1983 (4) TMI 61 - HC - Central Excise

Summary

Issues Involved:
1. Determination of the value of diverted goods.
2. Relevant point of time for fixing the value of the goods under Section 4 of the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Determination of the Value of Diverted Goods:

The primary question was how to determine the value of the diverted goods for excise duty purposes. The options considered were:
- The price for which the goods were sold by the petitioners in the market.
- The value in terms of Section 4 of the Act.

The court held that the value should not be the selling price of the petitioners, as this would convert the levy into a sales tax, which is beyond the scope of the Central Excises and Salt Act and the legislative competency of Parliament. Instead, the value should be the wholesale cash price at the factory gate of the original manufacturers in terms of Section 4(a) or, if not ascertainable, the price in terms of Section 4(b) of the Act. The court noted that excise duty is fundamentally a tax on manufacture or production, not on the sale of goods.

2. Relevant Point of Time for Fixing the Value:

The court needed to determine the relevant point of time for fixing the value of the goods under Section 4 of the Act. The options were:
- The time when the goods were actually manufactured or produced.
- The time when the goods were sold by the manufacturers to the petitioners free of excise duty under the exemption obtained.
- The time when the goods were subsequently diverted by the petitioners and sold in the market.

The court ruled out the first option based on precedent, which established that the relevant time is not the date of manufacture but the date of removal from the factory or warehouse. The court then considered Rule 196A, which specifies that the rate of duty and tariff valuation should be in force on the date of actual removal of the goods from the applicant's premises. This implies that the relevant date for determining the value under Section 4 should also be the date of diversion and sale by the petitioners.

The court further corroborated this position by referring to Rule 196A(ii) and Rule 9A, which support the idea that the relevant date for value determination should be the date of diversion and sale.

Conclusion:

The court concluded that for assessing the excise duty payable on the surplus parts diverted and sold in the market, the value should be the wholesale cash price at the factory gate of the original manufacturers in terms of Section 4(a) or, if not ascertainable, the price in terms of Section 4(b) of the Act at the time the goods were diverted and sold by the petitioners.

Judgment:

The petition was allowed, and the appellate order dated 17th November 1978, the letter dated 12th August 1977, and the demand dated 7th July 1977 were set aside and quashed. The bank guarantee was revoked and canceled. The respondent was directed to resume the assessment proceedings from the stage of provisional assessment, determine the differential duty or refund due within four months, and the respondents were ordered to pay the costs of the petition to the petitioners.