( 1. ) THE Petitioner is an existing company, within the meaning of the Companies Act, 1956, having its registered office at Birlagram, Nagda, in this State. The Petitioner is engaged in the manufacture of staple fibre of which sulphuric acid is an essential ingriedient. It also manufactures sulphuric acid and uses or consumes the entire quantity in the manufacture of staple fibre without selling any part of it. The dispute in this petition relates to the excise duty payable on the sulphuric acid so manufactured by the petitioner and used or consumed in its entirety in the manufacture of staple fibre at Nagda during the period between 10-11-1976 and 31-10-1978.

( 2. ) PRIOR to 10-11-1976, excise duty on sulphuric acid was levied and collected on the basis of tariff value fixed by the Central Government from time to time under Section 3 of the Central Excises and Salt Act 1944 (hereinafter referred as the Act ). However, with effect from 10-11-1976, excise duty on sulphuric acid became payable with reference to its value determined under Section 4 of the Act, instead of on the tariff value prior to that date. The duty of excise payable on sulphuric acid is at the rate ad valorem in accordance with Item 14-G of the First Schedule to the Act.

( 3. ) THERE is no dispute that for the period in question, commencing from 10-11-1976, the excise duty payable on sulphuric acid manufactured by the Petitioner is to be calculated with reference to the value thereof determined under Section 4 (1 ) (b) of the Act read with Rule 6 (b) of the Central Excise Valuation Rules, 1976, framed under Section 37 of the Act for the purpose of determining the value of excisable goods where the duty is payable in accordance with Section 4 of the Act. Section 4 (1 ) (b) of the Act and Rule 6 (b) of the Central Excise Valuation Rules, 1975 (hereinafter called the valuation Rules), in so far as they are relevant for the purpose of this petition, are as under :

Sec. 4. Valuation of exciseable goods for purposes of charging of duty of excise.- (1) here under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be (b) Where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. * * * * Rule 6. If the value of the excisable goods under assessment cannot be determined under Rule 4 or Rule 5, and * * * * (b) Where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based (i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee : Provided that in determining the value under this sub-clause the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods; (ii) if the value cannot be determined under sub-clause (i), on the cost of production of manufacture, including profits, if any, which assessee would have normally earned on the sale of such goods; The real controversy between the parties is whether it is sub-clause (i) or sub-clause (ii) of Clause (b) of Rule 6 that applies to the petitioners case. According to the petitioner, it is sub-clause (ii) that applies, while the respondents contend that sub-clause (i) is applicable.

( 4. ) REFERENCE may now be made to the procedure for removal of excisable goods and determination of duty, its assessment, reopening of assessment and penalty that may be imposed in certain cases. This procedure is contained in Chapter VII-A of the Central Excise Rules, 1944 (hereinafter called the excise Rules),