S.D.Agarwala, J. - (1.) The petitioner in the present writ petition is a company incorporated under the Indian Companies Act and is carrying on the business of manufacturing and selling cigarettes and smoking tobaccos of diverse kind throughout India. It owns five factories in the country. The factories are located at Bangalore in the State of Karnataka, Kidderpore in the State of West Bengal, Munger in the State of Bihar, Parel in the State of Maharashtra and Saharanpur in the State of Uttar Pradesh.
(2.) During the period 1st October, 1975 to 28th February, 1983 cigarettes manufactured by the petitioner-company were subjected to excise duty under Section 4 of the Central Excises and Salt Act, 1944, hereinafter referred to as the 'Act'. There was controversy between the petitioner-company and the Excise Department in regard to interpretation of Section 4 of the Act. It was held by some courts that value should be determined for the purposes of excise duty on the basis of the manufacturing cost plus profits. The controversy ultimately was raised before the Hon'ble Supreme Court in Union of India v. Bombay Tyre International Ltd. which was decided by the Hon'ble Supreme Court on 7th October, 1983. The decision of the Hon'ble Supreme Court is reported in AIR1984 SC 420 , (1983 )2 CompLJ4 (SC ), 1984 (2 )ECC102 (SC ), 1983 ECR653D (NULL ), 1983 (12 )ELT869 (SC ), 1983 (1 )SCALE521 , (1983 )4 SCC210 . The Hon'ble Supreme Court after considering the section in detail finally settled the controversy by holding that certain post manufacturing expenses were not deductible from the price to arrive at assessable value.
(3.) The petitioner company during the above mentioned relevant period have been filing price list deducting post manufacturing expenses from wholesale price for the purposes of payment of excise duty. On 8th December, 1978 a show cause notice was issued to the Company by the Excise Department in relation to Saharanpur factory inter alia asking the Company as to why their wholesale dealers should not be treated as Pelated persons' in terms of clause (c) of Sub-section (4) of Section 4 of the Act and also why the deduction claimed by them from their alleged ex-factory prices to the wholesale dealers towards the alleged post manufacturing expenses should not be dis-allowed.;