1992 (3) TMI 65 - HC - Central Excise

Exclusion of Interest for Excise Duty Calculation; Invalid Show Cause Notices; Costs Allocation

The Court held that interest on overdue payments should not be included in the assessable value for excise duty calculation under the Central Excises and ... Valuation - Interest for delayed payment Issues:Validity of show cause notices for including interest chargeable on overdues in the assessable value under the Central Excises and Salt Act, 1944.Detailed Analysis:1. The petitioners, engaged in manufacturing PVC Resin and PVC Compounds, challenged show cause notices issued by the Superintendent, Central Excise Department, Range Urban-1, Kota, regarding the inclusion of interest on overdues in the assessable value under Section 4 of the Act. The Assistant Collector had earlier confirmed the inclusion of interest, but the Collector, Central Excise (Appeals) allowed the petitioners' appeal, stating that interest should not be included. The Superintendent issued impugned notices after 7 years, leading to the current challenge.2. The petitioners argued that the Superintendent lacked jurisdiction to issue the notices after a decision by the appellate authority. They contended that disregarding higher authority decisions would create chaos in the department. They sought to quash the notices as unsustainable.3. The respondents claimed that interest on delayed payments forms part of the assessable value for excise duty calculation, based on the wholesale prices at which goods are sold to unrelated buyers. They argued that no writ petition was maintainable against the show cause notices.4. The Court analyzed Section 4 of the Act, defining assessable value as the price at which goods are sold in wholesale trade to unrelated buyers. The Department issued notices based on a previous Supreme Court decision, which the Court found irrelevant to the current case. The Departmental Instructions clarified that the price means the amount for which goods are sold, even if credit is given for payment.5. Judicial interpretations, like the A.K. Roy case and the Victory Glass case, emphasized that the wholesale price should exclude interest and other charges, focusing on cash payment at the factory gate. The Court agreed with the Karnataka High Court's view on preventing unnecessary harassment and quashing notices lacking jurisdiction.6. The Court criticized the trend of mechanically issuing show cause notices, causing parties to unnecessary litigation. It highlighted the need to utilize resources for developmental works rather than litigation. Consequently, the Court allowed the writ petitions, quashing the impugned notices and directing parties to bear their own costs.