1982 (4) TMI 68 - HC - Central Excise

Rule 10 - Valuation - Comparable goods would mean identical goods sold at the nearest place - Price list - Show cause notice in excess of authority - Validity

Issues Involved:
1. Applicability of Rule 6(b)(i) or Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975.
2. Effect of replacement of Rule 10 of the Central Excise Rules, 1944, by Section 11-A of the Central Excises and Salt Act, 1944.
3. Validity of sub-clause (i) of clause (b) of Rule 6 of the Central Excise Valuation Rules, 1975.
4. Validity of the Show Cause Notice, particularly concerning short levy and penalty.

Detailed Analysis:

1. Applicability of Rule 6(b)(i) or Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975:
The core dispute is whether sub-clause (i) or sub-clause (ii) of clause (b) of Rule 6 applies to the petitioner's case. The petitioner contends that sub-clause (ii) should apply, while the respondents argue for sub-clause (i). According to the petitioner, the value of sulphuric acid should be based on the cost of production plus a reasonable profit, as per sub-clause (ii). Conversely, the respondents assert that the value should be based on comparable goods, as per sub-clause (i).

2. Effect of Replacement of Rule 10 by Section 11-A:
The petitioner's first contention is that the omission of Rule 10 with effect from 17-11-1980 results in the automatic termination of the proceedings initiated earlier by issuing the notice. The court held that the replacement of Rule 10 by Section 11-A does not amount to repeal or omission of an enactment. Instead, it is a case of shifting the provision from one part of the Act to another without any break in its continuity. The court distinguished this case from the Supreme Court decision in M/s. Rayala Corporation's case, noting that the liability of the petitioner is based on short levy of excise duty, and the provisions for levy of excise duty remained unaffected by the change.

3. Validity of Sub-Clause (i) of Clause (b) of Rule 6:
The petitioner challenges the validity of sub-clause (i) on the grounds that it is inconsistent with Section 4(1)(b) of the Act. The court found no inconsistency between Section 4(1)(b) and sub-clause (i). Sub-clause (i) prescribes that the value of comparable goods should be used to determine the nearest ascertainable equivalent of the excisable goods' value. The court also rejected the contention that sub-clause (i) confers arbitrary powers on the proper officer, noting that sufficient guidelines exist to prevent arbitrariness.

4. Validity of the Show Cause Notice:
The petitioner contended that the show cause notice is invalid, particularly concerning short levy and penalty.

Short Levy:
The petitioner argued that the notice is defective because it is based on the value of sulphuric acid manufactured by another assessee, which they claim cannot be considered 'comparable goods.' The court rejected this argument, stating that comparable goods can include identical goods manufactured by another assessee. The petitioner also contended that the notice lacks necessary particulars, but the court held that this could be addressed by seeking further particulars if needed. The petitioner further argued that the notice should be quashed for the period in excess of six months, but the court held that this question could not be determined at this stage and would depend on the outcome of the enquiry.

Penalty:
The court found that the initiation of penalty proceedings under Rule 173-Q(1)(d) read with Rule 173-Q(2) was in excess of authority. The penalty proceedings were based on the petitioner's failure to exhibit the price of comparable goods in the price list. The court noted that the price list was filed in the prescribed form and manner, and the proper officer had approved it. Therefore, the penalty proceedings were quashed.

Conclusion:
The court quashed the initiation of penalty proceedings against the petitioner, finding it in excess of authority. However, the other reliefs claimed by the petitioner were rejected. The court held that the replacement of Rule 10 by Section 11-A did not result in the automatic termination of the proceedings and found no inconsistency between Section 4(1)(b) and sub-clause (i) of Rule 6(b). The court also held that the show cause notice concerning short levy was not invalid at this stage and would depend on the outcome of the enquiry.

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