1976 (7) TMI 63 - HC - Central Excise

Belting Dack - - Scope - Show cause notice - Criteria for issue - Clandestine removal - Connotation of - Cotton Fabrics - Freight and handling charges - Non-inclusion of in contract price - Admissibility

Summary

Issues:
Violation of conditions 3, 4, and 5 of Notification No. 144 dated 11-7-1970; Allegations of incorrect interpretation of notification; Withdrawal of exemption; Time-barred show cause notices; Ownership of nylon supplied by Dunlop and N.R.M.; Nature of contracts between petitioners and buyers; Levy of penalty under Rule 9(2) and Rule 173Q; Inclusion of nylon value in price list; Clandestine removal allegations; Assessment of duty; Inclusion of freight and handling charges in contract price.

Analysis:

The judgment involves two writ petitions seeking prohibition in the context of excise duty on cotton nylon duck fabrics. The petitioners, engaged in textile manufacturing, faced allegations of violating conditions of Notification No. 144, withdrawal of exemption, and time-barred show cause notices. The dispute centered on the inclusion of nylon value supplied by Dunlop and N.R.M. in the price list, contractual nature, and ownership of nylon.

The petitioners contended that the price list accurately reflected the value of cotton and conversion charges, excluding the nylon value as they were not the owners. The department argued that the price list should have included the nylon value, citing violations of conditions 3 and 4 of the notification. The court examined the contracts and concluded that the petitioners' pricing was appropriate, emphasizing the duty to assess facts properly before alleging violations.

Regarding penalty imposition under Rule 9(2) and Rule 173Q, the court rejected the department's stance due to the incorrect basis of the show cause notices. It referenced N.B. Sanjana v. E.S. and W. Mills to clarify the application of Rule 10 and highlighted the absence of clandestine removal, undermining the department's claims.

Additionally, the court dismissed arguments about freight and handling charges, noting that the contract explicitly stated "freight to pay," absolving the mills from including these charges in the price. Ultimately, the court ruled in favor of the petitioners, allowing the writ petitions and awarding costs to them.

In conclusion, the judgment resolved the issues of alleged violations, exemption withdrawal, time-barred notices, ownership concerns, penalty imposition, assessment accuracy, and inclusion of additional charges in the contract price. It highlighted the importance of factual accuracy in excise duty matters and upheld the petitioners' position on pricing and contractual obligations.