1994 (10) TMI 59 - SC - Central Excise

Dye Manufacturer Challenges Tax Reassessment Under Section 11A, Partially Succeeds in Dispute Over Excise Duty Valuation

The SC ruled on a dye-stuff manufacturer's challenge to a tax reassessment. The court upheld the Department's authority to revise the assessable value ... Classification of goods - price list shows various includible and excludible expenses as well as assessable value - intention to evade payment of duty​​​​​​​ - whether the classification and the price list accepted by the Department and acted upon, found subsequently to be erroneous, is to be applied prospectively or retrospectively - HELD THAT:- Since the appellant did not dispute that the method of calculation of the duty by the Department was correct, the submission of the learned counsel on lack of jurisdiction to initiate proceedings is not necessary to be decided as the power to issue show-cause notice vests even if the duty was short-levied as a result of erroneous application of law. However, once the Department accepted the price list, acted upon it and the goods were cleared with the knowledge of the Department, then in absence of any amendment in law or judicial pronouncement, the reclassification should be effective from the date the Department issued the show-cause notice. The reason for it is clearance with the knowledge of the Department and no intention to evade payment of duty. In the result, this appeal succeeds and is allowed in part. The appellant is held liable to pay duty on the dye-stuffs manufactured by it in the manner calculated by the Department from 16th October, 1976, the date the show cause notice was issued to the appellant. Issues Involved: Classification and price list acceptance, retrospective or prospective application.Classification and Price List Acceptance: The appellant, a dye-stuff manufacturer, submitted a price list approved by the Department, showing assessable value and expenses. After a year, a show cause notice was issued for revising the assessable value. The appellant's method for determining assessable value was found incorrect. The Tribunal upheld the Department's decision, stating that the Department was justified in taking action under Section 11A of the Central Excises & Salt Act, 1944, despite the price list acceptance.Retrospective or Prospective Application: The appellant argued that once the Department accepted and acted upon the price list, reclassification should be effective from the date of the show cause notice, not from the date of submission. Citing a previous case, the appellant contended that any correct calculation by the Department should apply from the notice date. The Court held that since the appellant did not dispute the Department's correct duty calculation method, the lack of jurisdiction to initiate proceedings was not necessary to decide. The reclassification was deemed effective from the date of the show cause notice, i.e., 16th October, 1976.Result: The appeal succeeded in part, with the appellant being held liable to pay duty on dye-stuffs manufactured based on the Department's calculation method from 16th October, 1976, the date of the show cause notice. Each party was directed to bear their own costs.