1996 (12) TMI 217 - AT - Central Excise

Summary

Issues Involved:
1. Duty demand based on higher sale price.
2. Abatement of differential duty for assessable value.
3. Interpretation of Section 4 of the Central Excise Act (CEA), 1944.
4. Divergence in judicial opinions on duty abatement.

Issue-wise Detailed Analysis:

1. Duty Demand Based on Higher Sale Price:
The primary issue in the appeal concerns the duty demand from the appellants due to the goods being sold at a higher price than the price approved by the authorities under Rule 173C. The learned Counsel for the appellant did not object to the duty being demanded based on the higher sale price but contended that the differential duty should be abated for arriving at the assessable value.

2. Abatement of Differential Duty for Assessable Value:
The appellant's Counsel argued that the differential duty now being demanded should be abated to determine the assessable value. He cited the Tribunal's decision in CCE, Hyderabad v. M/s. VST Inds., which concluded that extra accruals should be added to the wholesale price and not to the assessable value. This ensures that the duty is not confiscatory and only a part of the extra accrual is paid as excise duty. The Tribunal's decision in this case supports the appellant's contention that the abatement of duty should be allowed even if it was not collected from the customers initially but paid subsequently by the appellants.

3. Interpretation of Section 4 of the Central Excise Act (CEA), 1944:
The interpretation of Section 4(1)(a) and Section 4(4)(d)(ii) of the CEA, 1944, is crucial in this matter. Section 4(1)(a) defines the normal price for valuation, while Section 4(4)(d)(ii) excludes the amount of excise duty, sales tax, and other taxes from the value of excisable goods. The Tribunal's judgment in the case of Pieco Electronics and Electricals and other related cases emphasized that the term "payable" includes any duty that the assessee is obligated to pay, even if it was not recovered from the customers. This interpretation supports the appellant's claim for abatement of the duty demanded subsequently.

4. Divergence in Judicial Opinions on Duty Abatement:
There is a noted divergence in judicial opinions regarding the abatement of duty subsequently demanded. The Tribunal's decisions in cases like Byco International, Venus Paper Mills Ltd., and Vapi Paper Mills Ltd. have upheld the contention that the differential duty should be calculated on the cum-duty price, allowing for the deduction of the duty element from the gross sale price. However, the judgment in the case of Bata India Ltd. by the Hon'ble Supreme Court, which dealt with exemption notifications, held that the benefit of exemption would not be available if the goods were sold above the stipulated price, even if the duty element was not included in the sale price.

Conclusion:
Due to the divergence of views between different Benches of the Tribunal, the matter requires resolution by a Larger Bench. The Tribunal has directed the registry to forward the papers to the registry at Delhi for placing them before the Hon'ble President for orders to constitute a Larger Bench to resolve the issue comprehensively.