1997 (11) TMI 103 - SC - Central Excise

Whether the excess amount of duty, that is to say, duty in excess of 50% effective rate of duty, recovered in the shape of duty from the buyers, should not be considered as a part of the value of the goods for the purposes of excise? Held that - In the light of the explanation, what the appellants are entitled to exclude from the value of excisable goods is the effective duty of excise payable by them on these goods after taking into account the exemption Notification. They can, therefore, exclude only 50% of the duty which they have paid, being the effective duty of excise, from the value of the excisable goods. The balance amount if they have charged it from the customers, will form a part of the value of the goods for the purpose of calculation of excise duty. This explanation has been inserted by Finance Act, 1982 (14 of 1982) with retrospective effect from 1-10-1975 and it applied to the present case.

Issues:
1. Interpretation of excise duty exemption notification.
2. Validity of demand notice and time limit for recovery.
3. Definition of "value" under Section 4(4)(d) of the Central Excises & Salt Act, 1944.
4. Impact of retrospective application of the explanation on excise duty calculation.
5. Consistency of interpretation with previous court decisions.

Interpretation of excise duty exemption notification:
The case involved M/s. Pravara Pulp & Paper Mills seeking partial exemption from excise duty under a specific notification. They claimed that since the notification did not mandate passing on the benefit to customers, they were entitled to retain it. However, authorities found that the mills had recovered the full excise duty amount from customers, leading to a demand notice for the excess duty collected. The courts upheld that the mills could only exclude 50% of the duty paid, as per the effective duty of excise, from the value of goods for excise duty calculation.

Validity of demand notice and time limit for recovery:
A show cause notice was issued to the mills for recovering excess excise duty, which they contested as time-barred. The Assistant Collector confirmed the demand, but the Collector of Central Excise ruled that recovery for the period beyond six months from the notice date was not valid. This decision was upheld by the Central Excise & Gold (Control) Appellate Tribunal, limiting the recoverable amount within the statutory time limit.

Definition of "value" under Section 4(4)(d) of the Act:
The judgment referred to Section 4(4)(d) of the Central Excises & Salt Act, 1944, which defines the "value" of excisable goods. It specifies the components to be considered in determining the value, including the effective duty of excise payable and trade discounts. The courts applied this provision to calculate the excise duty value in the case of M/s. Pravara Pulp & Paper Mills.

Impact of retrospective application of the explanation on excise duty calculation:
The Finance Act, 1992, inserted an explanation with retrospective effect from 1-10-1975, affecting the exclusion of duty from the value of goods for excise duty calculation. This retrospective application influenced the calculation method in the present case, allowing only 50% of the duty paid to be excluded from the goods' value.

Consistency of interpretation with previous court decisions:
The judgment referenced decisions from the High Courts of Bombay and Karnataka, which supported the interpretation of excluding only 50% of the paid duty from the value of goods for excise duty calculation. The Supreme Court concurred with these decisions, upholding the order of the Tribunal and dismissing the appeal filed by M/s. Pravara Pulp & Paper Mills.

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