UNION OF INDIA & ORS. versus MAHINDRA & MAHINDRA LTD.

Citation: [2014] 7 S.C.R. 504 · Decided: 09-05-2014 · Supreme Court of India · Bench: S. J. MUKHOPADHAYA · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2014] 7 S.C.R. 504 
A 
UNION OF INDIA & ORS. 
V. 
MAHINDRA & MAHINDRA LTD. 
(Civil Appeal No. 6620 of 2003) 
MAY 09, 2014. 
B 
[SUDHANSU JYOTI MUKHOPADHAYA AND 
J. CHELAMESWAR, JJ.] 
CENTRAL EXCISE ACT, 1944: 
c 
s. 4 - Normal price in the course of wholesale trade -
Determination of - Show cause notices issued for short 
payment of excise duty covering period 1982 to 1985 - High 
Court quashed the same - On appeal, held: Assessee failed 
D to bring the ascertainable price of the goods, cost of 
transportation to depot etc., to the notice of the High Court -
Assessee simply challenged the show cause notices on the 
' 
ground that amended s.4 was not applicable - High Court 
without looking into the relevant fact, declared the notices 
E 
illegal only on the ground that sub-clause (iii) to s.4(b) was 
subsequently adde~d by amendment including 'depot', 
'premises of consignment agent' or any other place' or 
'premises' from where the excisable goods were to be sold 
after their clearance from the factory - Matter remitted to the 
competent authority for reconsideration. 
F 
s.4 (as amended by Finance Act, 1996) - Applicability 
of. 
. The assessee-respondent was issued two show 
G cause notices by lthe appellant-department for short 
payment of excise cluty under Section 11 A of the Central 
Excise Act, 1944. Tlhe High Court quashed the notices. 
The question which arose for consideration in the 
H, 
504 
UNION OF INDIA v. MAHINDRA & MAHINDRA LTD. 505 
instant appeal was whether the High Court was justified 
A 
in in~erfering at the stage of issuance of show cause 
notice when the notices were pertaining to under 
assessment due to 'incorrect application of Section 4 of 
the Act. 
B 
Allowing the appeal and remitting the matter to the 
competent authority, the Court 
HELD: 1. By Finance Act, 1996 (33/1996), Section 4 
of the Central Excise Act was amended and the 
possibility of there being different prices af different C 
places of removal was added by inserting Section (ia) 
after Section 4(1 )(a)(i). The depots came to be added in 
the definition of place of removal by adding sub-clause 
(iii) after Section 4 (4)(b)(ii). Then concept of time of 
removal came to be added by adding sub-clause (ba) D 
after sub-clause (b) in Section 4(4). In view of the fact that 
the amendment was made subsequently in the year 1996, 
the High Court mainly proceeded on the question 
whether the Revenue was justified in demanding excise 
duty on the basis of the higher price, at which the tractors 
E 
were sold by the assessee from their depots whether on 
wholesale basis or retail under the law as it stood at that 
point of time. The said question was answered in negative 
in favour of the assessee and the High Court set aside 
the show-cause notices. In the instant case as the matter 
F 
related to the years 1982 to 1985, Section 4, as it then 
stqod would apply. As per Section 4, any activity ancillary 
to but not incidental to the manufacture cannot be 
included as part of the activity for the manufacture. Any 
income either in the form of interest on deposits, notional G 
or real earned on the deposit etc. would not be the price 
for the manufacture though they might be profits or gains, 
if any, of any ancillary or allied venture. [Paras 4, 13, 14 · 
and 17] [515-G; 516-8, C, E, F; 512-D-E] 
2. In the instantcase the assessee failed to bring the 
H. 
506 
SUPREME COURT REPORTS 
. (2014) 7 S.C.R. 
I 
I 
A ascertainable price of the tractor, cost of transportation 
to depot, etc. to the notice of the High Court. The 
assessee simply challenged the show-cause notices on 
the ground that the amended Section 4 is not applicable. 
The High Court without looking into the relevant fact, only . 
B on the ground that sub-clause (iii) to Section 4(b) was 
subsequently added by amendment including 'depot', 
'prel'l'.lises of. consignment agent' or 'any other place' or 
'premises' from where the excisable goods were to be 
sold after their clearance from the factory, declared the 
C notices illegal and set aside the same. Even the matter 
was not remanded back to competent authority allowing 
the assessee to bring to its notice "normal price", in 
course of wholesale trade, place of removal of tractors, 
transportation charges, etc. [Para 18) [521-F-H; 522-A] 
D 
Union of India and Ors. v. BomlJay Tyre International Ltd. 
and Ors (1984) 1 SCC 467: 1984 (1) SCR 347; Asstt. 
Collector of Central Excise v. Madras Rubber Factory Ltd. 
1986 Supp.

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