

Issues Involved:
1. Inclusion of cost of packing materials supplied by buyers in the value of goods for excise duty.
2. Entitlement to refund of excise duty paid on such value.
3. Sustainability of the refund order rejecting part of the claim.
4. Jurisdiction to issue show cause notice on unjust enrichment.
5. Justifiability of the Assistant Collector's order dated 22-2-1989.

Summary:

Issue (i): Inclusion of cost of packing materials supplied by buyers in the value of goods for excise duty.
The court held that the cost of packing materials supplied by the buyer should not be included in the value of excisable goods for the purpose of excise duty. This decision was based on the Supreme Court ruling in Union of India & Ors. v. Bombay Tyre International Ltd. & Ors. (AIR 1984 SC 420) and reiterated in Alembic Glass Industries v. Union of India (1986) (24) E.L.T. 23 and Mangalore Chemicals v. Asst. Collector (1986) - (23) E.L.T. 48. The court emphasized that the cost of packing materials, whether primary or secondary, supplied by the buyer should not be included in the assessable value of the goods.

Issue (ii): Entitlement to refund of excise duty paid on such value.
The petitioner was entitled to a refund of the excise duty paid on the cost of packing materials supplied by the buyers for the period from 2-12-1975 to 14-5-1985. The court found that the entire claim of Rs. 42,78,947.07 represented the duty paid on such packing materials, and the rejection of Rs. 14,80,663.98 out of this amount was unjustified.

Issue (iii): Sustainability of the refund order rejecting part of the claim.
The court found that the rejection of part of the refund claim by the Assistant Collector on the ground that the petitioner had not passed on the benefit to the customers was contrary to the law. The court cited the decision in Mangalore Chemicals v. Assistant Collector (1986) (23) E.L.T. 48 and the Supreme Court decision in Bombay Tyre International Case (1984 S.C. 420), which clarified that such a ground was not permissible for rejecting the refund.

Issue (iv): Jurisdiction to issue show cause notice on unjust enrichment.
The court held that the Assistant Collector did not have the jurisdiction to issue a show cause notice on the ground of unjust enrichment. The doctrine of unjust enrichment is a principle in equity that can be invoked only by courts and not by authorities under the Act. The Assistant Collector's action was found to be beyond the scope of the statutory provisions.

Issue (v): Justifiability of the Assistant Collector's order dated 22-2-1989.
The court quashed the impugned order dated 22-2-1989, finding it contrary to the law and the previous judgment of the court. The Assistant Collector's order was deemed unjustifiable as it ignored the settled legal position and the directions given by the court in W.P. No. 5995/75. The court ordered the refund of Rs. 14,80,663.98 with interest at 12% from 23-1-1985 to the date of refund and awarded costs of Rs. 5,000 to the petitioner.