TMI Blog1990 (12) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... e full duty is levied on exempted goods and subsequently as a result of applying the exemption notification, the excess duty is refunded, whether as per clause (i) of the 2nd part of the explanation to 4(4)(d)(ii) of the Act, such excess amount (i.e., the difference between the full amount of duty and the duty payable at reduced rate) the benefit of which is not passed on to buyers becomes part of the normal price? 2. Brief facts of the case, to the extent necessary for answering the questions referred for our opinion, are as follows: The respondent - Alembic Glass Industries Limited, was engaged in the manufacture and sale of glass and glass-wares at its factory situated in White Field near Bangalore. During the year 1975, the respondent filed the price-lists of their products before the Superintendent of Central Excise, Bangalore, for the purpose of enabling the Excise Department to levy the excise duty leviable under the provisions of the Central Excises and Salt Act, 1944 ("the Act" for short). In the price lists the respondent stated that cartons and packing materials used for packing the glass and glass-ware articles, manufactured and sold by the respondent, were being su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as it challenges the validity of Section 4(4)(d)(i); (ii) We quash the impugned show cause notice issued by the Assistant Collector (Exhibit-B)." (Underlining by us) After the above order, the respondent made an application before the Assistant Collector of Central Excise - the second appellant, claiming refund of Rs. 42,78,947.07 which was the amount of excise duty paid by the respondent on the value of the packing material during the period commencing from 2-12-1975 to 14-5-1985. There is no dispute that the amount of excise duty paid by the respondent during the aforesaid period was, as stated by the respondent. The 2nd appellant, however, granted a refund of Rs. 27,89,502.00. He rejected the claim for refund of Rs. 14,80,663.00. The basis on which the Assistant Collector granted only a partial refund was that during the period commencing from 2-12-1975 to 14-5-1985 as disclosed by the bills under which the goods manufactured by the respondent were sold, the respondent had collected excise duty to the extent of Rs. 42,78,947.07 and as the respondent failed to answer a specific query made by the 2nd appellant as to whether the respondent was going to refund the amount to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty paid on the value of the packing material as no such excise duty was leviable as held in W.P. No. 5995 of 1975 [1986 (24) E.L.T. 23 (Kar.)] even though the respondent had not passed on the benefit to the buyers. 4. In the appeal, it has been the contention of the appellant that the method of ascertaining the value in relation to excisable goods is clearly laid down in Section 4(4)(d)(ii) of the Act, and accordingly the computation has been made by the 2nd appellant strictly according to that provision, in that as the amount of excise duty on packing material charged and collected from the customers was no longer excise duty in view of the Judgment of this Court in W.P. No. 5995 of 1975 [1986 (24) E.L.T. 23 (Kar.)] and the respondent was not refunding that amount to the customers, the same had to be treated as part of the value of the goods and when so treated Section 3 of the Act got attracted, and the appellants had the power and duty to collect excise duty on that amount and that is what exactly has been done, as a result of which Rs. 14,80,663/- was the excise duty payable on Rs. 42,78,947.07 and therefore deducting the excise duty the balance has been refunded. 5. Per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sum total of - (a) the effective duty of excise payable on such goods under this Act; and (b) the aggregate of the effective duties of excise payable under other Central Acts, if any, providing for the levy of duties of excise on such goods, and the effective duty of excise on such goods under each Act referred to in clause (a) or clause (b) shall be (i) in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to, or reduction of duty of excise under such Act on such goods equal to, any duty of excise under such Act, or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), already paid on the raw material or component parts used in the production or manufacture of such goods) from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act in respect of such goods as reduced so as to give full and complete effect to such exemption; and (ii) in any other case, the duty of excise computed with reference to the rate specified in such Act in respect of such goods. (e) 'wholesale trade' means sales to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyers, there would have been no other alternative for the 2nd appellant ]to refund the entire amount of excise duty which the respondent had charged and collected from the buyers and had paid it to the Central Government, as in that event that part of the amount could not have become the component of the value of the goods. But admittedly the respondent had not and was not agreeable to refund the amount of excise duty collected even after it ceased to be the excise duty in view of the decision of this Court in W.P. No. 5995/1975 [1986 (24) E.L.T. 23 (Kar.)] and in view of this, the said amount not being one of the items specified in Section 4(4)(d)(ii) of the Act which are required to be deducted out of the wholesale price charged by the respondent to the buyers concerned to ascertain the value of the goods chargeable to excise duty under Section 3, it had to be added to the value of the goods and the appellants were entitled to collect excise duty on that part of the amount and that was what has actually been done by the 2nd appellant. 8. In support of his contention that in arriving at the value of the goods chargeable to excise duty under the Act, no other item can be deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method adopted by the 2nd appellant in computing the amount to be refunded to the respondent was correct, for, out of the wholesale price charged in the bills by the respondent no item other than those specified in Section 4(4)(d)(ii) of the Act could be deducted. Therefore he submitted that all the three questions referred for the opinion of the Full Bench should be answered in favour of the appellants. As regards the Division Bench decision of this Court in Mangalore Chemical and Fertilizers' case [1986 (23) E.L.T. 48 (Kar.)] in which, on interpretation of Section 4(4)(d)(ii) of the Act it was held that no excise duty was leviable on that part of the amount of excise duty collected in excess from the buyers without passing on the benefits of exemption or reduction in the rate of excise duty, the learned Counsel submitted the interpretation was erroneous. 9. Shri Dushyant Dave, the learned Counsel appearing for the respondent, however, contended that the amount of excise duty which the respondent had charged and collected from its buyers and paid to the Government under protest, cannot at all be added to the value of the goods, after the decision of this Court holding that exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated in the bill lost the character of excise duty. If that amount were to be refunded by the respondent to the buyer, undoubtedly the appellants had no other alternative than to refund the said amount, as admittedly the respondent had paid that amount to the appellants as excise duty. It is for this reason the 2nd appellant addressed a letter dated 26-11-1987 (Annexure-E) to the respondent. Relevant portion of the letter reads:- "2 Please refer to your refund claim for Rs. 42,78,947.07 filed on 6-2-1985. While you submitted the above claim you did not enclose the duty paying documents which were necessary to be enclosed for the purpose of finalisation of the claim. However, as you are aware, action is being taken by the Superintendent of Central Excise, Whitefield Range, to verify the claim with the duty paying documents which are in your custody. 2. In the meantime, I would request you to intimate whether you are passing on the benefit of the refund as claimed by you, to the customers and in case you are doing so, you may please state the names of the parties to whom you are passing on the benefit, the amount which is being passed on and as to the mode of transfer of the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case in Mangalore Chemicals and Fertilizers - 1986 (23) E.L.T. 48 (Kar.) were these: The petitioner therein was engaged in the manufacture of caustic soda. It was liable to excise duty being a goods specified at Item 14-B of the First Schedule to the Act. In exercise of the power under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government issued a notification dated 16-6-1976 under which it granted exemption from payment of excise duty on Caustic Soda, subject to certain conditions. Thereafter, a trade notice dated 21-3-1977 was issued by the Collector of Central Excise. The relevant portion of the notice reads:- "Subject: Central Excise — Scheme of Excise Duty — Relief to encourage higher production — Reg. Attention of the trade is invited to Government of India Notification No. 198/76-C.E., dated 16-6-1976, communicated in this Office Trade Notification No. 173/76, dated 21-5-1976, wherein the Government of India had brought into force a Scheme in June, 1976 under which manufacturers of specified commodities would be entitled to 25% reduction in the Central Excise duty leviable on clearance of their manufactures which were in excess of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aggregate of excise duty payable on such goods under any other Central Act. The effective duty or the duty actually chargeable or payable only should be exempted or excluded. What is chargeable is only the real or actual excise duty chargeable under the Act or other Central Acts thereto on such goods. This is the first general import of the explanation and has no relevance to the other part of the explanation relating to cases of exemptions granted by Government with which we are primarily concerned, which however is closely interlinked with the first. The second part of the explanation provides that in computing the effective or actual excise duty referred to in clauses (a) and (b) to which exemption have been granted by Government, then so much of duty that is actually paid by the assessee shall alone be computed. In other words, only the duty as reduced and actually paid on the manufactured goods should be excluded in determining the assessable value of such manufactured goods. In deter mining the assessable value of goods, that are not governed by exemptions either partial or whole, the duty chargeable under the Act had to be excluded. But in cases of exemptions only the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which reduction or exemption is granted, out of the wholesale price charged, by a manufacturer to the buyer, only the actual amount of excise duty payable has to be deducted and no deduction of an amount calculated at the rate of excise duty payable in the absence of exemption or reduction, can be granted. Similarly there is no controversy about paragraph 30 in which, the Division Bench said that it was competent for the Government while granting exemption from or reduction in excise duty, to impose a condition that exemption or reduction could be availed if only the benefit is passed on to the consumers. But the controversy is about the view expressed at paragraph 31 in which the Division Bench said, that it was not the requirement of the explanation that if the benefit of exemption is not passed on to the consumers excise duty is leviable on that part of the amount not passed on. 13. We proceed to analyse the correctness of the view taking the very illustration given by the Division Bench at paragraph 29. (1) If on manufacture of goods 'A' the excise duty payable is Rs. 100/-, but the Government has reduced the duty by Rs. 50/- in determining the assessable value, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith effect from 1-4-1975 is: (1) That for ascertaining the value of the goods, for the purpose of levy of excise duty, only the amount of actual duty payable alone should be deducted from the total wholesale price charged and collected from the buyers. Therefore, in cases of reduction in the rate of excise duty, the deduction permissible is the amount of excise duty payable at the reduced rate, and in the case of total exemption from payment of excise duty there is no question of deduction at all. In other words, in both types of cases the manufacturer cannot claim deduction at the rate of excise duty prescribed. To this extent, the view expressed by the Division Bench in Mangalore Chemicals and Fertilizers -1986 (23) E.L.T. 48 (Kar.) is correct and we respectfully agree. (2) But if in a given case, notwithstanding the grant of exemption from payment of excise duty or reduction of excise duty it is found that a manufacturer has actually charged and collected excise duty by not passing on the benefit of exemption or reduction to the buyers, as the amount so collected does not fall under any of the deductible items specified in Section 4(4)(d)(ii) the same has to be added to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As a result the amount to which the manufacturer would be entitled to refund would be the amount that had been collected from the buyer which had lost the character of excise duty, minus the excise duty payable on that part of the amount. 17. The learned Counsel for the respondent, however, contended that Section 4(4)(d)(ii) had no application at all while considering an application for refund under Section 11B of the Act. The relevant portion of the said section reads:- "Sec. 11B Claim for refund of duty. - (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date. Provided that the limitation of six months shall not apply where any duty has been paid under protest." As can be seen from the above provision, any person claiming refund of any excise duty is entitled to make an application before the Assistant Collector. When such an application is made, the authority has to decide as to whether the applicant is entitled to refund and if so, as to the exact amount of refund to which the applicant is entitled to. In order to find out a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
