1986 (6) TMI 160 - AT - Income Tax

Summary

Issues Involved:
1. Validity of differential pricing in invoices.
2. Competence and jurisdiction of the Assistant Collector to raise demands after finalization of RT 12 returns.
3. Applicability of the highest sale price for excise duty assessment.
4. Validity of subsequent show cause notices.
5. Interpretation of Section 4 of the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Validity of Differential Pricing in Invoices:
The primary issue was whether the different prices charged in the invoices by Dharampur Leather Cloth Co. Pvt. Ltd. for the period from January 23, 1975, to May 21, 1975, were valid. The Superintendent of Central Excise issued a show cause notice for short levy under Rule 10 read with Rule 173J of the Central Excise Rules, 1944. The appellant argued that the higher prices were for a small percentage (2% to 20%) of sales and should not affect the overall pricing. However, the Assistant Collector rejected this argument, stating that the approved prices under Section 4 of the Central Excises and Salt Act, 1944, should be based on the nearest wholesale market prices, which in this case was Bombay.

2. Competence and Jurisdiction of the Assistant Collector:
The appellant contended that the Assistant Collector did not have the competence to raise demands on short assessments after the finalization of RT 12 returns and approval of the classification and price lists. The Appellate Collector, however, held that the recovery of short levies was permissible under Rule 10 of the Central Excise Rules, provided it was within the limitation period. The Tribunal upheld this view, confirming that the Assistant Collector had the jurisdiction to confirm such demands.

3. Applicability of the Highest Sale Price for Excise Duty Assessment:
The appellant argued that using the highest sale price for excise duty assessment would be detrimental to their business, as it would imply that all sales were at the highest price, which was not the case. They cited the judgment of the Madras High Court in Sharda Silicate and Chemical Industries, which held that prices charged on a rational commercial basis should be considered for excise duty. However, the Tribunal found that the appellant failed to establish that the higher prices were based on rational commercial considerations. The Tribunal upheld the view that the highest price at which goods were capable of being sold should be considered for excise duty assessment.

4. Validity of Subsequent Show Cause Notices:
In Appeal No. 219, the appellant argued that the subsequent show cause notice was invalid. They cited the Patna High Court judgment in Kani Ram Ganpat Ram v. Commissioner of Income-tax, which stated that previous decisions could only be reopened if fresh facts came to light. The Tribunal, however, found that no new facts had emerged to warrant reopening the assessments and upheld the validity of the subsequent show cause notice.

5. Interpretation of Section 4 of the Central Excises and Salt Act, 1944:
The Tribunal examined the old Section 4 of the Central Excises and Salt Act, 1944, which was applicable during the relevant period. The section defined the value for duty purposes as the wholesale cash price at which an article of like kind and quality was sold or capable of being sold at the time of removal from the factory. The Tribunal referred to the judgment in Modi Vanaspati Mfg. Co. v. Collector of Customs and Central Excise, which clarified that the amendment to Section 4 was not retrospective and could not be applied to the period before October 1, 1975. The Tribunal concluded that the old Section 4 should be applied as it stood during the relevant period, without incorporating the later amendments.

Conclusion:
The Tribunal upheld the findings of the Appellate Collector of Central Excise and dismissed all six appeals. The differential pricing in invoices was not accepted, the competence of the Assistant Collector to raise demands was affirmed, the highest sale price was deemed applicable for duty assessment, the validity of subsequent show cause notices was upheld, and the interpretation of Section 4 of the Central Excises and Salt Act, 1944, was confirmed as per the old provisions.