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Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY
A.P.Paper Mills Ltd. - Appellant
Versus
Assistant Collector of Central Excise, Rajahmundry - Respondent
Decided On : 01-01-79
CENTRAL EXCISE - EXEMPTION NOTIFICATION - CONDITIONS - INSTRUCTIONS ISSUED BY CENTRAL GOVERNMENT - VALIDITY - ASSESSABLE VALUE - CALCULATION - FORMULA PRESCRIBED BY INSTRUCTIONS - VALIDITY - EXCISE DUTY - NATURE - LEVY ON PRODUCTION OR MANUFACTURE OF GOODS - POST-MANUFACTURING COSTS AND EXPENSES - EXCLUSION FROM ASSESSABLE VALUE.
Fact of the Case:
The petitioner, a manufacturer of paper, challenged the demand of excise duty on the ground that it was entitled to the benefit of an exemption notification issued by the Central Government. The exemption notification provided that certain manufacturers would be entitled to a 25% reduction in the excise duty leviable on clearances of their manufacture which are in excess of the clearances in the "base period", subject to the prescribed conditions. The petitioner contended that the instructions issued by the Central Government, which required the manufacturers to pass on the benefit of the exemption to the consumer, were invalid and that the formula prescribed by the instructions for calculating the assessable value was contrary to the concept of excise duty.
Finding of the Court:
The court held that the instructions issued by the Central Government were invalid as they were not in accordance with the provisions of the Act or the concept of excise duty. The court further held that the formula prescribed by the instructions for calculating the assessable value was contrary to the concept of excise duty, which is a tax on the production or manufacture of goods alone, and on nothing else.
Issues: 1. Whether the instructions issued by the Central Government were valid? 2. Whether the formula prescribed by the instructions for calculating the assessable value was valid?
Ratio Decidendi: 1. The instructions issued by the Central Government were not in accordance with the provisions of the Act or the concept of excise duty. The exemption notification did not itself say that the exemption, will be available only to those manufactures who pass on the benefit to the buyer/consumer. In the absence of such a provision in the notification, it was contended, the same cannot be filled in by way of instructions under rule 233, which do not have a statutory character. 2. The formula prescribed by the instructions for calculating the assessable value was contrary to the concept of excise duty, which is a tax on the production or manufacture of goods alone, and on nothing else. The instructions, according to the counsel, in effect amount to adding a part of the Excise duty to the value of the goods determined under Section 4, which is impermissible.
Final Decision: The writ petition was allowed and it was declared that the benefit of the Notification No. 198/1976, dated 16-6-1976, cannot be denied to the petitioner only on the ground that the benefit of exemption has not been passed on by the petitioner to the buyer/consumer.
( 1 ) PETITIONER, the Andhra Pradesh Paper Mills Ltd. , Rajahmundry, manufactures and sells among other products, paper of all sorts. Paper is one of the products liable to Central Excise duty under Tariff Item No. 17 of the Schedule to the Central Excises an Salt Act, 1944. Duty is levied on ad valorem basis, value being determined in accordance with Section 4, Rules, have been framed by the Central Government under section 37, rule 8 empowers the Central Government to exempt, from time to time by Notification in the Official Gazette, any excisable goods from the whole or any part of the duty leviable on such goods, subject to such conditions as may be specified in the notification. Rule 233 empowers the Central Board of Revenue and Collector of Central Excise for issue written instructions providing for any supplemental matters arising out of these rules. "
( 2 ) WITH a view to encourage the production and manufacture of paper, the Central Government issued a Notification under Rule 8, being Notification No 198/1976, dated 16-6-1976 (amended latter under Notification No. 216/1976, dated 24-7-1976 ). Under the Notification, manufacturers of specified commodities and paper is one of the commodities mentioned therein are entitled to 25% reduction in the Central Excise duty leviable on clearances of their manufacture which are in excess of the clearances in the "base period", subject to the prescribed conditions. The relevant portion of the Notification reads as follows : -"in exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government, hereby exempts the excisable goods of the description specified in column (3) of the Table herein annexed (hereinafter referred to as the specified goods) and falling under such item number of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), as are specified in the corresponding Entry in column (2) of the said Table and cleared from one or more factories in excess of the base clearances by or on behalf of a manufacturer from so much of the duty of excise leviable thereon under the said sub-rule (1) of rule 8 and in force for the time being as is in excess of seventy-five per cent. of such duty, subject to the following conditions. "
( 3 ) BY making rule 173-C, the Government of India, in 1968 introduced a procedure, known as "self removal procedure". Under this procedure, the manufacturers can clear the excisable goods without prior assessment by the Central Excise officer or his counter-signature on the gate pass at the time of the clearance of the goods. But under this scheme there is an obligation on the manufacturers to submit to the appropriate excise authorities, from time to time, price lists in the prescribed form, for their approval, for the purpose of levying excise duty, within seven days of the close of each month. After the issuance of the exemption Notification, the Petitioner placed before the department the necessary information and record, to determine the `base year and the quantum of specified goods manufactured during the `base year, for enabling the department to work out the benefit of the said notification. , This was approved by the Superintendent of Central Excise, Rajahmundry, by his letter dated 7-12-1976 According to the petitioner, it became entitled to avail of the benefit of the exemption notification, from December, 1976 and the same was extended to it until March, 1977. In that month, however, the Department refused to extend the benefit of the said notification, and issued a notice to the petitioners, calling upon it to show cause why the amount of duty short-paid should not be demanded and collected in accordance with the rules. The petitioner submitted an explanation, stating that it was entitled to the benefit of the notification in respect of the excess production over the `base period and that, therefore, there was no short payment of duty. This explanation
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