A K ROY Vs. CARONA SAHU COMPANY LIMITED

JUDGEMENT

(1.) The Collector of Central Excise and the Assistant Collector of Central Excise have filed this against the judgment and order of K.K. Desai J. whereby he quashed and set aside the two Notices of Demand dated January 30, 1967, calling upon the Petitioners to pay different duty and the order made by the Assistant Collector of Central Excise on May 27, 1967, and the appellate order made by the Collector Central Excise on February 6, 1968. Carona Sahu Company Limited, the Petitioners, carry on business of manufacture and sale of foot-wear. They have two factories at Jogeshwari, in one of which they manufacture Cavas/Rubber Foot-wear while in the other they manufacture Leather Foot-wear. Under Item 36 of the First Schedule to the Central Excises and Salt Act, 1914 (hereinafter referred to as "the Act"), duty of excise was levied on foot-wear with effect from February 28, 1964. By a Notification of exemption dated February 28, 1965, the levy was withdrawn with effect from February 28, 1965. In this appeal we are concerned with the Notices of Demand for payment of excise duty made by the Department for the October 1, 1964, to February 26, 1965.

(2.) Before the learned trial Judge two contentions were urged on behalf of the Petitioners. The first contention was that having regard to the provisiona of Section 4 of the Act, the only basis for determination of the excise duty payable by the petitioners Company was the price charged by the petitoners to the distributors with the abatement of trade discount which was admittedly continously being given by the Agreement of Distribution. According to the Petitioners, the price charged by the distributors to the wholesale purchasers, with whom they dealt, was entirely irrelevant in assessing the excise duty payable by the Petitioner. Secondly, it was contended before him that during the relevant peiod, i.e., October 1, 1964 to February 26, 1965, final and complete assessments of excise duty were made and the amounts assessed to be due were recovered and paid. It was urged that in fact there was no provisional assessment and the provisions of Rule 9-B of the Rules were not attraction in effect or in substance. The demand made from the Petitioners by the two Notices of demand was in respect of duty short levied; but the same was time-barred and the petitioners could not be called upon to pay the same. The learned trial Judge accepted the contention of the petitioners inter alia holding that the finding made in the impugned appellate order that the prices charged to the distributors could not be accepted as wholesale price particylarly when the distributors were selling the goods in their turn in wholesale to other dealers and the distributors had not given any discount in certain cases. He also accepted the other contention on behalf of the Petitionrs that there was no provisional assessment as contemplated by Rule 9-B. On these grounds he quashed the two Notices of Demand and the imnpugned orders passed by the Assistant Collector of Central Excise and the Collector of Central Excise. It is against this Judgment and order that the present appeal is filed by the Excise authority.

(3.) mr. Dalal on behalf of Excise authorities contended that the transactions between the Factory and the distributors in Bombay could not be deemed to be wholesale transactions and the price charged to the distributors could not be accepted as wholesale price. Upon proper onterpretation of the provisions of section 4 of the Act his submission was that Excise duty had to be paid having regard to the prices charged by the distributors to the wholesale dealers and that the Petitioners were not entitled to any deduction eithe by way of trade discount or Onward Freight Allowance or Special Rebate as contemplated in the agreement between the petitioners and the distributors. Secondly, he submitted that as the question of determination of the price for the purpose of levy of Excise duty was pending detemination by the appropriate authorities, the order that was passed by the approppriate authorities for refund of the balances in the two Current Accounts was merely provisional and the demands made by the two ompugned. Notices of Demand were fully justified as it was at that stage that the prices were really determined for determination of the value for payment of Excise duty.