1990 (12) TMI 100 - HC - Central Excise

Summary

Issues Involved:

1. Deduction of effective rate of duty from the normal price as per the second part of the explanation to Section 4(4)(d)(ii) of the Act.
2. Inclusion of refunded amount in the normal price when the higher rate of duty is initially assessed and collected but not passed on to the buyer.
3. Treatment of excess duty refunded on exempted goods as part of the normal price when the benefit is not passed on to the buyers.

Summary:

Issue 1: Effective Rate of Duty Deduction
The court addressed whether only the effective rate of duty can be deducted from the normal price and not the element of duty refunded by the department, the benefit of which has not been passed on to the buyer. The court concluded that as per the second part of the explanation to Section 4(4)(d)(ii) of the Act, the effective rate of duty must be deducted not only from the normal price but also from any amount charged and collected as excise duty, but subsequently refunded, if the benefit of refund has not been passed on to the buyer.

Issue 2: Refunded Amount Inclusion in Normal Price
The court examined whether the refunded amount can be included in the normal price in cases where the higher rate of duty is initially assessed and collected from the customers and subsequently on a proper computation of value as per Section 4, the value of goods gets reduced resulting in refund of duty, the benefit of such refund is not passed on to the buyer. The court held that as per clause (ii) of the second part of the explanation to Section 4(4)(d)(ii) of the Act, excise duty on the amount becoming refundable is leviable if the benefit of such refund is not passed on to the buyer.

Issue 3: Excess Duty on Exempted Goods
The court considered whether the excess duty refunded on exempted goods becomes part of the normal price when the benefit is not passed on to the buyers. The court ruled that where full duty is levied on exempted goods and subsequently, as a result of applying the exemption notification, the excess duty is refunded, such excess amount the benefit of which is not passed on to the buyers becomes part of the normal price, in view of the explanation to Section 4(4)(d)(ii) of the Act.

Conclusion:
The Full Bench answered all three questions in favor of the appellants, establishing that the amounts not passed on to the buyers must be included in the value of goods for the purpose of excise duty calculation.