Gauhati High Court
Sarada Plywood Industries Ltd. vs Union Of India (Uoi) on 28 September, 1994
Equivalent citations: 1994(74)ELT528(GAU)
JUDGMENT J.N. Sharma, J.
1. C.R. No. 581/87. This application under Article 226 of the Constitution of India has been filed challenging the legality and validity of the impugned Trade Notice dated 1-4-1987 vide Annexure-C and communications dated 6-4-1987, 9-4-1987 and 23-4-1987 vide annexures D1, D2 and D3 respectively issued by the Assistant Collector of Customs and Central Excise, Dibrugarh and the communications dated 10-4-1987 and 24-4-1987 issued by the Superintendent of Customs and Central Excise, Naharkatia Range-III, Dibrugarh with a prayer for quashing the same.
The Trade Notice No. 2/87 reads as follows :-
"where the assessee sells their commodities at the factory gate as per Section 4(1)(a), as well as from sale depot as per Section 4(2) of the Central Excises and Salt Act, 1944, in wholesale and the unit billing price at these two points of sale is different, he shall likewise file one price list in Part-I for factory and gate sale and another price list in Part-II for selling Depot sale simultaneously. He may also file price list in other Part i.e. from Part II to VII depending upon pattern of sales etc. as per requirement under Section 4 ibid."
2. Annexure D-I is a notice on the subject of determination of assessable value under Section 4. By that notice the Company was directed to submit a separate price list in proper form for the depot sales w.e.f. 6-4-1987 alongwith sufficient documents covering factory gate sales as well as depot sales for determination of correct assessable value. By Annexure D-2 it was stated "that as regards sale of your subject products from different sale depots you should submit a separate price list in proper form for approval of assessable values in question". Annexure D-3 is also a direction to submit a separate price list in proper form for sales of plywood products from different sale depots w.e.f. 11-3-1987. Annexure E-1 is also a notice by which the petitioner was requested to submit a separate price list in proper form for depot sales w.e.f. 6-4-1987. Annexure E-2 is a notice in pursuant to Trade Notice No. 2/87 dated 1-4-1987 issued by the Assistant Collector of Customs and Central Excise laying down necessary guidelines regarding the procedure for submission of price list and classification list.
3. The brief facts are as follows :-
That the petitioner is a company and had owned a factory at Joypore in the district of Dibrugarh in the State of Assam. The petitioner company manufactures various types of plywood and other timber products. The petitioner company has a wide and diversified market throughout the country for its products. The petitioner company sells portion of the various goods manufactured by its factory at Joypore to wholesale buyers at the factory gate at Joypore whereas the remaining goods are sold by the petitioner company to a similar class of wholesale buyers throughout the country from the various sale depots set up by the petitioner company in Calcutta, Delhi, Bombay, Ahmedabad, Madras, Kanpur, Visakapatam and such other cities and naturally the prices of the products are different from the prices prevailing at the factory gate. The products of the company are assessable to excise duty under the provision of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). Such duty is leviable ad valorem under the various provisions of the Act and in accordance with the procedure prescribed by the Central Excise Rules, 1944 (hereinafter referred to as the Rules). Such products are assessable to excise duty ad valorem at the rate prescribed under the provisions of the Central Excise Tariff Act, 1985 (Act 5 of 1986). The products manufactured by the petitioner Company fall under Chapter 44 of the aforesaid Central Excise Tariff Act, 1985 which deals with "wood and wood-products". The value of such goods for the purpose has to be determined in accordance with the provisions of Section 4 of the Act. Section 4 of the Act stipulates the various methods for determination of the value of excisable goods for the purpose of assessment to excise duty and the said section both amended and non-amended are quoted below :-
Section 4 before its amendment by Act XXII of 1973, Section 4 read as follows :-
"4. Determination of value for the purpose of duty. - Where under the Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be -
(a) the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or
(b) where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or not capable of being sold at such place, at any other place nearest thereto.
Explanation. - In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of the duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid."
Parliament enacted XXII of 1973 which substituted a new Section 4 for the original provision with effect from October 1, 1975. The new Section 4 provides :-
"4. Valuation of excisable goods for purpose of charging of duty of excise -
(1) Where under the Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to other provisions of this section, be deemed to be -
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale:
Provided that -
(1) where in accordance with normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each [such price shall subject to the esistence of the] [sic] other circumstances specified in clause (a) be deemed to be the normal price of such goods in relation to each such class of buyers; (ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in Clause (iii) of this proviso the price or the maximum price, as the case may be, so fixed, in relation to the goods so sold, be deemed to be the normal price thereof;
(iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail;
(b) where the normal price of such goods is not ascertainable for the reasons that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.
(2) where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price."
It is stated by the petitioner that Section 4(l)(a) embodies the concept of factory gate sale which is the basis of determination of value of the goods for the purpose of excise duty. This sale, of course, is subject to other conditions mentioned in the section. Section 4(2) of the Act postulates that when the price of any excisable goods at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. It is contended that it has been inconsistently held by the Apex Court under the old Section 4(a) that the value of an excisable article for the purpose of levy to excise duty should be taken to be the price at which the excisable article is sold by the assessee to a buyer at arm's length in the couse of the wholesale trade at the time and place of removal namely, at the factory gate. It is further contended that the new Section 4 to the Act does not create a scheme in any way materially different from that embodied in the old Section 4. The Section 4 was made merely more comprehensive. There is no basic change or difference of the method of computation of the value of the excisable goods for the purpose of assessment to Central Excise duty. It is further contended that whereas the value of the goods under Section 4(i)(a) of the Act is ascertainable, there is no scope for invoking the later provisions of Section 4(i)(a) for the purpose of determination of value for assessment of excise duty. Rule 173B provides that prior to removal of any excisable goods, an assessee is required to file before the proper officer for necessary approval a list of goods in the prescribed form showing full description of all excisable goods produced or manufactured by such an assessee as well as all other goods produced and manufactured and intended to be removed from the factory. Rule 173C enjoins upon every assessee the duty of submission of the price list of all excisable goods manufactured or produced by such an assessee. Such price list is to be submitted in the prescribed form who may approve the price list after making suitable amendment and/or modification to the said list. Seven different Forms in Part-I to VII have been prescribed and the assessee is required to submit the price list in any of the Forms depending on the part of Section 4 of the Act under which the assessable value is ascertained. Rule 173C is directly related to the method of valuation under Section 4 of the Act. It is contended that there being factory gate sales of the goods manufactured by the petitioner company and all conditions under Section 4(i)(a) being present, the assessment of the entire goods manufactured by the company is to be made on the basis of the factory gate price under Section 4(i)(a) of the Act and the company is liable to pay excise duty on its entire production on the basis of the value of the goods determined on the basis of such factory gate prices. On a correct interpretation of Section 4 of the Act, when the value of any excisable goods can be determined under Section 4(i)(a) of the Act, for the purpose of assessment to duty, the other provision of Section 4 cannot be resorted to for determination of value for the purpose of assessment. The price list which has been submitted by the petitioner company under Rule 173C was approved by the authority and the Company has been clearing all the goods manufactured by it after payment of duty on the assessable value determined with reference to ex-factory wholesale prices in accordance with such price lists. The petitioner company has also been submitting monthly returns in Form No. RT 12 along with copies of the gate passes of the goods cleared from the factory. The Respondents made final assessment in respect of Central Excise duty payable to the petitioner company on the basis of separate orders for different period of time. The respondent No. 2 purported to issue a Trade Notice No. 2/87 dated 1-4-1987 (Annexure-C) the Respondent No. 2 asked the petitioner company to file one price list in Part-I for the factory gate sale and another price list in Part-It for its depot sales. Thereafter communications dated 6-4-1987, 9-4-1987 and 23-4-1987 were received by the petitioner company from Respondent No. 2 asking the company to submit separate price lists in proper form for its gate sales/depot sales for determination of correct assessable value. These three communications are Annexures D-1, D-2 and D-3 respectively. Subsequently, the company also received two different communications dated 10-4-1987 and 24-4-1987 from the respondent No. 3 asking the petitioner company to comply with the said requirements. These two communications are Annexure E-1 and E-2 in the writ application. Hence this Writ Application.
5. I have heard Mr. M.L. Lahoty, learned counsel for the petitioners and Mr. K.N. Choudhury, learned C.G.S.C.
6. An affidavit-in-opposition has been filed on behalf of the respondents. In paragraph 4 of the affidavit-in-opposition it is stated as follows :-"Except a small percentage at the factory gate, the company sells 85% to 95% of their goods through their different sale depots at different prices to buyers of different areas as per Section 4(i)(a) of the Act."
In paragraph 7 it is stated as follows :-
"that the value of the goods for the factory gate sales was already determined under Section 4(i)(a) of the Act.... That the price prevailing at the factory gate is not the same as in the sale depot. They clearly submitted that the normal price at factory gate is different from sale depots. When the prices in the sale depots are different, they need submission of price list in Part-II under Section 4(i)(a) proviso (i) of the Act for determination of value after making permissible deduction under Section 4(2) and 4(4)(d) for the goods attached and sold from different sale depots. The goods sold at the factory gate i.e. at the time of place of removal under Section 4(1)(a) has got no relation with the goods sold at different prices from different sale depots...."
7. The contention that the prices of goods are different at the depot sales with the prices of the factory gate and that is the basis for determination of value is contrary to Section 4(l)(a) of the Act.
8. From the records of the petitioner it is evident that 85% to 95% of goods are sold through their different sale depots at different prices to buyers of different areas. The remaining 5% to 15% are sold at the factory gate at the ex-factory wholesale price. As the value of sale depots is different from the price of factory gate sales price, the petitioner is legally bound to submit price list under Section 4(1)(a) proviso (i). The approval of the price list for factory gate sales is admitted by the Deponent. That with regard to the Trade Notice the submission is made in paragraphs 34, 35, 36 and 37, which reads as follows :-
"34. That with regard to the statement made in para 37 of the writ petition the deponent begs to state that Trade Notice issued is not a supplemental instructions. The instructions were issued as per Board's letter F. No. 35/16/36-CX dated 19-9-1956 for assessees' guidance.
35. That with regard to the statement made in para 38 of the writ petition, the deponent begs to state that the Trade Notice dated 1-4-1987 was issued for submission of price list and classification list correctly under Rule 173C of the Central Excise Rules, 1944.
36. That with regard to the statement made in para 39 of the writ petition, the deponent begs to state that it is a general instruction issued to all assessees for their guidance under Board's letter as mentioned in para 37.
37. That with regard to the statement made in para 40 of the writ petition, the deponent begs to state that even if the trade notice is treated as null and void, the actual position of submission of price list in Part II in accordance with Section 4(1)(a) proviso (i) remains unaffected as because the assessees were not asked for submission of price list in pursuance of this Trade Notice, but on the factual position of their pattern of sale, reaslisation of different price at sale depots etc."
9. An objection is taken also regarding the maintainability of the writ application on the ground of no other alternative remedy.
10. An affidavit-in-reply was filed which reads as follows :-
"The consistent view of the court while interpreting Section 4 is that when normal price under Section 4(i)(a) is ascertainable, assessment of the entire goods manufactured by an assessee is to be made at the basis of sales at such normal price, whatever may be the quantum of such sale.
There is no scope for invoking the later provision of Section 4 for determination of the value of assessment of duty as soon as it becomes clear that normal price under Section 4(i)(a) is ascertainable in respect of goods manufactured by the petitioner company.
The quantum of sale at the factory gate is not relevant for making assessment under Section 4(i)(a). All that the law requires for the purpose of assessment is that normal price at the place of removal should be ascertainable and merely because only a small quantity of goods are sold at the factory gate, would not disentitle the petitioner company from clearing their goods on payment of duty by making assessment under Section 4(i)(a) of the Act.
It was within the knowledge of the respondents that the petitioner company used to sell about 85% to 90% of the goods manufactured through different sale depots and at all relevant times, it was within the knowledge of the Central Excise Department that the prices of the company's goods were higher as the depot prices included permissible addition over and above the ex-factory prices. The price realised at the factory gate for the goods manufactured by the petitioner company was the normal price from an unrelated person in normal course of business where price was the sole consideration for the sale made. The Trade Notice No. 2/87 dated 1-4-1987 was issued without any jurisdiction and in clear contravention of the statutory provision relating to assess the value of excise duty and as such the Trade Notice is invalid in the eye of law. Once the price under Section 4(i)(a) is determined, there is no power to take resort to other part of the section. The Trade Notice dated 1-4-1987 is clearly outside the ambit of the Central Excise Act and the Rules framed thereunder. The direction for filing of price list and valued the goods in a part manner is unauthorised by law. The Trade Notice dated 1-4-1987 is without any authority of law and as such it is violative of the Article 226 of the Constitution of India.Civil Rule No. 1388/87
11. This Civil Rule has been filed by Shri S.M. Dutta, Executive Director, Sarada Plywood Industries Ltd. and Shri P.D. Chitlangia, Managing Director, Sarada Plywood Industries Ltd. The prayers made in the writ application are to quash the notice dated 30-11-1987 vide Annexure-C and restraining the defendents from taking any action vide notice dated 30-11-1987.
12. The brief facts are as follows :-
That the price lists submitted by the Company were approved and final assessment was made by the authority in respect of Central Excise duty. Further, the show cause notice as alleged that the company sold about 90 per cent of the goods manufactured by its different branches/depots located in various parts of the country and the factory gate sale prices cannot be the value of their products for the purposes of Section 4 of the Act and the Rules and that the prices at which the goods were sold from the depots should be the assessable value of the goods manufactured by the company, and regarding the sale of the goods at the depots, there was mis-statement and suppression of facts and by resorting to such mis-statement and suppression, the company has evaded the payment of excise duty to a tune of Rs. 1,28,00,673.29 ps during 1-8-1983 to 15-4-1984. By the aforesaid show cause notice the company was asked why the said amount should not be realised in terms of Section 11A of the Central Excises and Salt Act, 1944 and Rule 9(2) of Central Excise Rules. The petitioner company was also asked to show cause as to why the penalty should not be imposed on the company under the Rule (1) of the Rules. It is contended in the writ application that power under Section 11A of the Act cannot be exercised in the facts and circumstances of this case. The value of the entire excisable goods manufactured by the company for the purpose of assessment to excise duty has to be made on the basis of the factory gate prices under Section 4(i)(a) of the Act.
13. An affidavit-in-opposition has been filed on behalf of the respondents. Their case is that this application is not maintainable as there are other adequate alternative remedies available under the Act and for that purpose number of cases have been relied in the Affidavit-in-opposition (but at the time of arguments none of the decisions were placed before me). The next contention is that the price prevalent at the factory gate sales cannot be the basis for assessment and the respondents have right to show cause.
An affidavit-in-reply has been filed wherein it is stated that the impugned show cause notice is misconceived, erroneous and issued in colourable exercise of power with a view to harass the petitioner company. The other facts stated in the affidavit-in-reply are the same matter as in the other writ application.
C.R. No. 1242/8814. This application has been filed by Shri S. Ahmed, Managing Director and Shri S. Ahmed, Director of Upper Assam Plywood Products Pvt. Ltd. and in that Civil Rule the validity and legality of show cause notice dated 8-4-1987 vide Annexure-1 is challenged. The other facts are same as with the earlier case. There was a factory gate sale and products manufactured by the company were sold by its different branches and it is contended that the prices prevalent at the gate sales must be the price used for assessing the products for excise duty. It is also stated that the company submitted price list and same was approved by the authority. It is also stated that the taxes were assessed and adjudicated. The respondents issued show cause notice for a tune of Rs. 49,18,205.90. for the period from 1-4-1982 to 19-3-1986.
15. An affidavit-in-opposition has been filed on behalf of the respondents on the same line as in the other cases.
C.R. No. 592/8716. This Civil Rule has been filed by the Sarada Plywood Factory Pvt. Ltd. in regard to the validity and legality of show cause notice dated 29-1-1987 Annexure-B to the writ application. This show cause notice is for Rs. 1,24,99,453.48 ps. for the period from 1-1-1982 to 31-12-1982. The other facts are same. An affidavit in opposition and affidavit-in-reply has been filed.
C.R. No. 1387/8717. This Civil Rule has been filed by M/s. Sarada Plywood Industries Pvt. Ltd. for challenging the legality and validity of show cause notice dated 30-11-1987 Annexure-C to the writ application. The show cause notice is for Rs. 1,28,00,673.29. for the period from 1-1-1983 to 15-4-1984. The other facts are same.
C.R. No. 593/8718. This Civil Rule has been filed by M/s. Sarada Plywood Industries Pvt. Ltd. challenging legality and validity of the notice dated 29-11-1987 vide Annexure-A to the writ application. The notice is for the period of 1-1-1982 to 31-12-1982 and the amount involved is Rs. 1,24,99,453.48 ps. The other facts are same.
19. Let us first take up the Civil Rule No. 581/87.
Rule 233 of Central Excise Rules, 1944 provides as follows :-
"the Central Board of Excise and Customs and the Collectors may issue written direction providing for supplemental matters arising out of the Central Excise Rules, 1944". Under the rule what can be issued, is the administrative instruction and not such direction or directions, as would change the very basis of the assessment. Further, under this rule, the only direction that the Central Board of Excise and Customs can issue is that relating to administrative matters and not relating to judicial matters, otherwise it would be violative of Section 35 of the Act and the rule will be ultra vires.
Section 35 of the Act provides for Appeals to Collector (Appeals). In this connection let us have a look at the instructions issued vide Annexure-C. A copy of the Trade Notice was also given to the Appellate Collector, Customs and Excise, Calcutta. It is well settled law that the authority is bound to respect the basic and elementary postualate of the rule of law, that in exercising their authority and discharging their quasi-judicial function, the Tribunals constituted under the Act, must be left absolutely free to deal with the matter according to their best judgment. The Tribunals must be absolutely unfettered by any extraneous guidance by the executive and/or administrative wing of the State. If the exercise of discretion conferred on a quasi-judicial Tribunal is controlled by any such direction, that puts fetters on the exercise of quasi-judicial authority and the presence of such fetters would make the exercise of such authority completely inconsistent with the well accepted notion of judicial process. It is true that law can regulate the exercise of judicial power. It may indicate by specific provisions on what matters the Tribunal constituted by it should adjudicate. It may indicate by specific provision, lay down the principles which have to be followed by the Tribunals in dealing with the said matters. The scope of the jurisdiction of the Tribunals constituted by statute can well be regulated by the statute and principles for guidance of the said Tribunals may also be prescribed, subject of course to the inevitable requirement that these provisions do not contravene the fundamental rights guaranteed by the Constitution. But what law and the provision of law may legitimately do cannot be permitted to be done by administrative or executive orders.
20. That apart, in paragraph 34 of the affidavit-in-opposition it is admitted as follows :-
"34. That with regard to the statement made in paragraph 37 of the writ petition the deponent begs to state that Trade Notice issued is not a supplemental instructions. The instructions were issued as per Board's letter F. No. 35/16/36-CX dated 19-9-1956 for assessees' guidance."
So, the admitted position is that as per guidance this Trade Notice was issued. Mr. Lahoty contends that the Trade Notice cannot be issued under Rule 233 of the Rules and as such the same is liable to be struck down. He further submits that this Trade Notice has interfered with the power of the quasi-judicial authority under the Act and on this ground also this should be quashed and in this connection he placed reliance on the following decisions reported in Orient Paper Mills Ltd. v. Union of India, AIR 1969 SC 48. In paragraph 8 of the judgment it was held :-
"8. If the power exercised by the Collector was a quasi-judicial power - as we hold it to be - that power cannot be controlled by the direction issued by the Board. No authority however, high placed can control the decision of a judicial or a quasi-judicial authority. That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authority in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are judges in their own cause, yet when they are called upon to decide disputes arising under the Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their orders as their judgments; they would essentially be the judgments of the authority which gave the direction and which authority had given those judgments without hearing the aggrieved party. The only provision under which the Board can issue direction is Rule 233 of the Rules framed under the Act. That rule says that the Board and the Collectors may issue written instructions providing for any supplemental matters arising out of these Rules. Under this rule the only instruction that the Board can issue is that relating to administrative matters; otherwise that rule will have to be considered as ultra vires Section 35 of the Act."
In this case the Supreme Court has relied on the earlier decision in Shri Rajagopal Naidu v. State Transport Appellate Tribunal, AIR 1964 SC 1573 and the Supreme Court has pointed out as follows :-
"That apart we are clearly of the opinion that even if the question of the legality of the direction issued by the Board had not been taken before the authorities under this Act, as that direction completely vitiated the proceedings and makes a mockery of the judicial process, we think we ought to consider the legality of that direction. For the reasons already mentioned, we hold that the direction was invalid and the same has vitiated the proceedings before the Collector as well as the Government."
21. In AIR 1970 (2) SC 1493 [Orient Paper Mills Ltd. v. Union of India, Respondents, the Supreme Court has held as follows :-
"5. According to learned Attorney General the assessment proceedings are not of a quasi-judicial nature nor is the assessing authority a quasi-judicial authority. We are unable to agree. It is apparent from the judgment referred to above and numerous other decisions of this court delivered in respect of various taxation laws that the assessing authorities exercise quasi-judicial functions and they have duty cast on them to act in a judicial and independent manner. If their judgment is controlled by the directions given by the Collector, it cannot be said to be their independent judgment in any sense of the word. An appeal then to the Collector becomes an empty formality. In the previous decision of this court mentioned above, the appeal and the revision had been rejected by the Collector and the Central Government on the ground that a direction had been issued by the Central Board of Revenue to the effect that the paper in question be treated as belonging to a particular classification. This court entertained no doubt that the direction given by the Board was invalid and it vitiated the proceedings before the Collector as well as the Government."
22. Mr. Lahoty has placed reliance on a decision in AIR 1977 Gujarat 113 [A'bad Cotton Mfg. Co. Ltd. etc., Applicant v. Union of India and Ors., Respondents] on two counts; firstly regarding the maintainability of the case under Article 226 of the Constitution of India, even in the case there was an existence of other alternative remedy and secondly, the validity of the Trade Notice. The case of the petitioner in that case was that blended yarn was coated with sizing materials to impart strength to the yarn in the weaving process in all these composite mills and in that process the weight of the blended yarn increased by some 12 to 14 per cent. The case of the petitioner was that blended yarn was yarn even after the sizing process. In all these mills the duty was charged by the excise authorities under Tariff Item 18E on weight basis per kilogram of unsized yarn i.e. to say at the spindle point. However, by the Trade Notice issued by the Deputy Collector of Central Excise, a change of basis had been made, by showing the price prevalent at the gate sales will not be the basis for assessing the excise duty. This Trade Notice was challenged before the Gujarat High Court as totally null and void and praying other reliefs.
In paragraph 22, the Gujarat High Court has pointed out as follows :-
"22. Therefore, the principle which emerges from these decisions is that when the petitioner is to be asked to exhaust his alternative remedies provided under the Act before entertaining the writ petition this distinction would always be material where the order is a nullity as being ex. facie without jurisdiction or in non-compliance with the provision of the Act or the essential principles of justice or on any other ground as explained in Tarachand Gupta's case or Bhopal Sugar Industries case or Md. Nooh's case (supra) and is, therefore, a purported order or a nullity. In such a context the alternative remedy would be a futile remedy because it did not affect the inherent nullity in the challenged decision, which is result in material distinction that the party may appeal against such decision but he was not bound to do so."
In the Gujarat case it was also pointed out that the Central Act does not provide for any appeal or revision against such Trade Notice, and in that view of the matter also an application under Article 226 of the Constitution of India was maintainable before the High Court.
23. In 1980 (6) E.L.T. 428 (Del.) [Appollo Tyres Limited and Ors. v. Union of India and Ors.] wherein the Delhi High Court in paragraph 19 has pointed out as follows :-
"19. This is a Division Bench decision of this Court which we respectfully follow. This decision was, in fact, followed by a Single Bench decision of this Court in the case of Madras Rubber Factory Ltd. v. Union of India and Ors., reported as 1979 (4) E.L.T. (J 173). It was observed that it is not open to the Board, in the administrative capacity to issue directions to various subordinate authorities exercising quasi-judicial functions to interpret excise rebate in a particular manner and to restrict relief thereunder. Any quasi-judicial order issued on the basis of such direction was held to be illegal and void. The learned Judge further observed that when there was no specific condition in the statutory notification that the benefit of rebate should be passed on to the consumer, the manufacturer is eligible for the benefit of rebate of the duty on excess production in terms of that notification irrespective of the same being passed on to the consumers or not."
In paragraph 29 of the judgment, the Delhi High Court further pointed out as follows :-
"29. For the reasons discussed in the said judgment and also in view of the Division Bench decision of this Court in Modi Rubber case, referred to by my learned brother, the notice and direction and orders of the respondents which go to deprive the first petitioner of the benefits accruing to it under these notifications in pursuance of certain departmental instructions and the Trade Notice No. 54/77 have to be quashed."
24. In 1977 (1) E.L.T. (J 92) Universal Cable Ltd. v. Union of India and Ors., in paragraph 37, the court has pointed out as follows :-
32. If the Board has a statutory power under Rule 233 to issue supplementary instructions, but these instructions cannot go against the statutory provisions and fetter the quasi-judicial powers of the excise authorities (see Orient Paper Mills v. Union of India, AIR 1969 SC 48). The method of valuation of excisable goods is laid down in Section 4 of the Act. The Board cannot prescribe different methods of valuation by issuing supplementary instructions. The excise authorities in assessing excise duty perform a quasi-judicial function and have to follow the principles of valuation laid down in Section 4 and the directions issued under the authority of the Board in that matter, were not binding on them".
25. In paragraph 38 of the judgment the court has pointed out as follows :-
"38. Existence of alternative remedy is no doubt taken into account in dealing whether interference should be made under Article 226, but it does not take away the jurisdiction of the High Court to interfere in approrpriate cases. Indeed, interference has been made under Article 226 in proper cases even at the stage of notice when it was found that the notice for re-assessment or for imposition of penalty was clearly in excess of authority. [See for example - N.B. Sanjana v. E.S. & W Mills, AIR 1971 SC 2039]."
26. In 1987 (27) E.L.T. 241 (Cal.) Collector of Customs, Calcutta and Ors. v. Union Carbide India, the Calcutta High Court in Paragraph 33 of the judgment has pointed out as follows :-
"33. It would appear from the said paragraph that it was the case of the appellants that mere was a direction and/or ruling of the Central Board of Revenue dated 29th December, 1955 which, inter alia, mentioned that battery grade manganese ore in the form of course powder was correctly assessable under Item No. 28 of the Indian Customs Tariff. It seems to us that the appellants issued the impugned notice to show cause on the basis of the said direction and/or ruling contained in the Central Board of Revenue's order dated 29th December, 1955."
"34. It is well settled that the assessing authority acting as quasi judicial authority cannot decide the issue before it on the basis of any surmise or on the basis of any ruling or direction issued by any authority, howsoever high it is. Such ruling or direction of the higher authority such as the Central Board of Excise and Customs may be binding on the officers subordinate to it, but not binding on any authority acting in the capacity of a quasi-judicial authority. Such direction or any interpretation given by any other administrative authority may be taken into consideration but should not form the basis of any decision arrived at by any quasi-judicial authority."
27. Shri K.N. Choudhury, learned counsel appearing for the respondents submit that this Trade Notice is issued as general instructions to all assessees of Dibrugarh and in this connection he has also drawn my attention to Paragraph 13 of the affidavit-in-opposition and submits that the corrigendum was issued by correcting the second list of Paragraph 3 of the Trade Notice as follows :-
"where the assessee sells commodities at the factory gate as per Section 4(i)(a) as well as from Sale Depot as per Section 4(i)(a) proviso (i) read with Section 4(2) of Central Excises and Salt Act, 1944, if wholesale and the unit selling price at these two points of sale is different, he shall likewise file one price list in Part-I for factory gate sale and another price list in Part-II for selling depot sale simultaneously. He may also file price list in other part i.e. from Part II to VII depending upon pattern of sales etc., as per requirement under Section 4 ibid.
28. It was also submitted that this Trade Notice was issued for submission of price list and classification list can rely under Rules 173C and 173B of the Central Excise Rules and it is general instructions issued to all assessees for their guidance under the particular law as mentioned in paragraph 37 of the affidavit-in-opposition.
29. Now on the back-drop of the law as stated above, let us have to decide the question of validity of this Trade Notice.
Trade Notice Annexure-3 along with corrigendum as quoted above. The Trade Notice Annexure-C in form mentioned as follows :-
"It is experienced with great displeasure that the assesses under the jurisdiction of Dibrugarh Division are in habit of submission of several price lists for each variety/brand of plywood products separately. This procedure of filing price list is creating numerous problems for final assessment of RT-12 returns as well as it is not a correct practice as per Rule 173C of Central Excise Rules where it provides for submission of only one price list covering all the products chargeable with duty at a rate dependent on the value of the goods. Rule 173C also provides every assessee to file likewise a fresh price list or on amendment of the list filed or approved if any alteration becomes necessary for any reason.
Henceforth every assessee should file one price list covering all the commodities manufactured/warehoused by him, direct to the Assistant Collector, Customs and Central Excise, Dibrugarh with a copy of the list to the concerned Range Superintendent well in advance so that necessary action can be initiated as per Rule 173C(5) and 173B ibid from this and to give effect of the price list in question. Subject to the provisions of Rule 173C, no assessee shall clear any goods from a factory, warehouse or other approved place of storage unless the price list is approved by the proper officer.
Where the assessee sells their commodities at the factory gate, as per Section 4(a)(a) as well from Sale Depot as per Section 4(2) of the Central Excises and Salt Act, 1944, if wholesale sale and unit billing price at those two points of sale is different he shall likewise file one price list in Part-I for depot sale simulteneously. He may also file price list in other Part i.e. from Part-II to VII depending upon pattern of sales etc. as per requirement under Section 4 ibid.
As regards classification list, every assessee shall file one classification list covering all assessable goods produced/manufactured by him direct to the approving authority under Rule 173B(i) with a copy to concerned Range Officer and if in the list approved by the proper officer, any alteration becomes necessary, the assessee shall likewise file a fresh list or an amendment of the list already filed/approved.
It is, therefore, impressed upon all the assessees under Dibrugarh Division that they would strictly follow the guidelines given above. Any deviation from the above by any assessee will be seriously viewed from the point of Central Excise law."
30. As pointed out above under Rule 233 of the Central Excise Rules, 1944, under this Rule what can be issued is the administrative instructions and no such direction or directions as would change the very basis of the assessment. In the instant case, paragraph quoted above, in the trade notice it is evident that the authority is trying to find out the price at the factory gate and the price at the sale depot as per Section 4(i)(a) of the Act. The purpose of observing this direction is to make the assessment on the basis of the price at the sale depot. This becomes more clear from the corrigendum quoted above and certainly this trade notice shall influence the quasi-judicial authority in assessing the tax under the Act. By this trade notice the excise authorities are seeking to interfere with the demand of excise duty arrogating a jurisdiction to change the settled basis of excise levy without even waiting for the final process of adjudication, the authorities are insisting on the compliance with the trade notice by changing the settled basis of the present levy of excise, in any event, this would be tax without authority of law so as to contravene the Article 226 of the Constitution of India. So it may be challenged on the ground of this action being ex facie without jurisdiction and as the authority is seeking to implement such executive instructions, the petitioners have a right to approach this Court. Section 35 of the Act admittedly does not provide any appeal with regard to such a trade notice. In view of Rule 233 of the Rules, no such executive instructions could be issued by the Collector of Customs and Central Excise, Dibrugarh and that rule says that trade notice can be exercised only by the Collector or by the Central Board of Excise and Customs providing for any supplemental matters arising out of these rules. It is stated that this trade notice was issued in pursuance to the direction of the Central Board of Excise and Customs but the same has not been produced before this court. So, it is not known what direction was given by the Central Board. Further, the method of valuation of excisable goods is laid down in Section 4 of the Act. The Board cannot prescribe different methods of valuation by issuing supplemental instructions, the assessing authority is not bound by the direction issued under the authority of the Board. This being the position, I hold that this trade notice is without authority of law and the same is liable to be set aside which I hereby do.
31. The next question which arises for decision is that whether in the facts and circumstances of this case and on the basis of admitted position, there is an obligation and on requirement in law to submit a separate price list for the depot sale of the petitioners company, whether demanding to submit separate price list is illegal and unjustified for valuation of excisable goods for determination under Section 4(i)(a) or under Section 4(2) of the Act. Under the facts and circumstances of this case the petitioners' company was asked to submit a separate price list for valuation of excisable goods for determination under Section 4(i)(a) or under Section 4(2), whether it is illegal and unjustified. It is also settled law that when valuation can be made and determined under Section 4(i)(a) of the Act, the question of taking resort to Section 4(2) of the Act does not arise.
32. Mr. Lahoty, learned counsel appearing for the petitioner, submits that the law on this point is settled by a catena of decisions of the Supreme Court and the authority does not have power to resort to Section 4(2) of the Act when the valuation price is known under Section 4(i)(a) of the Act.
In this connection, he has drawn my attention to the following facts :-
(i) Section 4(i)(a) embodied the concept of factory gate sales which is the basis of determination of the value of the goods for the purpose of excise duty.
(ii) There being sales at the factory gates of the goods manufactured by the petitioners' company and the price of such factory goods sales is being known and ascertainable, the petitioners' company has all along being filing its price list in Part-I in confirmity with the provisions of the Act and the Rules and said price lists have been all along approved by the respondents and final assessment of excise duty has been made on the basis of such price lists. In the affidavit-in-opposition it is admitted by the petitioners that 85% to 95% of goods are sold through different sale depots at different prices to buyers at different areas. The remaining 5% to 15% are sold at the factory at the ex-factory rate. It is not denied in the affidavit-in-op-position that the sale made by the petitioner at the factory gate is not a genuine sale. It is accepted that it is genuine sale but what is contended is that the quantum of sale at the factory gate is a small percentage i.e. 5% to 15%.
33. Now let us proceed to determine the question on the basis of the admitted position of facts. Section 4(I)(a) and Section 4(2) of the Act have already been quoted.
34. Shri Lahoty in support of this contention relied on the following decision in (1973) III SCC 503 [A.K. Roy v. Voltas Limited] where the Supreme Court has considered the Section 4 of the Act. Shri Lahoty has relied on the following paragraphs of the judgment :-
"10. We do not think that for a wholesale market to exist, it is necessary that there should be a market in the physical sense of the term where articles of like kind or quality are or could be sold or that the articles should be sold to so-called respondents' buyers.
20. There can be no doubt the 'wholesale cash price' has to be ascertained only on the basis of transactions at arm's length. If there is a special or favoured buyer to whom a specially low price is charged because of extra-commercial considerations, e.g. because he is relative of the manufacturer, the price charged for those sales would not be the 'wholesale cash price' for levying excise under Section 4(a) of the Act. A sole distributor might or might not be a favoured buyer according as terms of the agreement with him are fair and reasonable and were arrived at on purely commercial basis. Once wholesale dealings at arm's length are established, the determination of the wholesale cash price for the purpose of Section 4(a) of the Act may not depend upon the number of such wholesale dealings. The fact that the appellant sold 90 to 95 per cent of the articles manufactured to consumers direct would not make the price of the wholesale sales of the rest of the articles any the less the 'wholesale cash price' for the purpose of Section 4(a), even if these sales were made pursuant to agreement stipulating for certain commercial advantages, provided the agreements were entered into at arm's length and in the ordinary course of business.
22. As already stated it is not necessary for attracting the operation of Section 4(a) that there should be a large number of wholesale sales. The quantum of goods sold by the manufacturer on wholesale basis is entirely irrelevant. The mere fact that such sales maybe few or scanty does not alter the true position."
35. Mr. Lahoty has also relied in (1975) I SCC 499 [Atic Industries Ltd. v. H.N. Dave, Assistant Collector of Central Excise and Ors.]. Paragraph 12 of the judgment is relevant:
"12 ... The only relevant price for assessment of value of the goods for the purpose of excise in such a case would be the wholesale cash price which the manufacturer receives from sale to the first wholesale dealer that is, when the goods first enter the stream of trade. Once the goods have entered the stream of trade and are on their onward journey to the consumer, whether along a short or a long course depending on the nature of the goods and the conditions of the trade, excise is not concerned with what happens subsequently to the goods. It is the first immediate contract between the manufacturer and the trade that is made decisive for determining the wholesale cash price which is to be the measure of the value of the goods for the purpose of excise. The second or subsequent price, even though on whoesale basis, is not material. If excise were levied on the basis of second or subsequent wholesale price, if would load the price with a post-manufacturing element, namely, selling cost and selling profit of the wholesale dealer. That would be plainly contrary to the true nature of excise as explained in the Voltas's case (supra). Secondly, this would also violate the concept of the factory-gate sale which is the basis of determination of value of the goods for the purpose of excise."
35. He has also relied on (1984) I SCC 467 [Union of India v. Bombay Tyre International] where the Supreme Court has pointed out as follows :-
"15. Section 4 envisages a method of collecting tax at the point of the first sale effected by the manufacturer. Under the old Section 4(a) the value of the excisable article was deemed to be the wholesale cash price for which an article of the like kind and quality was sold, or was capable of being sold, at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market did not exist for such article at such place, then delivery was envisaged at the nearest place where such market existed."
"23. There can, therefore, be no doubt that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arm's length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise. That would be the wholesale cash price for which the goods are sold at the factory gate within the meaning of Section 4(a). The price received by the wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to other dealers would be irrelevant to the determination of the value and the goods would not be chargeable to excise on that basis."
"32. It will be noticed that the basic scheme for determination of the price in the new Section 4 is characterised by same dichotomy as that observable in the old Section 4. It was not the intention of Parliament, when enacting the new Section 4 to create a scheme materially different from that embodied in the superseded Section 4. The object and purpose remained the same, and so did the central principle at the heart of the scheme. The new section was merely more comprehensive and the language employed more precise and definite. As in the old Section 4, the terms in which the value was defined remained the price charged by the assessee in the course of wholesale trade for delivery at the time and place of removal. Under the new Section the phrase 'place of removal' was defined by Section 4(b) not merely as 'the factory or any other place or premises of production or manufacture of the excisable goods' from where such goods are removed but was extended to "a warehouse or any place or premises wherein the excisable goods have been permitted to have been deposited without payment of duty" and from where such goods are removed. The judicial construction of the provision of the old Section 4 had already declared that the price envisaged under Clauses (a) and (b) of that section was the price charged by the manufacturer in a transaction at arm's length. After referring to several cases, some of which have already been mentioned here earlier, this court pointed out in Voltas Limited : (SCC P. 509 para 20).
that the 'wholesale cash price' has to be ascertained only on the basis of transactions at arm's length. If there is a special or favoured buyer to whom a specially low price is charged because of extra-commercial consideration e.g. because he is a relative of the manufacturer, the price charged for those sales would not be the "whoesale cash price" for levying excise under Section 4(a) of the Act. A sole distributor might or might not be a favoured buyer according as terms of the agreement with him are fair and reasonable and were arrived at on purely commercial basis."
"47. From what has gone before we consider that the true position under the Central Excises and Salt Act, 1944 as amended by Act XXII of 1973 can be set forth as follows :-
(i) The price at which the excisable goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal as defined in sub-section 4(b) of Section 4 is the basis for determination of excisable value provided, of course, the buyer is not a related person within the meaning of sub-section 4(c) of Section 4 and the price is the sole consideration for the sale. This proposition is subject to the terms of the three provisos to Sub-section (a) of Section 4;
(ii) Where the price of excisable goods in the course of wholesale trade for delivery at the time and place of removal cannot be ascertained for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in the manner prescribed by the Central Excise (Valuation) Rules, 1975 should be taken as representing the excisable value of the goods;
(iii) Where the wholesale price of any excisable goods for delivery at the place of removal is not known and the value thereof is determined with reference to the wholesale price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery should be excluded from such price."
36. He has also relied on (1988) Supplement SCC 658 [Indian Oxygen Ltd. v. Collector of Central Excise]. In this case the Supreme Court has pointed out that if the price at the factory gate is ascertainable, assessment should be made in terms of the price which is known. In this case reliance was placed in the earlier decision of the Supreme Court in Bombay Tyre International (supra). In that particular case, the price of the goods at the factory gate at Vishakapattam is known and the Supreme Court has pointed out that tax must be levied on the basis of price found at the factory gate. When the goods are partly sold at the factory gate and partly at the depot sales and the factory gate is located near the factory and where the demand of the factory gate is likely to be normal, the quantum of the percentage of sale at the factory gate or at the depot sales is not a determining factor. In A.K. Roy (supra) quoted above, it is stated that even the price of goods is excisable, such excisable price shall be the basis for determination of the value under Section 4(a) of the Act. The percentage of sale at factory gate is not a determining factor. In the instant case it is not disputed that the price at the factory gate is available. It is not the case of the respondents that the price available at the factory gate is not genuine. Section 4(2) is a residuary section and it applies only in such cases where the price of any excisable goods at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal. In cases where the manufacturing cost and manufacturing profit on which excise duty is to be levied is known even though goods are removed to sales office, then Section 4(2) of the Act will be clearly applicable, [see 1977 (1) E.L.T. (J 14) (Pat.) - Tata Engineering and Locomotive Co. Ltd. v. S.N. Thakuria, Superintendent of Central Excise and Ors.]. If a demand, for production of material unrelated to the requirement of Clause (a) is made the authority making the demand can be restrained from doing so. For example, value of goods transacted through Branch offices cannot be said by any stretch of imagination to have relevance for determination of the price under Clause (a) of Section 4(I) where the price at which such goods are ordinarily sold for delivery at the place of removal is ascertainable. If the value of the goods delivered at the place of removal is not known and where the value is to be decided with reference to the price for delivery at a place other than the place of removal then alone the price of goods in regard to which transactions are made through Branch offices becomes relevant. Likewise the price list effective in different depots all over India cannot have relevance to determine the value of goods for purposes of charging excise duty under clause (a) of Section 4(1).
37. At the back-drop of the case law as enunciated above, the following proposition emerges. After the amendment the criteria for valuation is :-
(i) The normal price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyer is not a related person and the price is the sole consideration for the sale;
(ii) The only relevant price for assessment of value of the goods for the purpose of excise in such a case would be the wholesale cash price which the manufacturer receives from sale to the first wholesale dealer, that is, when the goods first enter the stream of trade. It is the first immediate contract between the manufacturer and the trade that is made decisive for determining the wholesale cash price which is to be the measure of the value of the goods for the purpose of excise. The second or subsequent price, even though on wholesale basis is not material;
(iii) It is the concept of factory gate sale which is the basis of determination of value of the goods for the purpose of excise. There can therefore, be no doubt that where a manufacturer sells the goods manufactured by him in a wholesale to a wholesale dealer at arm's length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise. That would be the wholesale cash price for which the goods are sold at the factory gate within the meaning of Section 4(1);
(iv) That the buyer must not be a related person and the price is the sole consideration for the sale. What has to be seen is that this agreement is made at arm's length and in the usual course of business;
(v) It is only if the price is found to be unreasonably low, then it can be said that there is a physical sense of the term. In absence of material to show that the price charged from the buyer is lower to the normal wholesale cash price, it cannot be assumed that this is not normal wholesale cash price and there is no question for substituting it for any other price.
38. As laid down by the Supreme Court in the case of A.K. Roy (supra) a wholesale market does not mean that there should be an actual place where articles are sold and bought on a wholesale basis and that these words can also mean the potentiality of the articles being sold on a wholesale basis even if there was no market in the physical sense of the term at or near the place of manufacture where the articles of a like kind and quality are or could be sold, that would not in any way affect the existence of market in the proper sense of the terms provided the articles could themselves be sold to traders even though the articles are sold to them on the basis of agreement which confers certain commercial advantages upon them. The concept of wholesale market is like the concept of hypothetical tenant in renting law. There must always enter an element of conjuncture, assumption and legal imagination in such a conception for otherwise the statutory concept will break down if it is too impeccably applied in terms of its real existence to this temporal world of ours. If the goods in question are such that they or their like kind and quality are not readily available in the market, it does not mean that their value cannot be ascertained. Nor it is necessary for a wholesale market to exist that there should be a large number of wholesales. Even one sale may, in certain circumstances, be representative of a wholesale market as pointed out in the case of A.K. Roy (supra). The quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. The mere fact that such sale may be few or scanty does not alter the true position, [see P.C. case of Ford Co. v. Secretary of State AIR 1938 P.C. 15].
38A. It is apparent that for the purpose of determing the "value", broadly speaking both the old Section 4(1) and the new Section 4(I)(a) speak the price for sale in the course of wholesale trade of an article for delivery at time and place of removal, namely, the factory gate. Where the price contemplated under the old Section 4(a) or under the new Section 4(I)(a) is not ascertainable, the price is to be determined under the old Section 4(b) and the New Section 4(I)(b) but whereas the price under Section 4(I)(a) is ascertainable it is that price which will be decisive. It is also stated that the burden to establish that the agreement/sales between the manufacturer and the wholesale buyers is not at arm's length and in the usual course of business, is on the Revenue. The burden is also on revenue to show that the price which is charged is not a genuine price.
39. This being the settled position of law, I hold that the respondents are bound to accept the sale price at the factory gate as the basis for assessment of tax and in this view of the matter the communications dated 6-4-1987, 9-4-1987, 23-4-1987 Annexures, D1, D2 and D3 respectively issued by the Respondent No. 2 to submit a separate price list in proper form for Depot Sales w.e.f. 6-4-1987 along with sufficient documents covering factory gate sales as well as Depot sales for determination of excisable value are liable to be quashed which I hereby do. I further hold that the respondents are bound to assess the tax on the basis of factory gate sales alone. For the same reasons Annexures E1 and E issued by the Superintendent of Custom and Central Excise, respondent No. 3 directing to furnish price list for Depot Sales for determination of correct assessable value also stands quashed.
In C.R. No. 1387/87 the show cause notice is Annexure-C. In the show cause notice it is admitted that there was factory gate sales but it is stated that this Factory Gate sales price is not the value of their products for the purpose of Section 4 of the Act. Accordingly, the Annexure-C stands quashed.
In C.R. No. 1243/88 the show cause notice is at Annexure I. In the show cause notice in clause it is stated that in view of the fact stated above, it has become necessary to re-determine the "value" of the excisable goods cleared by the said company in terms of Section 4(2) of the Act. In the notice it is admitted that there was factory gate sales. As there was factory gate sales the respondents had no power to re-determine the value of the goods in terms of Section 4(2) of the Act. The price must be determined in terms of Section 4(I)(a). In this view of the matter the notice dated 8-4-1987 vide Annexure-I to the writ application stands quashed.
In C.R. No. 1387/87 the show cause notice is dated 30-11-1987 vide Annexure-C. It is admitted that there was factory gate sales. About 90% of their production is marketed through their branches/depots. So the factory gate sales price is not the value of their product for the purpose of Section 4 of the Act. So, the authority is entitled to assess the value of the said goods under Section 4(2) of the Act. As the factory gate sales is not the basis for determining the value of the goods, this show cause notice stands quashed.
In C.R. No. 593/87 the show cause notice is Annexure-B dated 29-1-1987. There also it is stated that there are factory gate sales and 90% of their production is marketed through their branches/depots. So, the authority wanted to redetermine the value by applying Section 4(2) of the Act. As the factory gate sale is the basis for assessment the value of goods this show cause notice stands quashed.
In C.R. No. 592/87 the show cause notice is dated 29-1-1987 vide Annexure-B to the writ application. There also it is stated that there are also factory gate sales and 90% of their production is marketed through their branches and they wanted to assess the value under Section 4(2) of the Act. As indicated earlier this cannot be done and accordingly this show cause notice stands quashed.
In C.R. No. 1242/88 the show cause notice is at Annexure-I dated 8-4-1987. Annexure-I shows that they wanted to re-determine the value of goods under Section 4(2) of the Act though it is admitted that there are factory gate sales. As this cannot be done this show cause notice stands quashed.
Accordingly all the Civil Rules are allowed as indicated above. I leave the parties to bear their own costs.
Before I part with the record I would like to state one thing. The respondents wanted to urge that they have issued the show cause notice by invoking the power under Section 11A(1) of the Act. Mr. Lahoti, learned counsel appearing for the petitioners wanted to urge that even though this power cannot be exercised by invoking the power under Section 11A(1) of the Act. I have decided the matter by holding that the value is to be assessed under Section 4(I)(a) of the Act, this aspect of the matter has not been considered and also I did not hear the respondents on this aspect of the matter.