By TIOL News Service

NEW DELHI, MAY 12, 2014 : THIS appeal is directed against the judgment and order dated 13th September, 2002 passed by the High Court of Judicature at Bombay in Writ Petition No. 2986 of 1986. By the impugned judgment the Division Bench of the High Court set aside two show-cause notices dated 12th August, 1985 and 4th February, 1986 issued by Superintendent of Central Excise for short payment of excise duty under Section 11A of the Central Excise and Salt Act, 1944

The Show Cause Notice alleged:

(i) that the assessee sold the duty paid stocks from their sales depots at the higher price;

(ii) that the sales depots were related persons and that therefore the price at which the goods were sold from the depots should be considered as the assessable value;

(iii) that though the retail price included excise duty, freight and dealer's margin, excise duty had been paid at the factory gate without including the aforesaid amounts and that this was incorrect in view of Rule 6(a) of Central Excise (Valuation) Rules, 1975;

(iv) that the assessee had not included in the assessable value (1) after sales services charges (2) dealer's margin (3) marketing and selling expenses and (4) excess freight;

(v) that the assessee had concealed the invoice value.

The assessee challenged the Show Cause Notices in the High Court. The High Court referring to the old and amended Section 4 of the Act held that the department was not justified in demanding the excise duty on the basis of higher price, at which the tractors were sold by the assessee from their Depots whether on wholesale price or retail price under the law in force at that point of time.

Aggrieved Revenue is before the Supreme Court.

The Supreme Court observed,

The High Court mainly proceeded on the question whether the Revenue was justified in demanding excise duty on the basis of the higher price, at which the tractors were sold by the assessee from their depots whether on wholesale basis or retail under the law as it stood at that point of time. The said question was answered in negative in favour of the assessee and the High Court set aside the show-cause notices.

In the present case as the matter relates to the years 1982 to 1985 Section 4, as it then stood and quoted above shall apply.

In the present case the assessee failed to bring the ascertainable price of the tractor, cost of transportation to depot, etc. to the notice of the High Court. The assessee simply challenged the show-cause notices on the ground that the amended Section 4 is not applicable. The High Court without looking into the relevant fact, only on the ground that sub-clause (iii) to Section 4(b) was subsequently added by amendment including `depot', `premises of consignment agent' or 'any other place' or `premises' from where the excisable goods were to be sold after their clearance from the factory, declared the notices illegal and set aside the same. Even the matter was not remanded back to competent authority allowing the assessee to bring to its notice "normal price", in course of wholesale trade, place of removal of tractors, transportation charges, etc.

The Supreme Court felt it had no option but to set aside the HC order and so the matter is remanded to the Original Authority.

(See 2014-TIOL-58-SC-CX)