M/S. MODIPON FIBRE COMPANY, MODINAGAR, U.P. versus COMMISSIONER OF CENTRAL EXCISE, MEERUT

Citation: [2007] 11 S.C.R. 688 · Decided: 25-10-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Dismissed

Judgment (excerpt)

A 
MIS. MODIPON FIBRE COMPANY, MODINAGAR, U.P. 
B 
c 
v. 
COMMISSIONER OF CENTRAL EXCISE, MEERUT 
OCTOBER 25, 2007 
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] 
Central Excises Act, I 944: 
S. 4( 4)( d)(ii) and Explanation appended thereto-Yarn-Turnover 
tax-Deduction of-By virtue of Exemption Notification, rate of 
turnover tax for normal area sales was 2%andfor backward area sales 
was 0.5%-Claim of deduction at 2%for entire clearance without 
mentioning two types of sales effected by it-Entitlement for-Held: 
D Not entitled-Assessee entitled to deduction of only effective duty 
payable-Since exemption has been granted, exemption has to be 
deducted fi·om ad valorem duty-Central Excises Rules, I 944-Rule 
I 73-C-Finance Act, 1982-s.47. 
S. I IA-Demand of duty on clearance of Yarn-By virtue of 
E Notification, rate of turnover tax for normal area sales was 2% and 
for baclnmrd area sales was 0. 5'Yo-Assessee claimed deduction at 2% 
for entire clearance-Demand.for differential duty raised by 
department for period March I 994 to March 1997-Extended period 
of limitation-Invocation of-Held: Invokable as assessee was guilty 
F of suppression of two types of sales effected by it-However, since 
assessee intimated on I 4.1. I 99 7 about the ll1'0 types of sales, 
Department cannot allege suppression after 14.1. I 997-Notification 
dated 19.10.1993. 
The appellant-assessee had been engaged in the manufacture 
G of Nylon and Polyester Yarn in its factory in U.P. which is cleared to 
its various Depots situated all over India including Surat from where 
the Yarn is sold to dealers. In respect of yarn cleared and despatched 
to Surat depot, the assessee claimed deduction at 2% on account of 
Turnover Tax (TOT). This was on the footing that the Government 
H 
688 
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MODIPONFIBRECOMPANY,MODINAGAR, U.P. v. 
689 
COMMNR. OF CENTRAL EXCISE, MEERUT 
ofGujaratvide Notification dated 19.10.1993 had exempted sale of A 
Yarn of all kinds by a registered dealer to a special manufacturer of 
processed Yarn or to an eligible unit to the extent to which the rate 
of TOT exceeded 0.5% of the total turnover. 
The Revenue issued show cause notice dated 19.3.1999 on the B 
ground that the assessee had suppressed the fact that during the 
~ period March 1994 to March 1997, there were two types of sales, 
./ 
one in the backward area as notified by the Gujarat Government 
and the other in areas other than the backward area; that the 
assessee had claimed deduction for TOT at the full rate of2% in 
respect of entire clearances of Nylon Yarn sent to its Surat depot c 
without mentioning that in the State of Gujarat on account of 
Notification dated 19.10.1993 two rates of TOT existed and, 
therefore, the assessee had claimed wrongfully the deduction at a 
higher rate of 2% as against the rate of 0.5%; that since the 
D 
assessee had deducted TOT at a higher rate to arrive at the 
y 
assessable value, it had lowered the assessable value to the extent 
of 1.5% and, as such, a demand for difference was made on the 
assessee. The demand was confirmed by the authorities. On appeal, 
the Tribunal confirmed the demand, however it found that demand 
was beyond limitation after the assessee had informed Department E 
on 14.1.1997 that there were two types of sales and hence it was not 
open to Department to claim suppression after 14.~.1997. The 
assessee and Department both filed appeals against th~ order of 
Tribunal 
-1 .. 
Dismissing the appeal of assessee and of department;the' Court F 
HELD: 1. In terms of s.4( 4)( d)(ii) of Central Excises Act, 1944, 
the excise duty can be deducted if it had. not b.~en included in the 
invoice price. Ac~ording to the Explanation, what is deductible is the 
effective rate of duty. Where any exemption has been granted, that G 
~ 
exemption has to be deducted from the ad valorem duty. Thus, it is 
,..... 
only the net duty liability of the assessee that can be deducted in 
computing the assessable value. [Para 7] [698-E] 
~ 
IDL Chemicals Ltd. v. Collector of Central Excise, (1997] 5 SCC H 
~ 
690 
SUPREME COURT REPORTS 
[2007] 11 S.C.R. 
·-r 
A 311; MRF Ltd v. Collectoro/Central Excise, Madras, [1997] 5 SCC 
104; JK Synthetics Ltd v. Commercial Taxes Officer, [1994] 4 SCC 
276; Harshad Shanti/al Mehta.v. Custodian and Ors., [1998] 5 SCC 1 
and Associated Cement Companies Ltd v. State of Bihar and Ors., 
(2004] 7 sec 642, referred to. 
B 
2. S.4( 4)( d)(ii) does not refer to duty leviable under the rel

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