1976 (12) TMI 60 - HC - Central Excise

Court strikes down trade notice setting assessable value for Central Excise Duty, emphasizes duty calculation based on wholesale price.

The court held that the trade notice directing the assessable value for Central Excise Duty to be equal to brand-name owners' prices was ultra vires the ... Valuation of goods manufactured with customer's brand name Issues:Challenge to trade notice issued by Collector of Central Excise regarding assessable value for Central Excise Duty based on brand-name owners' prices.Analysis:The petition challenged a trade notice issued by the Collector of Central Excise, directing the petitioner, a company manufacturing resins, to declare the assessable value for Central Excise Duty 'equal to the value charged by the brand name owners to the wholesale market.' The petitioner contended that this direction deviated from the valuation method prescribed under Sections 3 and 4 of the Central Excises and Salt Act, 1944. The petitioner argued that the department was attempting to fix the value for excise duty based on brand-name owners' prices, contrary to the law laid down by the Supreme Court in previous cases. The court referred to the Supreme Court's decision in Atic Industries Ltd. v. H.H. Dave and emphasized that excise duty should be based on the wholesale cash price at the factory gate. The court held that the direction in the impugned trade notice, requiring value equal to brand-name owners' prices, was ultra vires the Collector's authority under the Act.The court distinguished the present case from Atic Industries Ltd. as the buyer company in this case owned only 5% equity shares, not 50% as in the Atic case. The court also considered an unreported judgment of the Division Bench, which aligned with the Atic Industries case. The court found no support for sustaining the direction in the trade notice based on the Division Bench's judgment. Regarding Direction No. 1 in the trade notice, the court clarified that it was intended to collect information on customers claiming rights to the trade name, and the petitioners did not object to this interpretation. Direction No. 3, pertaining to customers, did not concern the petitioners. The court decided to strike down the latter part of Direction No. 2, which also affected Clause 4 of the notice.The court allowed the petition in part, indicating that the department could take appropriate action if the alleged contracts between parties were a camouflage to evade excise duty. The administration was advised to determine the real value of goods for duty purposes in accordance with Section 4 of the Act, as interpreted by the Supreme Court in the Atic Industries case. The ruling made the rule absolute only to the extent specified in the judgment.