COLLECTOR OF CENTRAL EXCISE, PUNE ETC. ETC. versus DAI ICHI KARKARIA LTD. ETC. ETC.

Citation: [1999] SUPP. 1 S.C.R. 360 · Decided: 11-08-1999 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed

Judgment (excerpt)

A 
COLLECTOR OF CENTRAL EXCISE, PUNE ETC. ETC. 
B 
v. 
DAI ICHI KARKARIA LTD. ETC. ETC. 
AUGUST 11, 1999 
[S.P. BHARUCHA, R.C. LAHOTI AND N. SANTOSH HEGDE, JJ.] 
Central Excise and Salt Act, 1944/Central Excise Rules, 1944/Central 
Excise (Valuation) Rules, 1975: 
C 
S.4(1) (b) I Rules 57A to 57J/Rule 6 - Excisable product-Computation 
of price for assessment of excise duty-Intermediate products being specified 
goods for purpose of MOD VAT scheme-Cost of-Held, in determining cost 
of the product, excise duty paid on raw material also covered under MOD VAT 
scheme is not to be included 
D 
Words and phrases: 
Word 'cost'-Meaning of-Explained 
The assessee-manufacturers purchased raw material for use in the 
manufacture of intermediate products. The intermediate products were used 
E in the manufacture of final products. The raw material and the intermediate 
products were liable to excise duty and were specified goods for the purpose 
of MODV AT scheme. The assessable value of the intermediate products was 
to be determined on the basis of its cost and in determining the assessable 
value of the intermediate products, the cost of raw material was to be taken 
F into account. Before the Central Excises and Gold (Control) Appellate Tribunal 
the question that arose for consideration was : whether part of the cost of 
the raw material was the price paid by the manufacturer to its seller or it 
was the price of the raw material less the excise duty thereon, which was 
paid by the seller and for which the manufacturer was entitled to credit 
under the MODV AT scheme, to be utilised against the payment of excise duty 
G on products manufactured by him including the intermediate product. The 
Tribunal held in favour of the manufacturers. 
In the appeals filed by Revenue before this Court, it was contended for 
Revenue that for determining the cost of the excisable product for the 
purpose of assessment of excise duty, in view of Explanation to s.4(4) (d) (ii) 
H 
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_, 
.· 
C.C.E. v. D.l. KARKARIA LTD. 
361 
of the Central Excise and Salt Act, 1944, the credit under the MODVAT A 
scheme taken by the manufacturer, equal to the excise duty paid on the raw 
material, was not to be taken into account to reduce the price paid by the 
manufacturer to the seller of the raw material. It was submitted that the 
MODY AT scheme resulted in reducing the excise duty on the excisable 
product; but it had no bearing in determining the cost of its production; the 
cost of production of the excisable product was not reduced by the amount B 
of the MODY AT credit on the raw material, the credit was a contingent 
credit; and the manufacturer did not have any indefeasible right or title to 
it. 
Dismissing the appeals, the Court 
HELD: 1. In determining the cost of an excisable product covered by 
the MODVAT scheme under Section 4 (1) (b) of the Central Excise and Salt 
Act, 1944, read with Rule 6 of the Central Excise (Valuation) Rules 1975, 
the excise duty paid on raw material also covered by the MODVAT scheme 
c 
is not to be included. The Tribunal has rightly recorded the finding that D 
MODY AT credit results in reduction of the cost of the excisable product to 
the extent of the credit. 1376-H; 377-A) 
Eicher Motors ltd. v. Union of India, (1999) 106 ELT 3, relied on. 
Collector of C. Ex. v. lncab Industries, (1990) 45 ELT 342 and Super E 
Cassettes Industries ltd. v. Union of India, (1997) 94 ELT 302, referred to. 
Mis. Kirlosker Brothers ltd Dewas (MP.) v. Union of India & Ors . . 
(1992) 2 SCC 658, and Collector of Central Excise Bangalore v. Mysore 
Paper Mills ltd., (1997) 7 SCC 64, distinguished. 
2.1. The MODVAT schemes is a part of the Central Excise Rules, F 
1944, Rules 57A to 57J of the Rules make it clear that a manufacturer 
obtains credit for the excise duty paid on raw material to be used by him in 
the production of an excisable product immediately it makes the requisite 
declaration and obtains an acknowledgment thereof. It is entitled to use the 
credit at any time thereafter when making payment of excise duty on the G 
excisable product. There is no provision in the Rules which provides for a 
reversal of the credit by the excise authorities except where it has been 
illegally or irregularly taken, in which event it stands cancelled or, if 
utilised, has to be paid for. 1370-B; 373-E-F; GJ 
2.2. In the instant case, the credit under the MODVAT scheme has H 
362 
SUPREME COURT REPORTS (1999] SUPP. I S.C.R. 
A been val

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