Bombay High Court
Godrej And Boyce Manufacturing Co. Pvt. ... vs Union Of India And Others on 1 January, 1800
JUDGMENT
1. The petitioners mananfacture, tnter alia refrigeratros. These refirgerators are classified under Item 29A of the Frist Schedule to the Central Excises and Salt Act, 1944 for the purpose of payment of excise duty. The refirgerators manufactured by the petitoners are sold by them to wholesale dealers in Bombay as well as outside Bomabay.
2. the refirgerators sold to the wholesale dealers in Bombay are supplied wrapped in a polythene cover. Refrigerators which are sold and delivered by the petitioners to wholesale dealers outside Bombay, are packed in a special secondary packing in order to protect them against damage through handling and transit. this secondary packing consits of a double-faced corrugated fibre box, its fitments and a wooden base. The petitioners levy a separate charge for this sceondary packing, under a separate invoice. At all material times the charge so levied was Rs. 150/- per package for 'N' Model refrigerators and Rs.115/- per package for 'P-3' and P-4' m9dels. After April 1982, the charges were increased to Rs. 200/- and Rs. 165/- respectively.
3. The practice of levying a separate charge for secondary packing has been invogue for a long time. The petitoners, during the relevant period,sold apporximately 40% of their erfrigerators to wholesale dealers in Bombay, wrapped in a poluthene cover. The balance 60% of the refrigerators were sold and dlivered to wholesale dealers outside Bomaby.
4. It is the case of the petitones that these refirgerators are sold at the factory gate to wholesale dealers in Bomaby without the special secondary packing. Such special secondary packing is neither essential nor necessary for the purpose of marketing the refirgerators in the wholesale market. The charge levied for such packing should, therefore, not be added to the wholesale price for the calcutation of exicse duty payable on the refrigerators.
5.Under rule 173-C of the Central Excise Rules the petitones filed a price list dated 20th October 1977. For arriving at the assessable value of the refrigerators under section 4 of the Central Excises and Salt Act. 1944, the petitioners did not add to the whlesale price the value opf the special secondary packing. In other words, the price list dod not cover the charge for secondary packing. By an order dated 12 th January 1978 the Assitant Collector of Central Excise rejected the petitoners' claim for exclusion of the value of the secondary packing fromthe assessable value of the refrigerators under SEction 4. the petitioner filed an appeal dated 11th April 1978 before the Appellate Collector, Certral Excise under Section 35 of the said Act. By his order dated28th October 1980 the Appellate Collector upheld the submissions made on be half of the petitiioners. He held that the assessable value of the secondary packing. Thereafter, no further proceedings ere adopted by respomdent No.1 by way of revisoin and /or review. The order of 28th October 1980, therefore, became final under ythe providsions of Section 35(2) of the said Act.
6. Consequent upon the order of 28th October 1980, the Assistant Collector of Customs passed several orders granting refunds of the excess amount collected as excise duty on the value of the secondary packing. The petitoners had paid these amounts under protest. The petitioners were also permitted to take credit in repect of the amounts ordered to be refunded in the R.G. 23 Register maintained under Rule 56A. the total sum so refunded amounted to RS. 7,27, 250.44 for the period from July 1980 to November 1980. Thereafter, the petitoners were allowed to clear thewir REfirgerators onpayment of excise duty calcuated on their assessable value without adding to it the value of secondary packing in repwct of sales made outside Bomaby.
7. the petitioners thereafter received several show cause notices from the Superintendent of Central Excise. there show cause notices were dated 23rd Novmber 1982, two show cause notices were dated 5th April 1983 and one show cause notice was dated 11th Janary 1983. the show cause notices of 23rd November 1982, two show cause notices were dated 5th April 1983 required the petitoners to show cause why the value declared by the petitoner coompany in its several price lists filed from time to time. they required the petitioners to show cause why excise duty sopught to be levied as a result, should not be recovered under Section 11A of the said Act.
8. The show cause notice of 11th January 1983 required the petitoners to show cause why the amounts "erroneously" refunded incash to the petitoners should not be recovered from them. This notice covered the refunds granted for the period from July 1980 to November 1980.
9. The petitioners have challenged these show cause notices as being without jurisdiction. They have also submitted that the issue is concluded by the order of the Appellate Collector dated 28th October 1980 which is final and binding on the Department. The petitiners have also submitted that the show cause notices amount to an attempt by a subordinate officer to review the order passed by a superior officer and such a review is wholly without jurisdition. The petitioners have submitted a chart relating to these show cause notices, the period which they pertain and the amounts claimed under these show cause notices, in order to show that a substantial protaion of the claim which is of section 11A of the Central Excises and Salt Act. The chart so submitted by the petitioners is set out as an appendix to this judgment.
10. On merits the petitioners have submitted that the packing in question is secondary packing, specifically supplied at the request of the wholesale dealers outside Bombay. The packing is separately charged for. The charges levied for such packing cannot be added to the price for the purpose of arriving at the value of the goods under section 4(4)(d)(i) of the Central Excises and Salt Act.
The petitioners are relying upon the decision of the Supreme Court in the case of Union of India and Others v. Bombay Tyre International Ltd., reported in 1983 E.L.T. 1896 (S.C.) in support of thier submission.
11. The first challenge is to the show cause notices themselves. These show cause notices were issued long prior to the decision of the Supreme Court in the case of Union of India v. Bombay Tyre International Ltd. The operative part of the order in the above case was delivered in May 1983 and the resoning and judgment were delivered in October 1983. These notices, however, were issued prior to May 1983 and they pertain to a period which is much prior to May 1983, when the order of the Supreme Court in the case of Union of India and Others v. Bombay Tyre International Limited was delivered. The law and its interpretation, therefore had not been affected in any way by the above Supreme Court decision at the time when the show cause notices were issued.
12. The validity of the show cause notices will be judged as on the date of issue of these notices. At the date when these notices were issued, the question whether secondary packing supplied by the petitioners should be included in the value of the refrigerators or not, was concluded by an order of the Appellate Collector passed on 28th October, 1980. The Appellate Collector was, in terms, required to consider the very same special secondary packing. The Appellate Collector had held that the value of such of such special secondary packing should not be included in the value of the refrigerator of the petitioners for the purpose of levy of excise duty. This finding was given in respect of an earlier period. But there was no change, either in the facts or in the law, at the time when the impugned show cause notices were issued. The earlier order of the Appellate Collector was therefore binding on the Department. The department was under an obligation to follow the earlier order.
13. In the case of Mercantile Express Co. Ltd. v. Assistant Collector of Customs and Others reported in 1978 E.L.T. (J 552) the Calcutta High Court held that the Customs authorities were bound by their own decisions in administering taxing statutes. It observed :
"The custom now say that they are not bound by their previous dicisions. Whether the doctrine of precedents applies in its full rigour to Administrative Agencies and Officers, and whether a reasonable latitude should be given to them or administrative tribunals to correct or modify their previous decisions may still temain debatable cotroversy in the world of law; nevertheless I am clearly of the opinion that neither the Appraiser not the Collector of Customs can change his mind from time to time in espect of the same articles by assessing them in the case of one importer under one section and them assessing them for another importer under different sectin. To allow the Customs to do so will lead to utter confusion on the very basis and principles of taxation and grave uncertainty in business and foreign trade of India."
What is true of Customs authorities is equally true of Excise authorities, and the observations of the Calcutta High Court apply with even grater forec in the case of the same assessee who is southt to be taxed differently for the same article.
14. The Delhi High Court in the case of Bharat Carpets Ltd. v. Union of India reported in 1978 E.L.T. (J 111) was required to consider an order passed in revision under Section 36. It held that the order in revision for one period is binding on the taxing authorities even for subsequen periods.
15. In the case of I. B. M. World Trade Corporation v. Union of India reported in 1980 E.L.T. 274 (Bom.) this High Court has also held that once a finding is given by asuperior authority on contentions raised before it, it is binding upon the subordinate authorities in subsequent proceedings, unless some other material is brought to their notice, which compels them to take a contrary view. The court was concerned with the levy of countervailing duty in the case. The same principle would apply to the levy of excise also. In the present case not other material was before the subordinate authorities at the time when the show cause notices were issued, which would warrent a different view being taking by the subordinate authority for either the pervious or subsequent years or the same years.
16. In the show cause notices it has been stated that on enquiry and verification of the invoices it is found that the assessee has revcovered extra charges on packing for upcountry deliveries of refrigerators from their factory at the time of their emoval. This fact is not a new fact discovered for the first time when the show cause notices were issued. Recovery of extra charge for packing on upcountry delivery of refrigerators was not merely known to the department, but its inclusion or not-inclusion in the value for the prupose of excise with the subject-matter of departmental adjudication culminating in the order of the Appellate Collector dated 28th October, 1980. These order had become final and binding at the time when he when show cause notices were issued. It was therefore not open to the respondents to issue these show cause notices.
17. Mr. M. H. Sethna learned counsel for the respondents has submitted that these show cause notices must be examined in he light of the decision of the Supreme Court in Union of India v. Bombay Tyre International (Supra). According to him, by virtur of the decision of the Supreme Court the position in law has changed. In the light of this fact the shw cause notices should be held as justified and they cannot be said to be without jurisdiction. If these submissins were to be accepted, it would amount to upholding the validity of the show cause notices on the basis of the subsequent change in the law (assuming that there is such a change). There is no warrant for such a positon being accepted in law, especially when no retrospective change in the law has taken place.
18. In the case of Jenson and Nichloson (India) Limited and another v. Union of India and others reported in 1984 (17) E.L.T. 4(Bom.) this High Court was required to consider a case where the petitioners had filed a price list in June 1977 claiming certain deductions. The Assistant Collector of Central Excise by his order of 1st September, 1979 had allowed onluy some of the deductions claimed by the petitioners and not othes. In respect of the deductions which had not been allowed, the p[etitioners preerred an appeal and thereafter a revision application. In the meantime, the Supreme Court deliveed the judgment in the Bombay Tyre International Ltd. case. The court held that in respect of the deductions which were not the subject-matter of appeal and revision, the order allowing the deduction had become final. The reviewing authority had also not issued any notice in respect of those funds. It could not therefore, the contended that the deduction had been wrongfully allowed. In other words, it is not open to the respondents to support the show cause notices on the basis of any subsequent changes in law (assuming that there is such change). At the highest,as a result of any subsequent chage in law, the respondents may be entitled to e-open and/or review any orders pervioulsy passed if they are so entitled under any of the provisions of law. They would also have to exercise such a right within the time prescribed by law. The present show cause notices are not issued in the exercise of any powers of review nd/or revision under Sections 35A or 36 of the said Act, as than in force. They are without jurisdiction.
19. Under Section 11A of the Central Excises and Salt Act, 1944 "when any duty of excise has not been levied or paid or has been short- levied or short-paid or erroneoulsy refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which had been short-levied or short-paid or thowhom the refund has erroneoulsy been made, requiring him to show cause why he should not pay the amount specified in the amount specified in the notice."
Sub-section 3(ii) defines the "relevent date" as follows : "(3) ... ... (i) ... ... (ii) "re levant date" means-
(a) in the case of excisable goods on which duty of excise has not been livied or paid or has been short-levied or short-paid-
(A) Whereunder the rules made under this Act a monthly return showing particualrs of the duty paid on the excisable goods removed during the months to which the said return relates, is to be filed by a manufacturer or producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed.
(B)
20. Mr. Sethna objected to any notice being taken of these letters. In view of this objected to I am not relying upon these letters. Mr. Sethna however, is not right in contending that only such special secondary packing can be excluded which is provied at the instance of wholesale buyers. The observation of the Superme Court in relation to special secondary packing provided by the assessee at the instance of a wholesale buyer is an instance of special secondary packing which is not generally provided as a normal fature of the wholesale trade. The ratio laid down by the Supreme Court is that when secondery packing is such that it is not normally provided in the wholesale trade, its cost has to be excluded. The cost of such secondary packing as is provided when goods are sold in the wholesale market at the factory gate is to be included in the wholesale price of the goods for excise pruposes. it is an accepted positon that at least 40% of the petitioners' goods are sold in the wholesale market in packing which the goods are sold at the factory gate in the wholesale market by the petitioners. The secondaruy packing, therefore, which is provided by the petitioners when goods are transported and delivdered to wholsale dealers outside Bombay and which is separately charged for by the petitioner under a sepatate invoice cannot be considered as packing which is a normal fature of the wholesale trasde for the petitioners' refrigerators. The special secondaryb packing in question cannot be included in the wholesale cash price of the petitioners' refrigeratirs, for excise purposes.
21. The rule is therefore made absoulte in terms of prayers (a) and (b).
22. The respondents will pay to the petitioners costs of the petition.