1997 (5) TMI 48 - SC - Central Excise

Court rules excise duty based on factory removal time, not future sales prices

The Court upheld the respondent's argument in a case concerning the calculation of excise duty on goods sold to diverse customers. It ruled that duty ... Whether assessee sold the goods to private buyers at the time of removal of goods from the factory was treated as the 'normal price' of the goods? Held that:- The assessee has failed to make any declaration as to the price of the goods despatched by it to its various agents outside the State. At the point of time of removal of the goods, the assessee was not in a position to say that the goods were meant to be sold to Coal India or any other Government undertaking. The duty had to be calculated at the point of time of removal of the goods. At that point of time, the only way the duty could be levied was by calculating the duty on the basis of sales made to independent customers and not a special customer like Coal India. Even if ultimately and at a much later date from the date of removal of the goods, the appellant sold the goods to a Government Company or to Coal India Limited, the liability to pay duty at the time of removal of goods from the place of manufacture will not be altered. Rule 9A of the Central Excise Rules lays down that no excisable goods shall be removed from any place of manufacture until the excise duty leviable thereon has been paid. Rule 9A also lays down that the rate of duty shall be the rate in force on the date of actual removal of goods from the factory. There is a special rule for warehousing the goods which does not apply to this case. The appellant did not file any price list in connection with these goods which were being sent to the consignment agents. The assessee was unable to make any statement that the goods were meant for sale to Coal India Limited or for any Government Company. The Excise Officer was right in calculating the price which would have been payable by an ordinary customer as the 'normal price' of these goods. Appeal dismissed. Issues:Calculation of excise duty on goods sold to diverse customers, determination of 'normal price' for goods sold to consignment agents, adherence to Central Excise Rules regarding payment of duty at the time of removal of goods.Analysis:The appellant, a manufacturer of explosives, sold goods to various customers at different rates, including Coal India Limited, public sector companies, and ordinary customers without long-term contracts. Excise duty was paid at the factory gate based on different prices for these sales. Nearly half of the goods were transported to magazines outside the State of Orissa for ultimate sale. The dispute centered around excise duty payment at the time of goods' removal from the factory to the magazine.The appellant calculated duty based on the price paid by Coal India Limited, paying different rates for sales to different customer categories. The appellant argued that duty should be based on the 'normal price' as per the Central Excise Act, contending that the bulk of goods sold to Coal India Limited should determine the normal price. The appellant followed a provisional assessment process accepted by the excise authority for years.The respondent argued that the appellant failed to declare prices for goods sent to consignment agents, leading to duty calculation based on sales to private buyers. The Court upheld the respondent's contention, stating that duty should be levied based on prices at the time of goods' removal, not based on potential future sales to specific customers. Central Excise Rules mandated duty payment at the time of goods' actual removal from the factory, with duty calculated based on rates in force at that time.Since the appellant did not provide price lists for goods sent to consignment agents, and could not confirm sales to specific customers at the time of removal, duty was rightfully calculated based on sales to independent customers. The appeal was dismissed, emphasizing adherence to duty payment rules at the time of goods' removal.In conclusion, the Court ruled in favor of the respondent, highlighting the importance of declaring prices for goods sent to consignment agents and calculating duty based on actual removal of goods from the factory. The judgment emphasized compliance with Central Excise Rules and the necessity to determine duty based on sales to independent customers at the time of goods' removal.