1976 (2) TMI 40 - HC - Central Excise

Summary

Issues Involved:

1. Classification and assessment of glass bottles under the Central Excises and Salt Act, 1944.
2. Provisional and final assessment of excise duty.
3. Validity and legality of notices of demand issued by the Excise Department.
4. Applicability of Rule 10 and Rule 10A of the Central Excise Rules, 1944.
5. Violation of principles of natural justice.

Issue-Wise Detailed Analysis:

1. Classification and Assessment of Glass Bottles:
The Company manufactured glass bottles which were classified under the residuary sub-item (4) of Item 23A of the Central Excises and Salt Act, 1944, which included "Other glassware including tableware." This classification subjected the Company to an ad valorem excise duty rate of 15% with an additional special excise duty.

2. Provisional and Final Assessment of Excise Duty:
The Company and the Excise Department followed a procedure where the Company submitted price lists for each quarter. The goods were provisionally assessed pending verification of prices. A bond executed by the Company on November 2, 1964, indicated that final assessment could not be made for want of full information about the value. The Company agreed to pay all duties as finally ascertained. Despite initial assessments being labeled as "Provisional Assessment," the final approved assessable values were only conveyed later, indicating an incomplete assessment process.

3. Validity and Legality of Notices of Demand:
The demand notices were issued for the quarters from April 1, 1966, to June 30, 1967. The Company contended that the inclusion of transport and service charges in the assessable value was unwarranted and arbitrary. The Assistant Collector rejected the Company's contention and stated that the notices were governed by Rule 10A, not Rule 10. The Collector confirmed that the non-disclosure of service charges was suppression of material information, justifying the issuance of notices under Rule 10A.

4. Applicability of Rule 10 and Rule 10A:
The trial court held that the notices of demand were time-barred under Rule 10, which requires demands to be made within three months from the date the duty was paid or adjusted. The Department argued that Rule 10A applied, allowing recovery of sums due without a specific time limit. The Supreme Court's interpretation in the National Tobacco Co. case was referenced, distinguishing between completed and incomplete assessments. The Court concluded that the case involved incomplete assessments, thus falling under Rule 10A.

5. Violation of Principles of Natural Justice:
The trial court found that the Assistant Collector and the Collector violated principles of natural justice by not disclosing the evidence and material considered, nor giving the Company a reasonable opportunity to rebut the same. The Company was not allowed to cross-examine witnesses or meet adverse inferences drawn from K.P.T. invoices and comparisons with prices from other manufacturers. The Supreme Court's decision in the National Tobacco Co. case emphasized the need for a quasi-judicial process in assessments, which was not followed here.

Conclusion:
The appeal was dismissed, affirming the trial court's decision that the notices of demand and orders were issued in violation of natural justice principles. The Company was permitted to argue that amounts in K.P.T. invoices reflected post-manufacturing expenses if fresh action was taken by the Excise Department. Each party was ordered to bear its own costs of the appeal.