KIRLOSKAR CUMMINS LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) PETITIONER No. 1 is a Company incorporated under the Companies Act, 1956 and in their factory at Pune Inter alia, manufacture high horse-power engines for use in heavy duty earth moving machinery. These diesel engines are tailor made to the specification of individual customers. Out of the manufacture of engines 90% are sold to the customers, while approximately 10% diesel engines are sold to a company M/s. Cummins Diesel Sales and services (India) Limited, which is a wholly owned subsidiary company of Petitioner No. 1, and which acts as an authorised distributors of the products manufactured by petitioner No. 1. The price at which the diesel engines are sold, both to the direct customers and to the subsidiary company are commercial price consisting of manufacturing costs and manufacturing costs and manufacturing profits of petitioner No. 1 Company in respect of diesel engines. The petitioners claim that in no circumstances the price charged and recovered from the subsidiary company is concessional price and the sole consideration for the sale of engines to the subsidiary company is the price which is equal to that recovered from sale to individual buyers.

(2.) AMENDED Section 4 of the Central Excises and Salt Act, 1944 came into force with effect from Oct. 1, 1975. Prior to the amendment the Excise Authorities treated the wholesale case price charged by petitioner No. 1 Company to the direct customers as well as to the subsidiary as assessable value of the diesel engines. After Oct. 1, 1975 the Excuse Authorities treated the subsidiary company as 'related person' under Sec. 4 (4) (c) of the Act and declined to accept the price charged by petitioner No. 1 to the subsidiary company as the assessable value. The Excise authorities determined the assessable value by reference to the price charged by the subsidiary company to their purchasers. The price charged by the subsidiary company to their purchasers are roughly 25% higher than the price charged by petitioner No. 1 company to the subsidiary company. On December 15, 1975 the Division Bench of this Court delivered judgment in the case of indian Tobacco Company Limited holding that Section 3 (1) was the charging section under which excise duty was levied on the production and manufacture of goods and Section 4 prior to its amendment was only a machinery provision under which the quantum of the assessable value was to be determined and by which the scope of levy of excise duty could not be enlarged. The petitioners thereupon came to know for the first time that excess excise duty had been levied and collected for the period October 1, 1975 to September 30, 1976 by taking into consideration the price charged by subsidiary company to the purchasers as relevant for determination of the assessable value.

(3.) THE petitioners filed refund application dated October 8, 1976 for refund of duty illegally recovered between the period October 1, 1975 to September 30, 1976 and the amount claimed was Rs. 6,81,079. 36. The company also informed the assessing authorities that any future payment based on the second stage price would be made under protest. The excise authorities then informed the Company that the refund claim is receiving attention. Second refund application was filed by the Company on February 15, 1980 for the period from October 1, 1976 to September 30, 1979 and the amount claimed was Rs. 18,65,710. 04. On August 18, 1980 the assistant Collector of Central Excise, Pune gave personal hearing in respect of refund claim. The third application for refund was lodged by the Company on January 14, 1981 for the period commencing from October 1, 1979 to September 30, 1980 for the sum of Rs. 26,01,005. 58. One more application was filed on April 2, 1982 for the period commencing from October 1, 1980 and ending with September 30, 1981 for the sum of Rs. 17,76,438. 40. All these refund applications filed from the year 1976 onwards did not receive any consideration by the Assistant collector and curiously on April 28, 1982 the Assistant Collector informed the Company that files are not received in his office. The total amount of the refund claim being Rs. 44,65,261. 12 and releasing that the Assistant Collector was not giving any attention to these claims the company filed present petition under Article 226 of the Constitution of India on September 30, 1982.