1990 (10) TMI 77 - HC - Central Excise

Summary

Issues:
1. Assessment of excise duty on diesel engines sold to a subsidiary company.
2. Refund of excess excise duty charged due to incorrect assessment.
3. Determination of assessable value under Section 4 of the Central Excises and Salt Act, 1944.
4. Consideration of unjust enrichment in granting the refund.
5. Granting of interest on the refund amount.

Analysis:

Issue 1: Assessment of excise duty on diesel engines sold to a subsidiary company
The petitioner, a company manufacturing high horse-power engines, sold 10% of its engines to a wholly-owned subsidiary company. The Excise Authorities treated the subsidiary as a 'related person' and assessed the value of engines based on the price charged by the subsidiary to its purchasers, which was higher than the price charged by the petitioner to the subsidiary. The Court held that the price charged by the subsidiary should not be considered for determining the assessable value as it did not fall under the relevant provisions of Section 4 of the Act.

Issue 2: Refund of excess excise duty
The petitioner filed refund applications for duty wrongly recovered between 1975 and 1981. The Assistant Collector refused the refund, stating that no excess duty was paid. The Court found the Assistant Collector's decision erroneous and directed the refund of Rs. 44,32,673.10 to the petitioner, as the duty was incorrectly assessed based on the subsidiary's prices.

Issue 3: Determination of assessable value under Section 4
The Court analyzed Section 4 of the Act, emphasizing that the engines were not sold through a related person in wholesale trade. Proviso (iii) was deemed inapplicable as the engines were primarily sold directly to wholesale dealers. The Court concluded that the Assistant Collector erred in considering the subsidiary's prices for assessing the value of engines.

Issue 4: Consideration of unjust enrichment
The Department argued that refunding the amount would lead to unjust enrichment. However, the Court found no merit in this argument and referred to the requirements set out in a previous decision. As the Department's affidavit did not meet these requirements, the Court rejected the unjust enrichment defense and granted the refund to the petitioner.

Issue 5: Granting of interest on the refund amount
The Court directed the Department to pay the refund amount with interest at 9% per annum from the date of each refund application until the Assistant Collector's order. If the refund was not made by a specified date, the interest rate would increase to 15% per annum. The Court emphasized the need for timely refund payments and ordered interest payment in case of delays.

In conclusion, the Court allowed the petition, set aside the Assistant Collector's order, granted the refund, and directed the Department to pay interest on the refund amount in case of delays.