1993 (3) TMI 118 - HC - Central Excise

Issues Involved:

1. Applicability of Section 4 of the Central Excises and Salt Act, 1944 for determining the value of footwear for excise duty exemption.
2. Interpretation of excise duty exemptions under various notifications.
3. Deductions permissible from the wholesale price for determining the value of excisable goods.
4. The impact of amendments to Section 4 of the Act on the determination of excisable value.
5. The approach of the authorities in interpreting the statute and issuing notices.

Issue-wise Detailed Analysis:

1. Applicability of Section 4 of the Central Excises and Salt Act, 1944 for determining the value of footwear for excise duty exemption:

The petitioner, a manufacturer of footwear, sought a mandamus to command the respondents to withdraw, cancel, or rescind a notice dated November 7, 1988, and related proceedings, and to direct the respondents to deduct the amount of duty at the scheduled rate under the provisions of the Central Excises and Salt Act, 1944, while applying Notification No. 49/86-C.E., as amended by Notification No. 89/87-C.E. The petitioner argued that the value of the footwear should be determined by deducting trade discounts, excise duty, packing charges, and transport expenses from the wholesale price, as per the Supreme Court's decision in Bata Shoe Co. (P) Ltd. v. Collector of Central Excise, Patna, and Others, A.I.R. 1985 Supreme Court 1070.

2. Interpretation of excise duty exemptions under various notifications:

The petitioner referenced multiple notifications that provided exemptions based on the value of the footwear. For instance, Notification No. 89/87-C.E., dated March 1, 1987, fixed the value of footwear at Rs. 60/- for exemption purposes. The petitioner contended that, following the Supreme Court's interpretation, the value should be computed by deducting excise duty and trade discounts to determine eligibility for exemptions.

3. Deductions permissible from the wholesale price for determining the value of excisable goods:

The Supreme Court's decision in Bata Shoe Co. (P) Ltd. held that for determining the value of footwear for excise duty purposes, deductions for trade discounts and excise duty were mandatory. The petitioner argued that the deductions should also include packing charges and transport expenses. The department, however, contended that only trade discounts and excise duty should be excluded after the amendment of Section 4 of the Act in 1973.

4. The impact of amendments to Section 4 of the Act on the determination of excisable value:

The amendments to Section 4 of the Act, effective from 1973, were considered in the Supreme Court's decision in Union of India and Others v. Bombay Tyre International Ltd., A.I.R. 1984 Supreme Court 420. The amended Section 4 provided a detailed framework for determining the excisable value, including the exclusion of transportation costs and trade discounts. The judgment outlined that the value of excisable goods should be determined based on the price at which they are sold in wholesale trade, excluding related expenses and taxes.

5. The approach of the authorities in interpreting the statute and issuing notices:

The department's approach was criticized for being inconsistent with the Supreme Court's interpretation. The authorities issued notices based on the price charged to consumers, allowing deductions to determine the value for excise duty purposes. This approach was deemed incorrect as it did not align with the Supreme Court's rulings, which emphasized determining the value at the factory gate before considering consumer prices.

Conclusion:

The High Court allowed the writ petition, quashing the impugned order (Annexure P. 7) and the notice (Annexure P. 8). The court upheld the Supreme Court's interpretation that the value of goods for excise duty purposes should be determined by deducting trade discounts, excise duty, and other relevant expenses from the wholesale price at the factory gate. The department's approach of considering the consumer price and then making deductions was found to be legally incorrect.

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