SARADA PLYWOOD INDUSTRIES LTD. Vs. UNION OF INDIA (UOI)
LAWS(GAU)-1994-9-42
HIGH COURT OF GAUHATI
Decided on September 28,1994

Sarada Plywood Industries Ltd. Appellant
VERSUS
UNION OF INDIA (UOI) Respondents





Cited Judgements :-

ANDAMANS TIMBER INDUSTRIES LTD. VS. COMMR. OF C. EX., CALCUTTA-II [LAWS(CE)-2006-7-130] [REFERRED TO]
BURNS PHILIP INDIA LTD. VS. COMMISSIONER OF C. EX., CALCUTTA-IV [LAWS(CE)-1999-5-90] [REFERRED TO]


JUDGEMENT

J.N. Sarma, 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. 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 : -

(3.)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 existence 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 cause 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.

4. I have heard Mr. M.L. Lahoty, learned counsel for the petitioners and Mr. K.N. Choudhury, learned C.G.S.C.



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