Case Note & Summary
The dispute arose between a biscuit manufacturing company and the Collector of Central Excise regarding the assessable value of biscuits manufactured under an agreement with Britannia Industries Ltd. The appellant, incorporated on 30.12.1982, commenced production on 3.1.1985 and entered into an agreement with Britannia on 15.12.1986, which outlined the supply of ingredients and manufacturing processes. A show cause notice was issued on 16.11.1987, leading to a determination by the Assistant Collector that the excise duty should be based on Britannia's wholesale price. The appellant's appeal was rejected by the Collector (Appeals), and the Tribunal ruled that the appellant acted as an agent of Britannia. The Supreme Court, upon reviewing the case, referenced the Ujagar Prints decision, emphasizing that the assessable value should include the cost of raw materials and the appellant's manufacturing expenses, but exclude any profits or expenses incurred by Britannia post-manufacture. The court allowed the appeal, directing the excise authorities to reassess the duty in accordance with the law, without imposing costs.
Headnote
A) Central Excise - Assessable Value - Calculation of Excise Duty - Central Excise Act, 1944, Section 4 - The court held that the assessable value must include the cost of raw materials supplied by Britannia along with the appellant's manufacturing costs and profits, but not any post-manufacturing profits or expenses incurred by Britannia. The court reaffirmed the principles established in Ujagar Prints case regarding the determination of assessable value for excise duty (Paras 1-3).
Issue of Consideration
Whether the assessable value of biscuits manufactured by the appellant should be based on Britannia's wholesale price or the appellant's manufacturing costs.
Final Decision
The Supreme Court allowed the appeal, ruling that the assessable value must include the cost of raw materials and the appellant's manufacturing expenses, excluding any post-manufacturing profits or expenses incurred by Britannia. The excise authorities were directed to reassess the duty in accordance with the law, with no order as to costs.
Law Points
- Central Excise Valuation
- Assessable Value
- Principal-Agent Relationship
- Processing Charges
- Manufacturing Costs
