CACHET PHARMUCEUTICALS PVT Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) IN this petition under Article 226 of the Constitution, the assessee, which is a private limited Company, challenges the demand of Rs. 3,06,60,879.89 raised by the District Excise Officer, Alwar (respondent No. 3) to be invalid and illegal and has, therefore, prayed to quash the Demand Notice dated July 9, 1991 (Annexure 5). The circumstances leading to the filing of the writ petition may be narrated:

(2.) THE Company was manufacturing patent/proprietary medicines containing alcohol having its manufacturing unit in RIICO industrial Area, Bhiwadi in Alwar District. It had started production of pharmaceutical formations by using alcohol from August 27, 1987, and was paying excise duty to the State of Rajasthan. It is stated that the Company has stopped manufacturing medicines for the time being from August, 1992 for the reasons mentioned in para 11 of the writ petition. The products of the Company were liable to excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (hereinafter referred to as 'the Act of 1955') and the rules made thereunder. The Industrial Unit of the Company functioned under physical control of the Excise officer posted there and clearance of the products was made on realisation of excise duty under the Act of 1955 on the issue of prescribed transport permit in Form T.P.I. The Demand Notice (P.IA) dated July 9, 1993, was served on the Company on 12.7.1993 showing a short payment of duty to the tune of Rs. 3,06,60,870.89 by declaring wholesale price at lower rates than the actual. Petitioner's case is that before raising the demand no show cause notice was given to it and there was no determination or calculation of the deficiency in duty and the demand was raised in an arbitrary manner in violation of the principles of natural justice. The demand has been challenged on other grounds also, including that of limitation. A perusal of the Demand Notice (Annexure 5) shows that the basis of additional demand of the duty was on the ground that the Company had made short payment of excise duty by sowing the wholesale price of the medicines at lower rates than the actuals and that a Committee was appointed by the State Government and after holding an enquiry it calculated the short payment of excise duty in the sum of Rs. 3,06,60,870.89. By the said Demand Notice the Company was asked to deposit the amount within 15 days, failing which recovery proceedings under the Rajasthan Land Revenue Act shall be initiated.

(3.) SECTION 4(1)(a) of the Central Excise Act reads as under: Section 4 -Valuation of Excisable Goods for purposes of Charging of Duty of Excise.: (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, subject to the other provisions of this section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by. the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale: Provided that (i) Where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being relates persons) each such price shall, subject to the existence of the other circumstances specified in Clause (a), be deemed to be the normal price of such goods in relation to -each such class of buyers; (ii) Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under ' any such law, then, notwithstanding anything contained in Clause (HI) of this proviso, the price or the maximum price, as the case maybe, so fixed, shall in relation to the goods so sold, be deemed to be the normal price thereof; (Hi) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail; (b)... Sub -section (4) defines 'assessee' to mean the person who is liable to pay the excise duty under the Act and includes his agent. 'Related person' has been defined in Clause (c) of Sub -section (4) asunder: (c) 'related person' means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and, includes a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub -distributor of such distributor.