ASHOK LEYLAND LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) By these four writ petitions, Ashok Leyland Limited (for short the petitioners) challenge four different orders passed by Respondent No. 2 Assistant Collector, Central Excise, Nagpur (for short, the respondent) under Section 11A of the Central Excise and Salt Act, 1944, (hereafter the Act) directing the petitioners to pay short levied excise duty on the motor vehicles manufactured by them at their Bhandra factory.

(2.) The material facts lie within a narrow compass. The petitioners are manufacturers of medium and heavy duty motor vehicles and have their factories at Ennore and Hosur in Tamil Nadu, at Alwar in Rajasthan and at Bhandra in Maharashtra. These motor vehicles are liable to excise duty under Tariff Item 34 of the first schedule to the Act. The respondent is the authority concerned with levy and collection of duty in regard to the Bhandra factory. According to the petitioners they have fixed ex-factory price for these goods and excise duty is payable by them under Section 4(1)(a) of the Act on the ex-factory wholesale cash price. Their case is that they have appointed 22 main dealers all over India and 99 per cent of the sales are made to these dealers directly at the factory gate and only 1 per cent to the consumers in retail. The ex-factory price as shown in the price list furnished by the petitioners to the department under Rule 173(c) does not include the three items which the petitioners terms as delivery charges transit insurance charges' and commission (margin). It is common ground that the Superintendent Central Excise, issued show cause notices to the petitioners under Section 11A of the Act, claiming that these items also ought to have been included in the assessable value of the goods for levying the correct excise duty. The petitioners submit that these items are not liable to be included in the assessable value of the goods, in view of the decision of the Supreme Court reported in 1983 E.L.T. 1896 (Supreme Court) Union of India v. Bombay Tyres International Limited.

(3.) So far as the item of commission (margin) is concerned, the petitioners explain that this item does not form part of the wholesale price they charge from their main dealers. According to them the main dealers are allowed to mark up the commission by way of margin such that in public interest the maximum retail price of the vehicles throughout India is maintained at the same level and this commission forms part of the selling profit of the main dealers. It is common ground that on the basis of a similar show cause notice issued by the Department in respect of vehicles manufactured by the petitioners in their Tamilnadu factories, the matter went up to the madras High Court in Writ Petition No. 476 of 1978. By a judgment dated 28th September 1981, a learned Single Judge of that High Court upheld the stand of the petitioners that their main dealers were not related persons under the Act and that there was no scope for treating the commission as a component of the assessable value. This decision was confirmed in Letters Patent Appeal by that High Court in December 1982. The Supreme Court also dismissed the department's petition for Special leave to appeal in November 1983. The petitioners claim that this decision is binding on the present respondent also, inasmuch as identical terms of agreement between the petitioners and their main dealers on the basis of which the decision was rendered, apply to Bhandra factory also.