Karnataka High Court
Raja Industrial Works, Sringeri vs Assistant Collector Of Central Excise ... on 4 November, 1985
Equivalent citations: 1986(9)ECC212, 1986(24)ELT9(KAR), [1987]166ITR548(KAR), [1987]166ITR548(KARN)
ORDER
1. The petitioner is a manufacturer of trailers, under the name and style of M/s Raja Industrial Works, Sringeri. The clearance of these trailers manufactured by the petitioner was exempted from levy of Excise duty under Notification No. 31/66 dated 1-3-1966. It was later found, on investigation, that the petitioner was not entitled to claim exemption under the said notification and a show-cause notice was issued as per Exhibit-A by the Asst. Collector of Central Excise, Davangere, proposing to levy duty on the clearances made during the period 1-11-1969 to 14-5-1976. The show-cause notice was issued on the strength of the material collected by the department that the declaration filed by the petitioner earlier to avail of the exemption under the said notification, was false.
2. Under Notification No. 31/66 exemption is granted to trailers falling under Item 34 of First Schedule of Central Excise and Salt Act, 1944, from the whole of the duty provided such trailers are manufactured in a factory which does not employ more than five workers. Accordingly, the petitioner had been granted exemption relying on the declaration made by it before the department.
3. In reply to the show-cause notice, the petitioner contended that the factory had two separate units, namely, a manufacturing unit and a sales and service unit. If only the manufacturing unit is taken into consideration, the number of persons employed was less than 4 and therefore, during the relevant period the petitioner would not be liable to pay any duty.
4. Disagreeing with this contention, the Asst. Collector in his order, as per Exhibit-C held that on the basis of the material and investigation done by the Department, the petitioner would be liable to pay duty on the clearances made between 1-11-1969 and 14-5-1976. The materials on which the original authority came to these conclusions were (i) the project report filed by the petitioner before the Asst. Director of Industries and Commerce, Chickmagalur, in which they had stated that they had employed 17 workers and they manufactured 175 trailers from 1971 to 1975, and (ii) the report of the Inspector of Factories, Shimoga Division, that the petitioner had employed 20 workers during 1974 and 1975 and 25 workers during 1976. This report was based on the declaration filed by the petitioner in Form II under the Factories Act. The Asst. Collector therefore held that the petitioner would be liable to pay duty on the clearances made between 1-11-1969 to 14-5-1976 and called upon the petitioner to pay duty of Rs 43,876.20.
5. Being aggrieved by this order, the petitioner filed an appeal before the Appellate Collector of Central Excise, Madras. The appellate authority, on a perusal of the records and the material relied upon by the Asst. Collector, held that the order of the original authority was justified on the facts and circumstances of the case. He held that the decision of the Supreme Court in A. K. Roy v. Voltas Limited - 1977 E.L.T. (J 177) relied upon by the appellant were not applicable to his case.
6. Being aggrieved with the order of the appellate authority the petitioner has filed this petition challenging the appellate order. It is argued by Sri Ranganath, learned Counsel on behalf of the petitioner that the demand made by the Asst. Collector as confirmed by the appellate authority, is liable to be set aside on more than one ground. His first contention is that the petitioner had employed less than 5 employees in the manufacturing unit of the factory and that the persons in the sales unit should be excluded from consideration for the application of the Notification No. 31/66.
He has also relied upon the decision of the Supreme Court in the case of M/s Rohtas Industries v. Ramlakhan Singh . Another ground raised in the writ petition relates to limitation in respect of the demand made. It is contended that the provisions of Rules 9 and 173(Q) of the Central Excise Rules, 1944 (hereinafter referred to as "the Rules") are not applicable to the petitioner's case and the demand made is wholly beyond time.
7. Mr. Shivashankar Bhat, learned Senior Standing Counsel for respondents argued that the order of the Asst. Collector was made on a consideration of the material gathered by the department which proved beyond doubt that the petitioner had employed more than 5 workers during the relevant periods and it is a pure finding of fact.
8. As regards the petitioner's contention based on A. K. Roy v. Voltas Limited - , Sri Shivashankar Bhat submitted that the ratio of that decision was explained by the Supreme Court in Union of India v. Bombay Tyre International Limited - and it was observed by the Supreme Court in the case of Volta's Limited that the issue was different from the point that was raised in the latter case. However, on the question as to the determination of the value of an article for the purpose of Excise duty, the Supreme Court laid down the general principle in the following terms :
"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.
There can, therefore, be no doubt that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arms 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) -
In every case the fundamental criterion for computing the value of an excisable article is the price at which the excisable article or an article of the like kind and quality is sold or is capable of being sold by the manufacturer, and it is not the bare manufacturing cost and manufacturing profit which constitute the basis for determining such value."
In this view of the matter the petitioner's contention that the staff in the sales section should be treated as a different unit for the purpose of determining the value of the goods cleared by it, has to be rejected.
9. Even on facts, on the basis of the reports collected by the department from the Inspector of Factories and the project report filed by the petitioner before the Industries and Commerce Department, it is abuntantly clear that the petitioner employed more than 5 employees during the relevant period.
10. So far as the limitation is concerned action is taken by the department is under Rule 10A of the Rules which was in force during the relevant period. This is a residuary rule which is applicable to cases to which Rule 10 is not applicable. This is how the Supreme Court while dealing with the scope and ambit of Rule 10A observed in Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. - it is observed as under :
"..... There is no express prohibition anywhere against an assessment at any other time in the circumstances of a case like the one before us where no "assessment" as it is understood in law, took place at all. On the other hand, Rule 10A indicates that there are residuary powers of making a demand in special circumstances not foreseen by the framers of the Act or the Rules. If the assessee disputes the correctness of the demand an assessment becomes necessary to protect the interests of the assessee. A case like the one before us falls more properly within the residuary class of unforeseen cases. We think that, from the provisions of Section 4 of the Act read with Rule 10A, an implied power to carry out or complete an assessment, not specifically provided for by the rules, can be inferred. No Writs of Prohibition or Mandamus were, therefore, called for in the circumstances of the case."
Therefore, action taken to levy and recover duty for the years in question, is valid in law and is not barred by limitation.
11. The demand made is for the period between 1-11-1969 to 14-5-1976. The project report relied upon by the department refers to the period 1971 to 1975. It is not clear on which day the said project report was filed by the petitioner. Therefore, the first respondent shall ascertain the actual date on which the said report was filed and give the necessary relief. The demand for the years 1969 and 1970 is, therefore, set aside. In the result the writ petition is partly allowed.