2004 (6) TMI 55 - AT - Central Excise

Summary

Issues: Interpretation of Clause (ii) of proviso to Section 4(1)(a) of the Central Excise Act, 1944

Detailed Analysis:
1. The appellants are involved in the manufacture of bulk drugs falling under Chapter 29 of the First Schedule to the Central Excise Tariff Act, 1985. The dispute arises from the interpretation of the Drugs (Price Control) Order, 1995 (DPCO) regarding the maximum sale price set by the government for specified bulk drugs.

2. The Central Excise authorities issued a show cause notice to the appellants demanding differential duty for not paying excise duty on the maximum price fixed under DPCO. The appellants argued that they paid duty based on the actual selling price lower than the maximum price set by DPCO.

3. The key issue revolves around Section 4(1)(a)(ii) of the Central Excise Act, which determines the valuation of excisable goods for charging excise duty. The Tribunal had to reconcile conflicting decisions on whether duty should be paid based on the actual selling price or the maximum price fixed under DPCO.

Analysis of Legal Precedents:
1. Various decisions of the Tribunal were cited, showing a divergence in opinions. The Tribunal analyzed past cases like Orchid Chem. & Pharmaceuticals Ltd. and Vera Laboratories Ltd., which supported the appellant's argument. In contrast, decisions in Panchsheel Organics and Kopran Ltd. favored the Revenue's stance.

2. The Tribunal discussed the Supreme Court's ruling in Aluminium Industries Ltd., emphasizing the significance of price control orders in determining the normal price of goods for excise duty valuation. The legal fiction created by proviso (ii) to Section 4(1)(a) was highlighted to support the appellant's position.

Resolution and Decision:
1. The Tribunal found merit in the appellant's argument, emphasizing that the maximum price fixed under DPCO does not restrict manufacturers from pricing below that limit. The Tribunal cited cases like Vera Laboratories Ltd. and C.C.E., Vadodara v. Abbot Laboratories Ltd. to support its decision.

2. Consequently, the duty demand based on the maximum price set under DPCO as the normal price was deemed unsustainable. The Tribunal set aside the Commissioner's order and allowed the appeal, as no other issues were involved in the case.