1986 (12) TMI 43 - HC - Central Excise

Court strikes down order, directs fresh duty assessment with deductions. Interest claim rejected. Rule partly absolute.

The court struck down the second impugned order dated 19-8-1986 due to irregularities and failure to apply relevant case law. A fresh assessment of duty ... Valuation - Trade discount Issues Involved:1. Rejection of the price list and basis of assessment for Excise duty.2. Validity of deductions claimed by the petitioner.3. Interpretation and application of relevant case law.4. Re-assessment of duty payable.5. Claim for interest on total assessment.Detailed Analysis:1. Rejection of the Price List and Basis of Assessment for Excise Duty:The petition challenges the order dated 8-12-1981 rejecting the price list and basis of assessment for Excise duty. During the pendency of this petition, another assessment order dated 19-8-1986 was passed, which is also challenged.2. Validity of Deductions Claimed by the Petitioner:The petitioner claimed deductions on the grounds of normal discount, dealer's commission, additional discount, and special packing. The Assistant Collector, in the second impugned order dated 19-8-1986, rejected all claims of deductions except for the normal discount. The Court found that the rejection of deductions for dealer's commission and additional discount was based on an incorrect interpretation of case law. The Court noted that the dealer's commission, although not reflected in invoices, was accounted for in the books and should be considered valid. Similarly, additional discounts were given through credit notes and reflected in the account books, thus meriting consideration.3. Interpretation and Application of Relevant Case Law:The judgment discusses the evolution of the law regarding the assessable value of goods for Excise duty. Initially, the assessable value was based on manufacturing cost and profit, excluding post-manufacturing expenses. The Supreme Court's judgment in Union of India vs. Bombay Tyres International (1983 E.L.T. 869) shifted the basis to the 'normal price' of goods, allowing specific deductions. The Court also referenced subsequent judgments, including Union of India v. Godfrey Philips (1985) and Moped India v. Assistant Collector (1986), to clarify permissible deductions. The Court found that the Assistant Collector had overlooked these precedents, leading to an erroneous rejection of deductions for dealer's commission and special packing.4. Re-assessment of Duty Payable:The Court held that the second impugned order suffered from irregularities and non-application of relevant case law. It directed the Assessing Authority to re-assess the duty payable after verifying the account books of the petitioner and relevant dealers. The Court emphasized that deductions for dealer's commission, additional discounts, and secondary packing should be reconsidered in light of the Supreme Court's judgments.5. Claim for Interest on Total Assessment:The respondent's claim for interest on the total assessment was rejected. The Court noted the absence of a statutory provision for such interest and highlighted that no directions regarding interest were given in interim orders. The Court observed that the petitioners had paid the full assessment of Excise Duty and furnished Bank Guarantees worth several crores. Given the bona fide dispute and changing legal interpretations, the Court found no basis for awarding interest.Conclusion:The second impugned order dated 19-8-1986 was struck down due to various irregularities and non-application of relevant case law. The Court directed a fresh assessment of duty payable, considering permissible deductions for dealer's commission, additional discounts, and secondary packing. The claim for interest by the respondent was dismissed. The operative order dated 19-12-1986 made the rule partly absolute with no order as to costs.