TaxTMI 
TaxTMI 
1987 (12) TMI 43
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....e business of manufacture of viscose staple fibre, rayon grade pulp and sulphuric acid. The sulphuric acid is manufactured by the petitioner at its factory at Nagda and the same has, at all material times, been wholly and exclusively utilised for captive consumption. The petitioner does not sell and has never sold the sulphuric acid manufactured by it in the open market or to any party. The Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act') is an Act relating to Central duties of excise and to salt. Sulphuric acid at all relevant times was excisable goods falling under Item 14G of the First Schedule to the -said Act. At all material times, the duty was at the rate of 10 per cent ad valorem and it was levied from 24-4-1962. Section 3(1) of the Act provides that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods, which are produced or manufactured in India, and at the rates set forth in the First Schedule Under sub-section (2), the Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles enumerated, either specifica....
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....tion dated 26-11-1970 fixing the tariff value of sulphuric acid at Rs. 260/- per M.T. and the Court further held that the method of weighted average adopted by the respondent to determine the assessable value on all India basis was illegal and improper as the assessable value gets loaded with the manufacturing cost of other manufacturers, which violates the concept of excise duty as visualised by Section 3(1) of the Act, and therefore, the said notification was quashed. The petitioner states that his case is identical to the aforesaid case of the Bombay High Court, the only difference being, he is challenging the subsequent notification dated 26-7-1975, fixing the tariff value on sulphuric acid at Rs. 555/- per M.T. based on all India weighted average. According to the petitioner, the notification is arbitrary, unrelated to the actual value, illegal and ultra vires. Since an objection was taken about undue delay in filing the petition, by way of rejoinder, the petitioner further contended that the excise duty was paid under mistake, which was discovered by the petitioner some time in April 1979, after the decision of the Bombay High Court and immediately notice was given to the res....
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....ging section and creates liability to pay excise duty on excisable goods produced or manufactured in India, and the quantification's are provided under Section 3(2) and Section 4. The Bombay High Court, in Century Spinning and Mfg. Co. v. Union of India (supra), the Madras High Court in Subbarayan v. Union of India, 1979 (4) E.L.T. (J 473), and the Madhya Pradesh High Court in Gwalior Rayon Silk Mfg. Co. Ltd. v. Union of India, 1981 (8) E.L.T. 52 have held that in fixing tariff values pursuant to the power granted under Section 3(2), the Government cannot transgress the limits of excise duty laid down under Section 3(1). Accordingly, if the tariff values fixed by the Government are higher than manufacturing costs and manufacturing profits, they are illegal. Section 3(2) as also Section 4 are machinery sections and no action taken under them could violate the principle laid down by the charging Section 3(1). The fact that there are fluctuations in assessable value, is no reason for fixing a uniform tariff value based on weighted average which introduces irrelevant consideration, viz., the manufacturing costs and manufacturing profits of another producer on an All India basis. This c....
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....ions on the average of all India prices basis, they cannot, therefore, afford legal basis for levy of duty under Section 3(1) on sugar, the actual price of which even at the control price under the Essential Commodities Act, 1955, varies from state to state and even place to place. Therefore, tariff value for ad valorem charge on free sugar of the petitioner's factory should be fixed in the light of the provisions of Section 4." This Court, in Gwalior Rayon Silk Manufacturing Co. v. Union of India (supra) held :- "The guidelines for fixation of tariff value as furnished by Section 3(1) and 4 are that excise is a tax on the manufacturer and production of goods the value of the goods for levy of the duty should take into account only the manufacturing cost and the manufacturing profit and that the price charged by the manufacturer for sale of the goods in wholesale at the factory gate against cash payment represents the real value of the goods for the purposes of assessment to excise duty." The Kerala High Court, on the other hand, held in V. Veeran v. Union of India (supra) as follows :- "No doubt, excise duty is on manufacture but it can be levied in any manner the Parl....
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.... which has been expressed to mean the wholesale cash price in Section 4. If a uniform value is contemplated by the Central Government for administrative convenience or for other reasons, the provisions do not empower them to exceed the manufacturing cost and manufacturing profit of the producer and if the tariff value is to be fixed, it will have necessarily to be the lowest of the manufacturing cost and manufacturing profit of the producers or manufacturers in the country. The Madras High Court, in Subbarayan v. Union of India (supra), held that the value so fixed under Section 3(2) being on the average actual all India prices basis, such tariff values are not fixed in accordance with and as directed by the provisions of Section 4, which have to be followed in fixing the tariff values, to be notified under Section 3(2). This Court, in Gwalior Rayon Silk Mfg. Co. v. Union of India (supra), held that the administrative reasons for fixing tariff value by the Central Government cannot be such, which will go against the guidelines mentioned in Section 3(1) and Section 4. Clearly, therefore, the reasonings given in the aforesaid three decisions are not of any persuasive value to decide ....
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.... petitioner will have to be assessed on the basis of the unamended section, i.e. as per the law laid down in the aforesaid three cases of the Bombay, Madras and M.P. High Courts, and, therefore, the petitioner is liable to pay excise duty on the basis of his manufacturing cost, which he claims to be Rs. 400/- per M.T. It will be open to the department to ascertain the manufacturing cost and profit and levy excise duty accordingly, and the excess amount paid should be adjusted towards future excise duties recoverable from the petitioner. The petition has to be allowed to the extent of this period only. 9. Regarding the subsequent period, the petitioner has been rightly assessed and excise duty recovered, on the basis of the tariff value fixed at Rs. 555/- per M.T. as per notification dated 26-7-1975, in view of Section 4(3) as introduced from 1-10-1975. It is undisputed that the tariff value has been fixed on the basis of weighted average and the grievance of the petitioner is that no material has been placed on record to show how this weighted average of Rs. 555/- has been arrived at. The petitioner itself has annexed with its rejoinder, copy of an application for amendment of t....