2. The question involved in this case relates to interpretation of exemption notification No. 161/66-CE and clause 18 of the Drugs (Prices Control) Order, 1970. In order to facilitate a proper understanding of the issues, we reproduce below this notification and the clause : - "In exercise of the powers conferred by rule 8(1) of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in M.F. (DR & 1) No. 39/66-CE, dated 26-3-1966, the Central Government hereby exempts patents or proprietary medicines falling under item 14E from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of : (i) the value arrived at after allowing a discount of 10 per cent on the prices specified in the price list referred to in para 8 of the Drugs (Prices Control) Order, 1970 issued under section 3 of the Essential Commodities Act, 1955 (10 of 1955), showing the prices at which the medicines are sold to a retailer (hereinafter referred to as the wholesale price), or (ii) the value arrived at after allowing a discount of 25 per cent of the retail price specified in the price list showing the retail prices referred to in the said order : Provided that the aforesaid exemption shall be admissible only if the price list repressents the price at which the medicines are ordinarily sold to retailers or consumers, as the case may be : Provided further that a manufacturer shall at his option be allowed to claim exemption under the notification in respect of all medicines cleared by him either in relation to the wholesale prices or in relation to the retail prices and an option so exercised shall remain in force until the same is modified by the manufacturer by intimation to the proper officer in writing : Provided further that a manufacturer shall be entitled to modify the option as aforessid only once during the course of a financial year.
Explanation.- If the prices specified in the price list referred to above, the element of excise duty, if any, added to the price of any of the medicines, shall be deducted before allowing the discount." "18. Sale of split quantities of formulations. - No dealer shall sell loose quantity of any formulations drawn from a bulk bottle pack of such formulation, at a price which exceeds the pro rata price of the formulation plus 5 per cent thereof : Provided that nothing in this paragraph shall apply to any formulation compounded at the premises of the retailer." 3. Exemption notification No. 161/66-CE provided for an ad hoc discount procedure for valuing patent or proprietary medicines for the purpose of assessment of central excise duty. To the manufacturer desiring to avail of the benefit of this notification, it gave two options for valuing the goods the wholesale price less 10 per cent discount or the retail price less 25 per cent discount. The appellants desired to avail of the benefit of the notification and opted for the second basis of valuation, that is, the retail price less 25 per cent discount. The Department marked up their retail prices of bulk packs by 5 per cent in pursuance of clause 18 of the Drugs (Prices Control) Order, 1970. It is this action of the Department which has been impugned before us in the present appeal.
4. The appellants argued during the hearing that the aforesaid mark up was entirely meant as a compensation for the dealer who sold split quantities of medicines from bulk packs, that the question whether the dealer should charge this mark up from his customer and, if so, whether he should charge the maximum 5 per cent or something less were matters entirely for the dealer to decide, that the appellants had nothing to do with this mark up and no part of this mark up accrued to them, that the dealer was not entitled to add any mark up when he sold the bulk pack as such, that there was no authority in notification No. 161/66-CE to add this mark up for arriving at the assessable value of their bulk packs, that the Department's action was apparently occasioned by tariff ruling No. 8 of 1968 issued by the Central Board of Excise & Customs, that the Bombay High Court in Miscellaneous Petition No. 1067 of 1974 decided on 17-8-1979, struck down a demand for duty issued to M/s.
Geoffrey Manners & Co. Ltd., another manufacturer of medicines on the ground that the demand was based on the said tariff ruling and that the Department's appeal against this judgment had been summarily dismissed by the Division Bench.
5. The Department's representative stated that the Assistant Collector -4 as well as the Appellate Collector had applied their own mind to the facts of the present case and there was nothing to show in their orders that they had relied on the aforesaid tariff ruling. He added that the first proviso to the exemption notification No. 161/66-CE itself provided that the ad hoc discount procedure contained therein was admissible only if the price list represented the price at which the medicines were ordinarily sold to retailers or consumers, as the case may be and since the bulk packs were actually sold in split quantities after the mark up of 5 per cent, it was quite lawful for the Department to add this mark up to the retail prices of bulk packs for arriving at their assessable value in terms of the notification.
6. We have carefully considered the matter. It is an accepted principle of assessment of central excise duty that the goods have to be valued and assessed in the form they are presented for assessment at the time of their clearance from the factory. In this case, what is cleared from the factory is bulk packs of medicines. There is no dispute that if the dealer sold the bulk pack as such in retail, he would not be entitled to add any mark up to the listed retail price. The question of mark up arises only when the dealer sells split quantities from the bulk pack.
Quite evidently, the mark up is intended to be a compensation for the extra costs incurred by dealer in selling split quantities. Whatever mark up he charges, whether the full 5 per cent or less, he retains it with himself. No part of it accrues to the manufacturer, that is, the appellants. What the Department seems to have done is to have the marked up retail price of split quantities and apply it for the assessment of bulk packs. We find no authority for doing so in notification No. 161/66-CE or in any other provision of the Central Excise law. Quite simply, split quantities cannot be placed on par with bulk packs for the purpose of valuation. We hold that since the subject goods cleared from the factory are in bulk packs, they have to be valued according to the listed retail price at which they would be sold in the bulk pack as such.
7. Accordingly, we allow this appeal with consequential relief to the appellants.