Sundaram Abex Limited vs Collector of Central Excise

Govindasamy, J.—The petitioner is a public limited company registered under the Indian Companies Act, 1956 and is having its registered

office at Mount Road. The petitioner has its factory at Avadi, Madras and has been carrying on business in the manufacture of brake linings and

clutch facings for automotive and non-automotive parts having technical collaboration with Abex Corporation of U.S.A. The petitioner submitted a

price list under Rule 173C of the Central Excise Rules for the purpose of levying excise duty in the prescribed form for approval declaring their ex-

factory wholesale prices viz., list price less 33% as the assessable value under proviso (i) of sub-section 1(a) of Section 4 of the Act as amended.

The Excise Authorities by letter dated 3-10-1979 informed the petitioner that the duty payable by the petitioner company will be on the price at

which the distributors of the company sell the produces and therefore the price list shall be filed in part IV and not in part I and returned the price

list. However, the petitioner filed price list under part VI under protest. The Collector of Central Excise by letter dated 11-7-1980 issued a show

cause notice as to why the dealers should not be treated as related persons and duty charged at the price at which the said dealers sold the

products to others. The petitioner company submitted its explanation to the show cause notice. The Collector of Central Excise, the second

respondent herein, dropped the show cause notice and directed that the assessable value will be based on the price at which the company sells the

products to their wholesale dealers. Accordingly, the petitioner company was charged with duty on that basis. However, the first respondent by

order dated 28-7-1981 issued a show cause notice u/s 35(a) of the Central Excises and Salt Act stating that why the order of the second

respondent should not be set aside and assessable value should not be approved in part IV at the price which the wholesale dealer deals with the

goods to their customers i.e., less 25%. Aggrieved by the said order, the petitioner filed W.P. No. 8026 of 1982 before this Court and this Court

by order dated 28-7-1983 in W.M.P. No. 12006/82 stayed implementation of the order of the first respondent, if any, that whole be passed.

Thereafter, the petitioner started a factory in Madurai within the jurisdiction of the second respondent, wherein the same goods brake linings are

being manufactured. The petitioner has been following the same procedure which it has been following in Madras. During the course of verification

of the invoices and debit notes raised from the petitioner, it was noticed that the assessee had not passed on the 33% discount as approved in the

Part I price list, from time to time by the Assistant Collector of Central Excise, Virudhunagar, but they have passed only 25% of the discount to the

wholesale dealers and from the branches and the remaining 8% discount amount was not passed on to the buyers. The value of 8% differential

discount amount was not passed on to the buyers during the period February, 1985 to December, 1988 worked out to Rs. 59,54,556.13 and the

Central Excise Duty amount collected in the form of deposit on the said discount value worked out to Rs. 13,25,616.59. Since the factum of

differential amount was not brought to the notice, the respondent issued a show cause notice dated 16-9-1988 calling upon the petitioner to show

cause as to why the duty amount of Rs. 13,25,616.59 collected on the value of Rs. 59,54,556.13 and retained by them for the period from

February, 1986 to February 1988 should not be demanded by invoking the extended period under proviso to Section 11A(1) of the Central

Excises and Salt Act, 1944 as amended inasmuch as they have wilfully suppressed the fact of not allowing the 33% discount and allowing only

25% discount to the wholesale dealers. The petitioner submitted their explanation. However, the Collector of Central Excise the second

respondent herein by the impugned order dated 21-12-1988 directed the petitioner to pay the entire sum of Rs. 13,25,616.59 collected as deposit

on the differential discount in dispute. In these circumstances, the petitioner has filed the above writ petition for issue of a Writ of Certiorari to

quash the aforesaid order.

During the pendency of the writ petition, the Collector of Central Excise, Madras, in pursuance of the order of remand dated 30-3-1990 in

W.P. No. 8026 of 1982, on consideration of the entire facts and circumstances and the materials on record by his proceedings in C. No.

17/34A/1/81-C-Adji dated 25-1-1981 held that the wholesale dealers are not related persons and accordingly, the Collector of Central Excise,

Madras, dropped the proceedings initiated in show cause notice dated 28-7-1981 referred to hereinabove. In pursuance of the aforesaid finding,

and having regard to the facts and circumstances set out hereinabove, the wholesalers are not related persons and consequently, the petitioner is

entitled to 33% discount and hence the impugned order is liable to be quashed and is accordingly quashed with a direction that the petitioner shall

pay back the differential amount collected from the wholesalers concerned to them. Accordingly, the writ petition is ordered. No. costs.