2007 (3) TMI 269 - SC - Central Excise

Supreme Court rules on sugar molasses valuation dispute, orders refund to the assessee

The Supreme Court allowed the appeal by M/s. New Swadeshi Sugar Mills, holding that the assessable value of sugar molasses sold at Re. 1/- per quintal ... Valuation (Central Excise) - Normal price - Molasses - Applicability of proviso (ii) of Section 4(1)(a) - Bihar Molasses (Control) Act, 1947 - Held that:- Sugar is an essential commodity under the Essential Commodities Act. The Bihar Molasses (Control) Act, 1947 is a regulatory measure enacted in order to regulate the supply, storage and pricing of molasses produced by factories is the State of Bihar. The relevant provision of the said Act which dealt with price of molasses has not fixed a particular price. It has merely fixed a range/ceiling within which the factory was entitled to charge the price of the molasses. We are informed that in the relevant year, on account of surplus, the price charged by the assessee was Re. 1/- per quintal - proviso (ii) is not applicable since under the Bihar Molasses (Control) Act, 1947, there is no fixed control price stipulated. As stated above, under the said Act, a price range is demarcated subject to the ceiling of Rs. 15/- per quintal. In the circumstances, proviso (ii) to Section 4(1)(a) of the Central Excise Act is not applicable to the present case - Decided in favour of assessee. Issues Involved:Interpretation of Section 4(1)(a) of the Central Excise Act, 1944 regarding valuation of goods based on normal price. Application of proviso (ii) to Section 4(1)(a) in a case where the price of an essential commodity is not statutorily fixed. Determination of assessable value of sugar molasses sold by an assessee at Re. 1/- per quintal when the state government had not fixed a specific price under the Bihar Molasses (Control) Act, 1947.Analysis:1. The civil appeal was filed by M/s. New Swadeshi Sugar Mills challenging the judgment of the Customs, Excise and Gold (Control) Appellate Tribunal. The issue revolved around the assessable value of sugar molasses sold by the appellant at Re. 1/- per quintal during a year when the Bihar Government had not statutorily fixed the price but had a range/ceiling of Rs. 1/- to Rs. 15/- per quintal under the Bihar Molasses (Control) Act, 1947. The Department contended that the assessable value should be calculated at Rs. 15/- per quintal, which was a statutorily fixed price. The Tribunal had sided with the Department, leading to the appeal by the assessee.2. The assessee argued that under the Bihar Molasses (Control) Act, 1947, there was no specific statutory price fixed by the State Government, but rather a range within which the factory could set prices. The appellant maintained that since there was no fixed control price stipulated under the Act, proviso (ii) to Section 4(1)(a) of the Central Excise Act, which deals with exceptional circumstances for valuation of goods, was not applicable in this case. The Supreme Court found merit in the appeal, emphasizing that the Act only prescribed a range/ceiling for pricing molasses, not a specific fixed price.3. The Court highlighted that sugar is classified as an essential commodity under the Essential Commodities Act, and the Bihar Molasses (Control) Act, 1947 aimed to regulate the supply, storage, and pricing of molasses in the State. It was noted that the Act did not set a particular price but allowed for a price range within which factories could operate. Due to a surplus in the relevant year, the appellant had charged Re. 1/- per quintal for molasses, falling within the permissible range under the Act.4. The judgment clarified the application of Section 4(1)(a) of the Central Excise Act, which values goods based on the normal price, usually equated to the actual price charged. Proviso (ii) of the Act, which provides for exceptional circumstances, was deemed inapplicable in this case since the Bihar Molasses (Control) Act did not stipulate a fixed control price but a range up to Rs. 15/- per quintal. Therefore, the Court concluded that proviso (ii) was not applicable, and the impugned judgment of the Tribunal was set aside, allowing the appeal with no costs.5. As a result of the successful appeal, the Court ordered a refund of the amount to the assessee, subject to compliance with the provisions of Section 11B of the Central Excise Act. The decision provided clarity on the valuation of goods in cases where statutory prices are not fixed, emphasizing the importance of interpreting relevant provisions accurately to determine the assessable value of essential commodities like sugar molasses.