Case: National Leathercloth Manufacturing Company Vs. Union of India

The petitioners have claimed refund of Excise duty amounting to Rs. 40,18,805. 60 ps. with 18% interest in respect of the goods cleared by them during the period from 12th November, 1977 to 12th November, 1980, on the ground that certainexpenses have been erroneously included in the assessable value and excise duty has been erroneously paid by them.2. During the pendency of the petition the Respondents were directed by this Court to deposit certain amount in Court and the petitioners were permitted to withdraw that amount on furnishing security. Accordingly the Respondents had deposited the amount and the Petitioners had withdrawn the same by furnishing security. Later on, the said order was modified and the Petitioners were directed to bring back the amount withdrawn by them and the Respondents were directed to adjudicate the matter afresh in accordance with the decision of the Apex Court in the case of Union of India v. Bombay Tyre International Limited reported in 1983 (14) E. L. T. 1896. Since the Apex Court in the case of Bombay Tyre International (supra) has upheld the constitutional validity of new Section 4 of the Central Excises and Salt Act, 1944 the only issue to be determined by the Excise authorities was regarding the permissibility of certain deductions asexpenses as per the guidelines laid down by the Apex Court in the Bombay Tyre Internationals case (supra ).3. In the light of order passed by this Court, the matter was adjudicated afresh by the Excise authorities after giving personal hearing to the Petitioners and by an order dated 12th April, 1984 the Assistant Commissioner of Central Excise,rejected the refund claim of the Petitioners asand disallowed the deduction claimed by the Petitioners asexpenses under different heads. The petition has been amended to challenge the said order dated 12th April, 1984.

Court's reasoning:
Therefore, in view of above findings given by the adjudicating authority to the effect that the interest charges paid by the Petitioners is on account of the overdraft facility availed by them, the same cannot be treated asexpenses and refusal to deduct said interest charges from the assessable value cannot be faulted. In this view of the matter both the claims of the Petitioners fail.It is an admitted position that the duty demanded as per the impugned order dated 12th April, 1984 is to the tune of Rs. 53,93,388/and the Petitioners have already paid an amount of Rs. 39,20,000/thus leaving balance of Rs.. Mr. Dharmadhikari, learned Counsel for the Petitioners submitted that the Petitioners had furnished a bank guarantee of Rs. 16,00,000/as per the Court order in favour of the Respondents and the same has been renewed from time to time and the said bank guarantee continues to be in force. Since, we have upheld the validity of the order impugned in the Petition, the Respondents would be entitled to recover the balance amount of Rs. 14,73,388/with interest at the rate of 12% per annum from the date of said order till payment by encashing the bank guarantee furnished by the Petitioners and or by any other mode permissible in law.