1973 (12) TMI 39 - HC - Central Excise

Court rules freight charges not included in excise duty assessable value. Wholesale market defined. Petition allowed.

The court ruled in favor of the petitioner, a private limited company manufacturing aerated waters, in a dispute regarding the inclusion of freight ... Valuation - Wholesale cash price Issues:1. Whether freight and handling charges should be excluded from the wholesale cash price for the purpose of levy of excise duty.2. Whether a wholesale market exists at the factory premises of the company.Analysis:1. The petitioner, a private limited company manufacturing aerated waters under various trade marks, contested the inclusion of freight charges in the assessable value for excise duty purposes. The dispute arose when the Superintendent of Excise included freight charges in the assessable value, leading to an appeal by the company to the Deputy Collector of Central Excise. The central question revolved around whether freight charges should be part of the wholesale cash price. The court referred to Section 4 of the Central Excises and Salt Act, 1944, emphasizing that excise duty is levied only on the manufacturing cost and profits, excluding post-manufacturing charges like freight. The court cited a Supreme Court case to support this interpretation, concluding that post-manufacturing charges cannot be included in the wholesale cash price.2. The second issue pertained to the existence of a wholesale market at the factory premises of the company. The Deputy Collector had opined that a wholesale market should involve habitual sales at the factory premises, which the company did not meet. However, the court disagreed with this interpretation, citing a previous case where it was established that a wholesale market does not necessarily require physical sales at the factory. The court held that as long as there is a possibility of selling articles on a wholesale basis to traders, a wholesale market exists. The court noted that the company sold 20% of its articles at the factory premises, indicating the potential for wholesale transactions.3. In light of the above analysis, the court allowed the petition, quashing the impugned orders and directing a refund of any duty paid by the company under those orders. The judgment clarified the exclusion of post-manufacturing charges like freight from the wholesale cash price for excise duty calculation. Additionally, it established that a wholesale market can exist based on the potential for wholesale transactions, even if physical sales do not predominantly occur at the factory premises. The judgment provided a comprehensive interpretation of relevant legal provisions and precedents to resolve the issues raised by the petitioner.