1985 (8) TMI 82 - HC - Central Excise

Manufacturer entitled to exemption benefit without passing to consumers. Administrative directions impermissible. Writ petition allowed.

The court held that the manufacturer was entitled to retain the benefit of the exemption notification without passing it on to consumers. The notification ... Valuation - Aerated waters/soft drinks - Determination of normal price Issues Involved:1. Interpretation of the exemption notification under Rule 8(1) of the Central Excise Rules, 1944.2. Determination of the effective rate of excise duty on aerated waters not containing caffeine.3. Whether the benefit of the exemption notification should be passed on to the consumers or retained by the manufacturer.Issue-wise Detailed Analysis:1. Interpretation of the exemption notification under Rule 8(1) of the Central Excise Rules, 1944:The petitioner, M/s. Mamta Drinks and Industries Ltd., sought clarification on the procedure for submitting a fresh classification list following Notification No. 28/79-C.E., dated 1-3-1979, which exempted aerated waters not containing caffeine from excise duty in excess of thirty percent ad valorem. The Assistant Collector of Central Excise initially advised that the effective rate of duty was 30 percent ad valorem. However, upon receiving the full text of the notification, the petitioner realized the advice was misleading and submitted a revised classification list showing 60 percent ad valorem as the effective rate, claiming an exemption for the excess 30 percent. The Assistant Collector rejected this revised classification, interpreting the notification to mean the effective rate was 30 percent ad valorem for aerated waters not containing caffeine.2. Determination of the effective rate of excise duty on aerated waters not containing caffeine:The Assistant Collector's rejection was based on the interpretation that the notification exempted the duty in excess of 30 percent ad valorem, thus making the effective rate 30 percent. The petitioner challenged this interpretation, arguing that the notification did not stipulate that the exemption must be passed on to consumers. The court examined the relevant sections of the Central Excises and Salt Act, 1944, and previous judgments, including the Supreme Court's decision in Union of India v. Bombay Tyre International Ltd., which emphasized that the value for excise duty purposes should not include post-manufacturing costs or profits.3. Whether the benefit of the exemption notification should be passed on to the consumers or retained by the manufacturer:The core issue was whether the manufacturer could retain the benefit of the exemption or if it had to be passed on to consumers. The court referred to several judgments, including the Delhi High Court's decision in Modi Rubber Ltd. v. Union of India, which held that if the exemption notification does not specify that the benefit should be passed on to consumers, the manufacturer can retain it. The court also cited its own previous decision in M/s. Bizi Industries v. Superintendent Central Excise, which supported the view that administrative directions cannot impose conditions not specified in the exemption notification.Conclusion:The court concluded that the benefit of the exemption notification could not be denied to the petitioner on the grounds that it was not passed on to consumers. The notification did not contain any such condition, and imposing it through administrative directions was not permissible. Consequently, the writ petition was allowed, and the petitioner was entitled to the benefit of the exemption notification without any obligation to pass it on to the buyers/consumers. There was no order as to costs.