1991 (7) TMI 109 - SC - Central Excise

Whether assessable value of the article is different from the consideration received by the appellants to claim benefit under Notification 120/75 as held by Tribunal? Held that - the Tribunal fell into an error in its understanding of the notification. The Notification posits and predicates the possibility that the invoice-value could be lesser than the assessable-value and, taking into account the need to mitigate the hardship on the manufacturer of being called upon to pay duty on the value in excess of the invoice value, seeks to exempt the manufacturer from payment of duty in excess of the duty calculated on the basis of the invoice price . Allow these appeals; set aside the order of the authorities as well as the affirming order of the authorities as well as the affirming order of the Tribunal under appeal and hold that the appellant was entitled under the said Notification No. 120/75-C.E. to exemption from that part of the duty as was in excess of the invoice-price which, we hold, was not required to include the value of the wheel-sets .

Summary

Issues:
1. Determination of assessable value for excise duty purposes.
2. Interpretation of Exemption Notification No. 120/75-C.E.

Analysis:

1. Determination of assessable value:
The case involved a dispute regarding the assessable value of goods for excise duty purposes. The appellant, a company fabricating wagon-bodies for the Railways, invoiced only the price of the wagon-bodies, excluding the value of the "wheel-sets" supplied by the Railways. The Revenue demanded recovery of unpaid duty on the value of the "wheel-sets" as well. The Tribunal rejected the appellant's contention that assessable value should only include the value of the wagon-bodies. The Supreme Court upheld the Tribunal's decision, stating that for excise duty levy, the value of the article is the full intrinsic value inclusive of materials supplied by the customer, irrespective of the manufacturer's expenditure on such components. The Court emphasized that ownership of goods is irrelevant to excise duty imposition, which is solely based on manufacturing activity.

2. Interpretation of Exemption Notification No. 120/75-C.E.:
The second contention revolved around Exemption Notification No. 120/75-C.E., which exempted goods from excise duty in excess of the duty calculated based on the invoice price. The appellant claimed exemption under this notification, arguing that the value of the "wheel-sets" should not be included in the invoice price. However, the Tribunal rejected this claim, stating that the invoice value should reflect the full commercial price of the article to avail the exemption. The appellant argued that the purpose of the exemption was to relieve the burden of duty on the value of the "wheel-sets" supplied free of charge by the Railways. The Court held that the Tribunal misinterpreted the notification, emphasizing that the invoice price need not include the value of the "wheel-sets" and that the assessable value considers the full commercial value. The Court allowed the appeals, holding that the appellant was entitled to exemption under the notification without including the value of the "wheel-sets" in the invoice price.