Case: Union Of India  Vs. Mahindra &amp; Mahindra Ltd

2. The factual matrix of the case is as follows:The Respondent-Mahindra & Mahindra Limited is a Public Limited Company (hereinafter referred to as the "Assessee") and manufactures agricultural tractors (falling under Tariff item No. 34-II), required engines (Tariff item No. 29) and certain components (Tariff item No. 68) for the same at its factory situated at Kandivali, Mumbai. The Assessee has its sales depots at Bombay, Daman, Ludhiana and Lucknow, etc. It had been filing classification list and price list periodically under the procedure of self-removal of excisable goods which is under control and supervision of Inspectors of Excise at the factory level who in turn are under the control of the Superintendent of Excise. Accordingly, the Assessee had been paying the excise duty on the goods removed at the factory gate regularly.3. The competent authority in exercise of power conferred under the Act issued two above referred show-cause notices dated 12th August, 1985 and 4th February, 1986. The first show-cause notice dated 12th August, 1985 covered the period from 1982 to 1985 and allegedthat the Assessee sold the duty paid stocks from their sales depots at the higher price;(ii) that the sales depots were related persons and that therefore the price at which the goods were sold from the depots should be considered as the assessable value;(iii) that though the retail price included excise duty, freight and dealers margin, excise duty had been paid at the factory gate without including the aforesaid amounts and that this was incorrect in view of Rule 6(a) of Central Excise (Valuation) Rules, 1975;(iv) that the Assessee had not included in the assessable value (1) after sales services charges (2) dealers margin (3) marketing and selling expenses and (4) excess freight;(v) that the Assessee had concealed the invoice value.The notice alleged that there was an under assessment due to incorrect application of Section 4 of the said Act for the above referred reasons, and therefore, called upon the Respondent to show cause to the Assistant Collector of Central Excise Goregaon (East) Bombay Under Section 11A of the said Act.5. The Assessee filed a detailed reply to the notice on 30th September, 1985, much beyond the period of filing reply. It was pointed out that the Assessee had been regularly filing its monthly returns and maintaining the production registers. It had been filing classification list and price list which were checked thoroughly by the assessing authority right from the production stage. The depots are neither different bodies nor have they any separate existence. They are part and parcel of the Assessee itself. With respect to Rule 6(a), it was submitted that the said Rule applies only in those cases where the value is not ascertainable under the main definition of the term normal price in Section 4(1)(a) of the said Act. It was also submitted that the wholesale sales are on principal to principal basis and all the services like marketing, selling, servicing etc. thereafter are not done by the Assessee but by the dealers. It was denied that there was suppression of any information pertaining to sale invoices and since the department did not seek review of the approved price list, there was no justification in attempting to revoke the already approved assessable value.6. Another show-cause notice dated 4th February, 1986 was issued by the competent authority covering the period from 1st August, 1985 to 31st October, 1985 whereunder the competent authority asked to show cause as to why an amount of ?20,00,754.50 (Rupees Twenty Lakhs Seven Hundred Fifty Four and Paise Fifty only) be not assessed.It was alleged that the Assessee declared the unit of sale of one tractor for sale to individual buyers which includes freight and declare margin, besides excise duty, and that it is making sales of tractors from Bombay and from its depots at Daman, Lucknow and Ludhiana to individual buyers directly through its declared prices and that it did not declare such fixed retail price which could have been assessed by reducing such amounts, on account of freight and part of declare margin as is necessary and reasonable in the opinion of proper officer to arrive at the assessable value. Thus, it was alleged that there has been short payment of duty of excise for the reasons enumerated in the show-cause notice and that such short payment worked out in the annexure to this notice amounts to ?20,00,754.50 (Rupees Twenty Lakhs Seven Hundred Fifty Four and Paise Fifty only)- Basic excise duty and ?1,00,037.75 (Rupees One Lakh Thirty Seven and Paise Seventy Five only)- Special excise duty totaling ?21,00,792.25 (Rupees Twenty One Lakhs Seven Hundred Ninety Two and Paise Twenty Five only) during the period from 1st August, 1985 to 31st October, 1985. The Assessee was asked to show-cause to the Assistant Collector of Central Excise, Goregaon (East) Bombay as to why the differential duty amount of last five years should not be recovered from them Under Section 11A of the Act.The Assessee replied to the show-cause notice by its letter dated 25th March, 1986. The Assessee by its earlier letter dated 24th February, 1986, also asked for the work sheets showing as to how the assessable value had been worked out.7. Thereafter, the Assessee was served with annexure to the first show-cause notice on 21st May, 1986. The annexure stated that the list showing the difference in the prices at Daman and Ludhiana when compared to those at Bombay which was on much higher side upto ?5,000/- per tractor and it contained the amount beyond the reasonable expenditure on account of transportation, insurance etc. In the said annexure, it was accepted that few tractors i.e. about 20% were sold at the factory gate at Kandivali to show that the prices are ascertainable at the factory gate Under Section 4(1)(a) of the said Act. It was further alleged that this was done with an ulterior motive to reduce the duty liability. It was claimed that there was a short payment to the tune of ?3,59,45,487.40 (Rupees Three Crores Fifty Nine Lakhs Forty Five Thousand Four Hundred Eighty Seven and Forty Paise only) and thereby asked as to why a penal action under the Act should not be initiated apart from the recovery Under Section 11A of the Act. Detailed charts supporting the claim were also enclosed along with the annexure.8. Thereafter, the Assessee instead of waiting for a decision or moving before CEGAT moved before the High Court challenging both the notices.9. The High Court referring to the old and amended Section 4 of the Act held that the department was not justified in demanding the excise duty on the basis of higher price, at which the tractors were sold by the Assessee from their Depots whether on wholesale price or retail price under the law in force at that point of

Court's reasoning:
18. In the present case the Assessee failed to bring the ascertainable price of the tractor, cost of transportation to depot, etc. to the notice of the High Court. The Assessee simply challenged the show-cause notices on the ground that the amended Section 4 is not applicable. The High Court without looking into the relevant fact, only on the ground that Sub-clause (iii) to Section 4(b) was subsequently added by amendment including depot, premises of consignment agent or any other place or premises from where the excisable goods were to be sold after their clearance from the factory, declared the notices illegal and set aside the same. Even the matter was not remanded back to competent authority allowing the Assessee to bring to its notice "normal price", in course of wholesale trade, place of removal of tractors, transportation charges,