1991 (4) TMI 139 - HC - Central Excise

Issues Involved:
1. Whether the petitioner can clear goods provisionally under Rule 9B of the Central Excise Rules, 1944, based on the wholesale price charged by M/s. Peico Limited.
2. Whether the interim order reflected in Annexure P-4 can be challenged in a writ petition under Article 226 of the Constitution of India without first obtaining a final order from the authorities.

Detailed Analysis:

Issue 1: Provisional Clearance of Goods under Rule 9B
The petitioner challenged the issuance of Annexure P-4 by the Assistant Collector, Central Excise Range, Mohali, which allowed provisional clearance of goods pending the Collector's decision in a similar review proceeding. The petitioner manufactures dry cell batteries for sale to M/s. Peico Limited, which are sold at a normal price in the usual course of business. The petitioner argued that M/s. Peico Limited is neither a related person nor a favored buyer, and the transactions are on a principal-to-principal basis. The petitioner contended that excise duty should be charged based on the price at which the batteries are sold to M/s. Peico Limited, as it represents the full value of the goods.

The petitioner relied on Section 4 of the Central Excises & Salt Act, 1944, which states that the valuation of excisable goods for charging excise duty should be based on the normal price at which the goods are sold to an unrelated buyer in the course of wholesale trade. The petitioner argued that the price charged to M/s. Peico Limited should be the basis for excise duty, as it includes only manufacturing costs and profits, excluding post-manufacturing costs and profits.

The Collector issued a show cause notice under Section 35A of the Act, proposing to levy excise duty based on the price at which M/s. Peico Limited sells the goods in wholesale. The petitioner challenged this view, arguing that the excise duty should be based on the price at which the goods are sold to M/s. Peico Limited, as the petitioner is the manufacturer and M/s. Peico Limited is merely a buyer.

The court held that the petitioner manufactures goods according to the specifications provided by M/s. Peico Limited and sells them at a wholesale price stipulated in the agreement. The excise duty should be based on the price at which the petitioner sells the goods to M/s. Peico Limited, not the price at which M/s. Peico Limited sells the goods to its wholesale dealers. The court relied on the precedent set in "Joint Secretary to Government of India and Others v. M/s. Food Specialities Limited," where it was held that excise duty should be based on the value at which the manufacturer sold the goods to the buyer, even if the buyer affixes its trademark on the goods.

Issue 2: Challenge to Interim Order in Writ Petition
The respondents argued that the petitioner should first obtain a final order from the authorities and then challenge it in the appellate and revisional forums. However, the court noted that the petition had been admitted, and the plea of alternative remedy could not be raised at the final argument stage after a decade. The court also observed that the impugned order reflected the authorities' view in clear terms, making it appropriate to address the legal questions in the writ jurisdiction.

The court concluded that it would be unjust and inequitable to require the petitioner to seek redress from the Collector of Central Excise or the appellate and revisional authorities, especially when the facts were admitted, and the legal questions could be determined within the writ jurisdiction. The court cited precedents from various cases, including "M/s. Mysore Acetate & Chemical Company Limited v. Assistant Collector, Central Excise, Mysore" and "Alembic Glass Industries Ltd. v. Union of India and Others," to support its decision to address the merits of the case without insisting on a final decision from the authorities.

Judgment:
The court set aside Annexure P-4 and directed the respondents to levy excise duty based on the price charged by the petitioner from M/s. Peico Limited, not the price charged by M/s. Peico Limited from its wholesale agents. The petitioner was allowed to release the bank guarantee after paying the excise duty based on the stipulated price. No order as to costs was made.

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