1991 (11) TMI 62 - HC - Central Excise

Summary

Issues:
1. Whether the value of the wrapper paper should be included in determining the value of the core paper for the levy of excise duty.
2. Maintainability of the writ petition challenging the show cause notice without responding to it.
3. Interpretation of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 regarding the inclusion of packing material cost in determining the value of excisable goods.

Analysis:
1. The case involved a dispute regarding the inclusion of the value of the wrapper paper in determining the excise duty on the core paper manufactured by the petitioner. The Excise Department issued a show cause notice claiming a short demand of excise duty due to the alleged omission of the wrapper value. The single judge held that since the wrapper paper had already suffered excise duty, it should not be included again for determining the value of the core paper. The Additional Central Government Standing Counsel argued against this decision, stating that as per Section 4(4)(d)(i) of the Act, the value of packing material, including the wrapper, should be added to the contents for excise duty valuation. The court found that the case did not involve double taxation as the inclusion of the wrapper value was mandated by the Act, and the petitioner was given an opportunity to respond to the show cause notice to establish the purpose of the wrapper's use.

2. The issue of the maintainability of the writ petition without responding to the show cause notice was raised by the Additional Central Government Standing Counsel. It was contended that the petitioner should have first addressed the notice and pursued available remedies under the Act before approaching the court. The court acknowledged the importance of following due process in fiscal matters but allowed the petitioner to raise objections to the show cause notice and present evidence before the authorities for a proper determination.

3. The interpretation of Section 4(4)(d)(i) of the Act was crucial in deciding whether the value of the wrapper paper should be included in determining the excise duty on the core paper. The court referred to a previous Supreme Court judgment to emphasize that if the packing material, including the wrapper, is necessary to make the excisable article marketable, its value must be added for valuation. The court clarified that the inclusion of the wrapper value was not a case of double taxation as mandated by the Act. The court set aside the single judge's order and allowed the petitioner to submit objections to the show cause notice, granting an opportunity for a fair determination by the authorities while emphasizing the importance of following legal procedures in such matters.