1990 (11) TMI 155 - HC - Central Excise

Summary

Issues: Assessment of assessable value for excise duty on cigarettes based on conversion charges only.

Analysis:
The petitioner company, engaged in cigarette manufacturing, sought to have the assessable value of cigarettes assessed based solely on conversion charges received from another company. The Assistant Collector of Central Excise, however, determined the value by considering the selling price declared by the other company for similar brands of cigarettes. The petitioner challenged this assessment, arguing that including post-manufacturing profit of the other company was impermissible. The petitioner relied on the Supreme Court judgment in Ujagar Prints case, emphasizing that assessable value should include only conversion charges, manufacturing profit, and expenses. The respondents, on the other hand, cited the Jammu & Kashmir High Court judgment, asserting that the taxable event under excise law is manufacture, necessitating assessment based on the actual value of the manufactured goods.

The High Court emphasized that excise duty is triggered by the manufacture of taxable goods, obligating the manufacturer to pay duty based on the actual assessable value of the goods. The Court agreed with the Jammu & Kashmir High Court's view that the manufacturer must be assessed on the actual value of the manufactured goods, not just on job or conversion charges. While acknowledging the petitioner's argument regarding the method of calculation for assessing the value, the Court reiterated the importance of considering the actual assessable value of the manufactured goods for excise duty purposes.

Referring to the Supreme Court's decision in Ujagar Prints case, the High Court highlighted the proper method of valuation for excise duty assessment. The Court emphasized that the value for assessment should include the cost of raw materials, job work done, manufacturing profit, and expenses, excluding post-manufacturing profits. The Assistant Collector's decision to determine the taxable value based on the selling price of the other company was deemed incorrect as it included the trader's profit. The Court directed the assessing authority to determine the selling price of the cigarettes manufactured by the petitioner to establish the actual assessable value for excise duty purposes. Consequently, the Court allowed the writ petition, set aside the Assistant Collector's order, and remitted the case for fresh disposal in line with the observations and legal principles discussed.