Central Excise - Valuation of - Effect of amendment to section 4 vide section 47 of the Finance Act, 1982 - Effective duty payable alone deductible from cum duty price to calculate assessable value - Regarding - Central Excise - 15/89

Central Excise - Valuation of - Effect of amendment to section 4 vide section 47 of the Finance Act, 1982 - Effective duty payable alone deductible from cum duty price to calculate assessable value - Regarding Circular 15/89 Dated 19-10-1989 [From F. No. 6/57/86-CX.1(Pt)] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Central Excise - Valuation of - Effect of amendment to section 4 vide section 47 of the Finance Act, 1982 - Effective duty payable alone deductible from cum duty price to calculate assessable value - Regarding I am directed to say that a doubt has been raised as to whether notional duty or effective duty payable should be deducted from cum duty price to arrive at the assessable value under section 4 of the Central Excises and Salt Act 1944. In the case of Bata Shoe Company Ltd. v. Collector of Central Excise, Patna and Collector of Central Excise, Calcutta, the High Courts of Patna and Calcutta had decided the issue and the decision of one High Court was at variance with the decision of the other High Court. Therefore, M/s. Bata Shoe Company Ltd. as well as the Department had filed civil appeals in the Supreme Court. The Supreme Court later decided the matter settling the difference of opinion that existed between the Patna and Calcutta High Courts and according to that decision of the Supreme Court (1985-ECR- 913-SC), notional duty based on tariff rate was deductible from the cum duty price to arrive at the assessable value and not the effective duty payable. 2. To overcome the situations created by different High Courts' decisions, an amendment was made in section 4 by inserting an explanation to sub-section 4(4)(d)(ii) of the Central Excise Act to make it clear that in computing the amount of duty of excise deductible from the cum duty price, the effective amount of duty of excise payable on the goods under assessment shall alone be taken into account (vide section 47 of the Finance Act, 1982). This explanation has been given effect retrospectively from 1-10-1975. 3. In the case of M/s. I.T.C. Ltd. and Others v. Union of India in Civil Writ Petition No. 399/82 etc. (judgment circulated in F. No. 109/45/85- CX.3, dated 25-9-1986) a similar issue, whether Tariff rate should be deducted or effective duty payable should be deducted from the cum duty price to arrive at the assessable value was considered by the Delhi High Court. M/s. I.T.C. Ltd. relied upon the decision of the Supreme Court in the case of Bata India Ltd., in support of their argument that the duty as per tariff rate should be deducted from the cum duty price to arrive at the assessable value. The Delhi High Court considered the contention of M/s. I.T.C. Ltd., and held that in the case of Bata India Ltd. the Supreme Court was not concerned with the effect of the amendment of section 4 carried out in 1982, vide Finance Act, 1982. Thus, the Supreme Court's decision in the case of Bata Shoe Company v. Collectors of Central Excise, Patna and Calcutta is not relevant after the amendment of Section 4 in 1982. The Delhi High Court while disposing of the petitions of I.T.C. Ltd. and Others held that the assessable value of the goods will have to be determined on the basis of the effective duty payable after taking the exemption notification into account and dismissed the writ petitions. 4. In view of the above, while determining the assessable value of excisable goods under assessment, effective duty payable alone (and not the tariff rate nor notional duty payable) should be deducted from the cum duty price. If the goods are exempted from the whole of the duty of excise, there is no question of deducting notional duty payable from the wholesale price to arrive at the assessable value. If any such practices exist the practice of assessment may be set right in respect of all commodities. Amounts collected in excess of the declared assessable value may be dealt with as per Ministry's Circular Nos. 6/89-CX.1 (F. No. 15C/33/86-CX.1, dated 23-6-1989 and Circular No. 10/88-CX.1 (F. No. 15C/33/86-CX.1, dated 21-3-1988). 5. Please acknowledge receipt of this circular. 6. Hindi version will follow.