- (1.) This writ application was moved by the petitioner company against a show cause notice dated 27th March, 1987 issued by Shri N.K. Bajpai, Director, Directorate of Anti Evasion (Central Excise) New Delhi, whereby the petitioner company was, inter alia, directed to show cause why Central Excise Duty to the extent of Rs. 803.75 crores which was allegedly short paid by the petitioner company should not be demanded under the provisions of S.11A of the Central Excises and Salt Act, 1944 read with R.9(2) of the Central Excise Rules.
(2.) The facts, in short, relevant for the purpose of determination of the questions raised in this case are as follows :- The petitioner company is engaged in manufacturing of cigarettes having its registered office at Calcutta and have five factories situated at Bombay, Bangalore, Saharanpur Munger and Calcutta respectively. The petitioner company sells cigarette manufactured by it through wholeseller, secondary wholesellers and retailers. The petitioner company also had been getting their brands of cigarettes manufactured on job basis from other tobacco companies which are mentioned in the show cause notice. Prior to lst March, 1983 the cigarettes were liable to excise duty under item 4 II(2) of the first schedule of the said Act and were liable to excise duty under Chap. 24 of the Central Excise Tariff Act, 1985. The valuation of the excisable goods for the purpose of charging the excise duty was made in accordance with the provisions of S.4 of the said Act. The said Tariff Act as prescribed under the said item was as follows : JUDGEMENT_294_AIR(CAL)_1989Html1.htm
(3.) Thereafter the Central Government, in exercise of its power under R.8 of the Central Excise Rules, issued Notifications from time to time granting exemption and providing for a lower and concessional rate of excise duty on cigarettes than ordinarily prescribed under the Act. Prior to 1st March, 1983 the amount of duty was required to be determined with reference to the wholesale cash price of the exercisable goods determined in accordance with the principles laid down under S.4 of the said Act. After 1st March, 1983 by a Notification dated 27-2-86 issued under R.8 of the Central Excise Rules, the rates of duty for cigarettes were related to various specific slab rates for which different rates of cigarettes were placed depending upon the retail price of package of cigarette, in other words, the rate of excise duty was made specific for different values depending upon the retail price of the cigarettes and that the duty was levied according to the rates prescribed. For the purpose of determination of the amount of excise duty payable under the Notifications issued under R.8 of the said Rules, the Central Government from time to time issued Notifications changing the rates. It is not necessary to set out the said rates which were amended from time to time but only for the purpose of this writ application the rate introduced by the Notification dated 2-9-85 is mentioned for the purpose of understanding the case made out in the show cause notice and the case made by the parties before this Court which is as follows : (1) Rate (2) Cigarettes (being cigarettes packed in packages) of which the adjusted sale price per one thousand - (i) does not exceed rupees sixty forty-two rupees per one thousand; (ii) exceeds rupees sixty but does not exceed rupees one hundred and seventy One hundred and twenty five rupees per one thousand. (iii) exceeds rupees one hundred and seventy but does not exceed rupees three hundred Two hundred and twenty five rupees per one thousand; The said Notification, inter alia, provided certain definitions which are necessary to be set out in this connection : (a) 'adjusted sale price', in relation to each cigarette contained in a package of cigarettes, means the unit price arrived at by dividing the sale price of such package by the number of cigarettes in such package ; (b) 'cigarettes packed in packages', means cigarettes which are packed for retail sale, in packages which (a) contain 10 or 20 cigarettes, and (b) bear a declaration specifying the maximum sale price thereof as the amount specified in the declaration, plus local taxes only. (c) 'sale price' in relation to a package of cigarettes means the maximum price (exclusive of local taxes only) at which such packages to be sold in accordance with the declaration made on such package.";