Retrospective excise exemption and natural justice in price approvals shape duty demands on samples and discounts

Additional excise duty exemption on samples was available only from 19-6-1976 under Notification No. 192/76-C.E.; the earlier basic excise notification did not extend to the separate levy, so no retrospective exemption applied for the prior period. The note also states that where price approvals for 'B' grade fabrics and cash discount were made mechanically without notice or hearing, consequential RT-12 demands based on those approvals could not be sustained on the existing record. Such demands required fresh consideration after compliance with natural justice and a proper hearing of the assessee.

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Issues: (i) Whether exemption from additional central excise duty on samples was available for the period prior to 19-6-1976; and (ii) whether the demands relating to disallowance of 6-1/4% discount on 'B' grade fabrics and cash discount could be sustained when the underlying price approvals had been made without hearing the assessee.

Issue (i): Whether exemption from additional central excise duty on samples was available for the period prior to 19-6-1976.

Analysis: The exemption specifically covering additional excise duty was granted only by Notification No. 192/76-C.E. dated 19-6-1976. The earlier notification relied upon by the assessee related only to the basic duty under Section 3 of the Central Excises and Salt Act, 1944 and did not extend to additional excise duty under the separate levy.

Conclusion: The exemption was not available for the period prior to 19-6-1976 and the demands on this count were upheld, against the assessee.

Issue (ii): Whether the demands relating to disallowance of 6-1/4% discount on 'B' grade fabrics and cash discount could be sustained when the underlying price approvals had been made without hearing the assessee.

Analysis: The price lists had been approved mechanically and without notice or hearing, and the same defect attached to the repeated approvals on subsequent price lists. Since the approvals themselves were under challenge and had not been made in observance of natural justice, the consequential RT-12 demands based on those approvals could not be finally sustained on the existing record. Fresh consideration of the admissibility of the discounts and the maintainability of the related demands was required after hearing the assessee.

Conclusion: The demands relating to the 6-1/4% discount and cash discount were set aside and the matter was remanded for fresh orders, in favour of the assessee.

Final Conclusion: The demand for additional excise duty on samples was sustained, while the demands relating to the two discounts were quashed and sent back for reconsideration after due hearing.

Ratio Decidendi: A consequential demand based on an approval made in violation of natural justice cannot be sustained without fresh adjudication, and a later notification cannot be applied retrospectively unless its terms expressly so provide.

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