2014 (9) TMI 292 - HC - Central Excise

Determination of assessable value - normal value - change in sales pattern - Held that - Section 4 lays down the manner in which the valuation of the excisable goods for the purposes of charging duty of excise shall be made. Clause (a) of sub-section (1) of Section 4 of the said Act of 1944 provides that when the goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale, the normal price thereof shall be the value of excisable goods for charging of duty of excise. Clause (b) thereof is applicable when normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason. In such cases, it provided in clause (b) that the value for the purposes of charging duty of excise will be nearest ascertainable equivalent thereof determined in such manner as may be prescribed. The Valuation Rules of 1975 provide for determination of the ascertainable equivalent of value in terms of Clause (b) of sub-section (1) of Section 4 of the said Act of 1944. It appears that after the order of the Appellate Authority, a notice of review was issued by the Union of India which was transferred to the CEGAT. The CEGAT decided the matter by its judgment and order dated 29th November, 1986. The CEGAT referred to the original notice dated 15th October, 1976 in which the Assistant Collector had mentioned in the annexure that the sales were made by the first Petitioner in retail. Therefore, the CEGAT held that the finding of the Assistant Collector that there existed a wholesale price and, therefore, assessable value has to be determined in terms of Clause (a) of sub-section (1) of Section 4 of the said Act of 1944 was rightly set aside by the Appellate Authority. Quashing of SCN - Invocation of principle of res judicata - Held that - The impugned show cause notice proceeds on the footing that subsequently there is a change in the pattern of sales. If that be so, the principles of res judicata will have no application. Moreover, the finding of CEGAT is on the basis of consideration of the invoices for the relevant period which were produced before it. The learned Senior Counsel appearing for the Petitioners submitted that neither the Department has proved that there was a change in the pattern nor the Petitioners have been called upon to produce the material before this Court. However, all this is a matter of adjudication after reply to the show cause notice is given. The show cause notice specifically makes factual allegations regarding change of pattern of sales. The principles of res judicata cannot be applicable as a change in pattern of sales is alleged. Therefore, we are of the considered view that by invoking principles of res judicata, the show cause notice cannot be quashed. - Decided against assessee.

Summary

Issues Involved:
1. Jurisdiction to issue the show cause notice.
2. Applicability of the doctrine of res judicata.
3. Entitlement to rebate and approval of price lists.
4. Claim for refund of excise duty.
5. Alleged change in the pattern of sales.

Issue-wise Detailed Analysis:

1. Jurisdiction to Issue the Show Cause Notice:
The petition challenges the show cause notice dated 4th November, 1988, issued by the second Respondent on the grounds of lack of jurisdiction. The Petitioners argue that the issues raised in the notice have already been finally concluded, thus precluding the second Respondent from reissuing the notice.

2. Applicability of the Doctrine of Res Judicata:
The Petitioners contend that the issue of whether forklifts were sold in retail or wholesale has been conclusively decided by the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT), which upheld that the sales were retail. This decision, they argue, should be binding and final, invoking the doctrine of res judicata. The court references the case of Union of India v. East & West Shipping Agency to affirm that principles of res judicata apply to quasi-judicial proceedings under the said Act of 1944.

3. Entitlement to Rebate and Approval of Price Lists:
The Petitioners assert that the valuation of forklifts should be done as per Rule 6(a) of the Central Excise Valuation Rules, 1975, which allows for a rebate from the retail price to determine the wholesale price. The Assistant Collector initially approved a 7.5% rebate, which was later contested. The CEGAT's decision confirmed the retail nature of the sales, leading to the approval of price lists with a 7.5% rebate until 19th February, 1988. However, the show cause notice questions this rebate for subsequent periods, alleging a change in the sales pattern.

4. Claim for Refund of Excise Duty:
The Petitioners seek a refund of Rs. 88,66,292.70 for the period from 22nd October, 1975 to 30th September, 1987, arguing that the duty was paid under protest. The court references the Supreme Court's decision in Mafatlal Industries Limited v. Union of India, emphasizing that refund claims must be adjudicated under the provisions of the Central Excises and Salt Act, 1944, and the doctrine of unjust enrichment applies. The court notes that the Petitioners have not established that they did not pass on the duty burden to third parties, thus necessitating adjudication of the refund applications.

5. Alleged Change in the Pattern of Sales:
The show cause notice alleges a change in the sales pattern post the CEGAT decision, which purportedly justifies the reassessment of the rebate and price lists. The court acknowledges that this allegation requires factual adjudication, which cannot be preemptively quashed based on res judicata. The Petitioners must respond to the show cause notice, and the issue of any change in the sales pattern will be decided by the relevant authority.

Conclusion:
The court rejects the Petition, directing the Petitioners to reply to the show cause notice within three months. The Respondents are ordered to expedite the disposal of the refund applications. The interim relief granted earlier will continue for three months. The Civil Application No. 5434 of 1989 is disposed of as it does not survive post the rejection of the Petition.