COLLECTOR OF CENTRAL EXCISE Vs. DUNLOP INDIA LTD

JUDGEMENT

(1.) This appeal has been preferred by the Central Excise Authorities and the Union of India against the judgment of Masud J., dated December 12, 1974. By the said judgment the learned Judge, though he discharged the Rule Nisi obtained by the respondent, Dun-lop India Limited, on its application under Article 226 of the Constitution of India, directed that the appellants would deal with the pending applications of the respondent regarding levy of excise duty under Section 4(a) of the Central Excises & Salt Act, 1944 in accordance with the principles of law laid down by the Supreme Court in A.K. Roy and Anr. v. Voltas Limited . The respondent has also filed a cross-objection assailing the propriety of the judgment discharging the Rule Nisi.

(2.) The case of the respondent, Dunlop India Limited, is that it is a manufacturer of diverse excisable goods including rubber tyres and tubes for motor vehicles, cycles and other vehicles and also of various rubber products. The respondent has a factory at Sahaganj, in the district of Hooghly, West Bengal and another factory at Madras. The respondent has been paying excise duty as levied by the Central Excise Authorities on the 'basic price' of rubber tyres and tubes for Motor Vehicles manufactured at the said Sahaganj factory since 1951. It is the case of the respondent that the products of the respondent are sold to the dealers who are appointed by it at various places all over India. The price fixed by the respondent in respect of each product is uniform throughout India, but actual sales to consumers are made by the dealers and not by the respondent. The price payable by the dealer to the respondent includes the basic price, and the excise duty levied by the appellants on the basic price consists of manufacturing costs and post-manufacturing profits or selling profits. The post-manufacturing expenses include all selling and administrative expenses e.g. salaries, wages and bonus, rates and taxes, depreciation, rents, insurance, advertisement and travelling expenses, bank charges, auditor's fees, miscellaneous and other expenses and diverse other items, more particularly set out in the balance-sheet and profit and loss accounts of the respondent for each year. The post-manufacluring expenses and selling profits are all reasonably ascertainable and can, as a matter of fact, be ascertained, inter alia, from the balance-sheet in respect of each year. It is alleged that the manufacturing cost as would appear from the balance-sheet consists of the price of raw materials and finished goods, salaries, wages and bonus of workmen and staff welfare expenses, consumption of stores and spare parts, fuel, light and water, depreciation etc. It is contended that the selling profit and the manufacturing profit out of the said total gross profit can be easily ascertained and/or have been ascertained according to well recognised principles of apportionment and regular practice.

(3.) The further case of the respondent is that the appellants had no authority or jurisdiction to assess excise duty on the respondent's products more than the manufacturing cost and manufacturing profit only. It is alleged that the respondent has all along paid the excise duty as assessed and demanded by the appellants on a mistaken belief that such duty was payable also in respect of selling costs and selling profits, whereas in fact ard in law, no such duty was payable. The respondent discovered the mistake only upon coming to know during the last week of December, 1972 of the judgment of the Supreme Court in Voltas' case referred to above. The respondent, after it had discovered the said mistake, called upon the appellants to cancel the orders of assessment for the period 1951-1971 and to refund the excess duty which had been illegally assessed and recovered by the appellants on the post-manufacturing costs arid telling profit ard to refrain forthwith from assessing and recovering excise duty on the post-manufacturing costs and selling profits of the products of the respondent. As the appellants had not complied with the said demand of the respondent, the respondent moved an application under Article 226 of the Constitution before this Court and obtained the Rule Nisi. It was contended by the appellants that levying and realisation by the appellants of excise duty on post-manufacturing costs and post-manufacturing profits during the years 1951-71 were illegal, inoperative and void and was without jurisdiction and, as such, should be set aside and the appellants should be directed to refund to the respondent the sum of Rs. 7,95,90,000/- for the year 1951-1971 as mentioned in the schedule to the writ application. Prayers were made in the writ petition for the issuance of appropriate writ or writs in that regard.