1985 (4) TMI 67 - SC - Central Excise

Interpretation of Exemption Notification on Footwear Value for Excise Duty Refund

The Supreme Court analyzed the interpretation of a Notification exempting footwear valued under Rs. 5 per pair from excise duty. The Court held that the ... Whether the mode of determination of 'value' prescribed by Section 4 is not attracted while computing the 'value' of the articles of footwear for the purposes of testing the availability of the exemption granted under the Notification dated July 24, 1967? Held that:- Inasmuch as the value of the articles of footwear in question calculated in accordance with the provisions of Section 4 of the Act did not exceed ₹ 5 per pair, the articles in question were exempt from the charge to duty of excise under the Notification dated July 24, 1967. Appeal allowed. Issues: Interpretation of Notification dated July 24, 1967 regarding exemption from excise duty based on the value of footwear.Analysis:The judgment involved three appeals with the same parties and a common issue. The Bata Shoe Company Ltd. was engaged in manufacturing footwear and accessories in various establishments. The dispute arose regarding the interpretation of a Notification dated July 24, 1967, which exempted footwear valued at less than Rs. 5 per pair from excise duty. The company contended that certain footwear items priced at Rs. 6.25 per pair qualified for exemption based on their assessable value under the Notification. However, the Department changed its stance, claiming the duty element could not be deducted from the wholesale price, making the footwear taxable. The company pursued legal remedies in different High Courts, resulting in conflicting decisions.The Supreme Court analyzed Section 4 of the Central Excises and Salt Act, 1944, which determines the value of excisable goods for duty purposes. The Court emphasized that Section 4 applies to cases where an article is chargeable with duty based on its value. The Court clarified that the determination of the value under Section 4 is crucial even for assessing exemptions. The Court rejected the argument that Section 4 only applies to duty calculation and not to exemption determination. It held that the value of the footwear must be calculated as per Section 4 to ascertain eligibility for the exemption under the Notification dated July 24, 1967.The Court upheld the decision of the Patna High Court, which ruled in favor of the company, stating that the footwear items were exempt from excise duty as their value did not exceed Rs. 5 per pair. The Court disagreed with the Calcutta High Court's interpretation and criticized the Punjab and Haryana High Court's dismissal of the company's petition on the grounds of delay. The Supreme Court allowed the company's appeals, directing the refund of duty collected illegally by the Department. The Court dismissed the Collector of Central Excise, Patna's appeal and awarded costs to the appellants in two cases while not ordering costs in one case.