2006 (4) TMI 130 - SC - Central Excise

Supreme Court clarifies excise duty calculation based on factory gate price, upholding Tribunal decision

The Supreme Court upheld the Tribunal's decision in favor of the respondent-assessee, ruling that excise duty should be levied based on the ascertainable ... Whether the authorities could levy duty on the goods on the basis of wholesale price in relation to the sales effected at the factory gate so long as that price is one coming under Section 4(1)(a) of the Act? Held that:- It may be clarified that the Legislature in the year 1996 had introduced sub-clause (iii) to Clause (b) of sub-section (4) of Section 4 [after a further amendment by Act, 32 of 2003 the same is now Section 4(3)(c)(iii)] by which the depot sales were also included in the definition of 'place of removal'. In the present case, the period involved is prior to the aforesaid amendment and, therefore, the said amendment would not be applicable. Appeal dismissed. Issues:1. Appeal against the Tribunal's order allowing the respondent-assessee's appeal and setting aside the Commissioner's order.2. Determination of excise duty on goods sold at factory gate and through depots.3. Application of statutory provisions regarding wholesale price for excise duty calculation.4. Interpretation of Section 4(1)(a) of the Central Excise Act, 1944.5. Consideration of the definition of 'place of removal' under Section 4(4)(b) of the Act.Analysis:1. The appeal was filed by the Commissioner of Central Excise against the Tribunal's order in favor of the respondent-assessee, setting aside the Commissioner's original order. The Tribunal accepted the assessee's appeals and held that duty should be levied based on the ascertainable wholesale price at the factory gate, as per the then-existing statutory provisions. The Tribunal's decision was upheld by the Supreme Court, finding no infirmity in the Tribunal's ruling.2. The case involved the determination of excise duty on goods manufactured by the assessee and sold both at the factory gate and through various depots across the country. The authorities questioned the sale consideration based on discrepancies between prices listed in Part-I and actual sales at the depots. A show cause notice was issued for recovery of duty and penalty under Section 11A(i) of the Act. The assessee argued that duty should be levied based on the wholesale price at the factory gate, which was approved by the Central Excise authorities.3. The Assessing Authority rejected the assessee's plea and confirmed the duty demand, imposing a penalty. However, the Tribunal overturned this decision, emphasizing that duty should be levied on the ascertainable wholesale price at the factory gate as per statutory provisions. The Supreme Court concurred with the Tribunal's interpretation, upholding the decision based on the principles established in previous case law.4. The Supreme Court referred to the interpretation of Section 4(1)(a) of the Act, which specifies that the value of an excisable article for excise levy should be the price at which it is sold by the assessee in wholesale trade at the time and place of removal. The Court highlighted previous judgments that emphasized determining the value based on the price at which goods are ordinarily sold in wholesale trade for delivery at the time and place of removal.5. The Court also discussed the definition of 'place of removal' under Section 4(4)(b) of the Act, which includes the factory gate and, in later amendments, depot sales. The judgment clarified that the inclusion of depot sales in the definition of 'place of removal' was introduced in a subsequent amendment in 1996, not applicable to the period in question in this case. Therefore, the duty calculation should be based on the wholesale price at the factory gate only. As a result, the appeals were dismissed as lacking merit, with costs awarded.