1985 (10) TMI 162 - HC - Income Tax

Summary

Issues Involved:

1. Validity of the Explanation to Section 4(4)(d)(ii) of the Act.
2. Legality of the Trade Notice issued by the Collector.
3. Determination of assessable value under Section 4 of the Act.

Summary:

1. Validity of the Explanation to Section 4(4)(d)(ii) of the Act:

The petitioner challenged the validity of the Explanation to Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944, inserted by Section 47 of the Finance Act, 1982, arguing it was beyond the legislative competence of the Union Parliament and could not be enacted retrospectively. The Court held that the Union Parliament was competent to legislate the explanation and could do so retrospectively. The Court referenced rulings from the Supreme Court in Bombay Tyre International v. Union of India and Empire Industries Ltd. v. Union of India to support its decision.

2. Legality of the Trade Notice issued by the Collector:

The petitioner argued that the Trade Notice No. 58/77 issued by the Collector added to the terms and conditions of the exemption notification without authority and was illegal. The Court agreed, stating that the power to exempt and the terms and conditions of such exemptions are exclusively conferred on the Government and the Board, not the Collector. The Trade Notice was found to be unauthorized and illegal, and thus quashed.

3. Determination of assessable value under Section 4 of the Act:

The Court examined the true scope and ambit of Section 4 of the Act, especially in light of the Explanation added by the Finance Act, 1982. The Explanation clarified that in computing the amount of duty of excise deductible from the cum-duty price, only the effective amount of duty actually paid should be considered. The Court concluded that the assessable value should be determined based on the actual duty paid, not the hypothetical duty chargeable under the Act. The Court referenced several rulings, including those from the High Courts of Delhi, Madras, Andhra Pradesh, and Orissa, to support this interpretation.

Orders and Directions:

1. The writ petitions challenging the validity of the Explanation to Section 4(4)(d)(ii) were dismissed.
2. The Trade Notice No. 58/77 issued by the Collector and the impugned orders were quashed. The original authorities were directed to redetermine the assessments, recoveries, and refunds due from or to the petitioners in accordance with the law and the observations made in the order.
3. The petitioners were permitted to file additional representations or objections within 45 days.
4. The oral application for a certificate of fitness to appeal to the Supreme Court was rejected as the questions decided were not substantial questions of law that needed to be decided by the Supreme Court.

Conclusion:

The Court upheld the legislative competence of the Union Parliament to enact the Explanation to Section 4(4)(d)(ii) retrospectively, quashed the unauthorized Trade Notice issued by the Collector, and clarified that the assessable value should be based on the actual duty paid. The original authorities were directed to reassess the cases in light of these findings.