1996 (12) TMI 75 - HC - Central Excise

Summary

Issues:
Challenge to show cause notice for Central Excise Duty and penal action under Central Excise Rules based on pricing of tractors sold by dealers. Jurisdiction of High Court to entertain writ petition against the show cause notice.

Analysis:
The petitioners, engaged in manufacturing tractors under the brand name 'Swaraj,' sought to quash a show cause notice demanding Central Excise Duty and penal action for alleged contravention of Central Excise Rules. The petitioners contended that the demand based on the prices at which dealers sold tractors to retail customers was ultra vires of the law and the Constitution. The respondents argued that the writ petition was premature as the petitioners had the opportunity to present their case before Excise authorities. The Court noted the absence of substantial records to determine the maintainability of the writ petition.

The petitioners claimed that the margin retained by dealers upon selling tractors to customers was not assessable under Central Excises and Salt Act, emphasizing the principal-to-principal nature of their dealings with dealers. They cited case law to support their argument that excise duty should be based on manufacturing cost and profit, excluding post-manufacturing profits. However, the Court distinguished a previous case where wholesale dealings were with specific entities, unlike the present scenario where dealers sold the entire production. The Court held that the authorities should ascertain whether the margin was company profit or dealer commission.

The Court rejected the petitioner's reliance on additional case laws and highlighted the petitioners' failure to deposit the demanded tax amount as agreed. This failure, along with the lack of evidence that the show cause notice was ultra vires, led the Court to dismiss the writ petition. The Court emphasized that the matter required factual inquiry by the authorities to determine tax liability. The Court concluded that the petitioners had not demonstrated clean intentions and could not seek extraordinary writ jurisdiction without sufficient basis.

In summary, the High Court dismissed the writ petition challenging the show cause notice for Central Excise Duty, emphasizing the need for factual inquiry by the authorities to determine tax liability based on the pricing of tractors sold by dealers. The Court found the petitioners' failure to deposit the tax amount and lack of evidence supporting the petition as grounds for dismissal, highlighting the requirement for a thorough investigation by the authorities.