M/S. RAINBOW INDUSTRIES (P) LTD. versus THE COLLECTOR OF CENTRAL EXCISE, VADODARA

Citation: [1994] SUPP. 4 S.C.R. 135 · Decided: 04-10-1994 · Supreme Court of India · Bench: R.M. SAHAI · Disposal: Appeal(s) allowed

Judgment (excerpt)

M/S. RAINBOW INDUSTRIES (P) LTD. 
A 
v. 
THE COLLECTOR OF CENTRAL EXCISE, VADODARA 
OCTOBER 4, 1994 
[R.M. SAHAI AND M.K. MUKHERJEE, JJ.] 
B 
Central Excise Rules, 1944: 
Rule 173(2}-Sales to related persons-Price list in prescribed proforma 
submitted by assessee-Department accepting and acting upon it--Reclas-
C 
sification by Department-consequent revision of price and show cause 
notice for levy of difference--Held: Reclassification is valid but effective from 
date of show cause notice and not earlier. 
The appellant, a manufacturer of dye-stuff, filed a price list in the 
prescribed proforma as applicable for sales to related persons, showing D 
various includible and excludible expenses as well as assessable value. This 
was approved by the department on 6th December 1975 and the approval 
was to be effective from 1st October 1975. After about a year the Assistant 
Collector issued a show cause notice requiring the appellant to show cause 
as to why the net assessable value should not be revised and differential E 
duty recovered from the appellant. The reply of the appellant was not 
accepted by the Assistant Collector or by the Appellate Collector. The 
Tribunal also did not accept the same. 
In the appeal, it was contended that the classification and the price 
list submitted by .the appellant having been accepted and acted upon under F 
Rule 173 (2) of the Central Excise Rules, 1944 the Department was estopped 
from claiming that the appellant was guilty of suppression of facts; and 
that law does not comptemplate issuing of any notice merely because the 
Department felt that a particular Item was dutiable in another entry. 
Alternatively it was contended that if the calculation resorted to by the G 
Department is held to be correet it should apply from the date of issue of 
notice and not from the date when the price list was submitted. 
Allowing the appeal, this Court 
HELD : 1. Since the appellant did not dispute the method adopted li 
135 
'i 
.i 
I r 
: 136 
SUPREME COURT REPORTS (1994} SUPP. 4 S.C.R. 
A for calculation or the duty by the Department, the question or lack or 
jurisdiction to lnltlaie proceedings Is not necessary to be decided as the 
power to Issue show-cause notice vests even If the duty was short·levled as 
a result or erroneous application of law. [137-G] 
z. However, once the Department accepted the price list, acted upon 
B It and the goods were cleared with the knowledge of the department, then 
in the absence of any amendment io law or judicial pronouncement or 
Intention to evade duty, the reclassification should be effective from the 
date the Dep11rtment Issued the sho~ cause notice. [137-H, 138-A} 
C 
Collector of Central Excise, CalcUtta v. Indian Oxygen Ltd., Kluvdah, 
[1990] 48 E.L. T. AZ4 referred to. 
· 
· 
CIVIL APPELLATE JURISDICTION 
Civil Appeal No. 
3148(NM) of 1985. 
D 
From the Judgment and Order dated 21.11.84 of the Central Cus-
toms Excise and Gold (Control) AppeUate Tribunal, New Delhi io 0. No. 
759/84A." 
S. Ganesh and Ms. Poonam Madam for the Appellant 
E 
A.K Ganguli, AK. Srivas1ava, V.K Verma and Ms. Sushma Suri for 
the Respondent 
•. . 
The Judgment of the Court w~ delhrered by 
R.M. SAHAI, J. The short question of law that arises for considera-
F 
lion in this appeal directed against the judgment and order of the Customs 
Excise & Gold (Control) AppeUate Tribunal, New Delhi, is whether th: . 
classification and the price list accepted by the Department and acted ~~ 
upon, found ~ubsequently to be erroneous, is to be applied prospectively 
or retrospeCtively. 
G 
The appellant, a manufacturer of dye-stuff, ftled a price list in Part · 
IV profor~ as. appli:able for sales to related persons. The price Jist 
showed va~ous mcludible and excludible expenses as weU as assessable 
value as cl:umed by the appellant. This was approved by the Department 
on 6th December 1975 and the assessable value as declared was accepted 
H 
The approval was to be effective from 1st October 1975. After nearly a yea; 
RAINBOW v. COLLECTOR OF C. EXCISE [R.M. SAHAI, J.] 
137 
the Assistant Collector issued a show cause notice requiring the appellant A 
to show cause as to why the net assessable value as per the method shown 
in the annexure should not be revised and differential duty recovered from 
the appellant. The reply of the appellant was not accepted either by the 
Assistant Collector or by the appellate Collector or the Tribunal. In fact 
before the Tribunal it was conc

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