1986 (5) TMI 182 - HC - Central Excise

Issues Involved:
1. Levy of excise duty on cigarettes.
2. Interpretation of Section 4 of the Central Excises and Salt Act, 1944.
3. Validity and effect of exemption notifications under Rule 8 of the Central Excise Rules, 1944.
4. Retrospective amendment by the Finance Act, 1982.

Summary:

1. Levy of Excise Duty on Cigarettes:
The writ petitions were filed by cigarette manufacturing companies challenging the levy of excise duty on cigarettes. The primary issue was the computation of the 'value' for excise duty purposes, which is based on the wholesale price minus the duty payable.

2. Interpretation of Section 4 of the Central Excises and Salt Act, 1944:
Section 4(1) of the Act states that the duty of excise is chargeable on any excisable goods with reference to value, which is deemed to be the normal price at which such goods are sold in the wholesale trade. The definition of 'value' under Section 4(4)(d) includes the cost of packing but excludes the amounts of excise duty, sales tax, or other taxes payable on such goods and trade discounts allowed.

3. Validity and Effect of Exemption Notifications under Rule 8 of the Central Excise Rules, 1944:
Rule 8 allows the Central Government to exempt any excisable goods from the whole or any part of the duty leviable. Various notifications issued under Rule 8 provided partial exemptions to certain goods, including cigarettes. The department's interpretation required manufacturers to pass on the benefit of the exemption to consumers, which was challenged by the petitioners.

4. Retrospective Amendment by the Finance Act, 1982:
The Finance Act, 1982, introduced an Explanation to Section 4(4)(d)(ii) with retrospective effect from 1-10-1975, clarifying that the 'amount of the duty of excise payable' includes the effective duty after giving effect to any exemption notifications. This amendment aimed to counter judicial decisions that had interpreted the provisions differently.

Comprehensive Details:

Levy of Excise Duty on Cigarettes:
The petitioners argued that the excise duty should be computed based on the wholesale price minus the duty payable, as per the rates specified in the First Schedule of the Act. The department contended that the effective duty, after considering the exemption notifications, should be used for this computation.

Interpretation of Section 4 of the Central Excises and Salt Act, 1944:
The court noted that Section 4(1) requires the excise duty to be calculated based on the wholesale price. The definition of 'value' under Section 4(4)(d) excludes the amounts of excise duty and other taxes, implying that the duty should be computed on the net price.

Validity and Effect of Exemption Notifications under Rule 8 of the Central Excise Rules, 1944:
The court referred to previous decisions, including Modi Rubber and Ceat Tyres, which held that the exemption notifications should be given full effect without requiring manufacturers to pass on the benefit to consumers. The court reiterated that the assessable value should be determined first, and then the exemption should be applied.

Retrospective Amendment by the Finance Act, 1982:
The court examined the retrospective amendment, which clarified that the 'effective duty' payable includes the duty after giving effect to any exemption notifications. The amendment aimed to neutralize judicial decisions that had interpreted the provisions differently. The court held that the amendment successfully integrated the effect of the exemption notifications into the statute, altering the computation of the assessable value.

Conclusion:
The court concluded that the assessable values of the petitioners' goods should be determined based on the effective duty payable after considering the exemption notifications. The writ petitions were dismissed, and the court refused to grant a certificate of fitness for leave to appeal to the Supreme Court or to stay the implementation of the judgment.

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