1. The simple question which arises in this petition is whether the petitioner No. 1 is entitled to claim a deduction in respect of the items specified in paragraph 6 of the petition as post-manufacturing expenses. The heads under which these deductions are sought were :
(a) Freight from the Factory to Area Office and Customers,
(b) Area Office (Sales Depot) Expenses,
(c) Sales Promotion Expenses,
(d) Interest on the finished goods and on book debts, and
(e) Trading Selling Profits.
2. The claim for deduction in respect of all the above items having been rejected by the Assistant Collector of Central Excise, this petition has been filed by the petitioners.
3. It is well-known not that by virtue of the decision of the Supreme Court in Union of India and others v. Bombay Tyres International Pvt. Ltd. - 1983 Excise Law Times 1896, the whole law regarding deductions permissible by way of post-manufacturing expenses has undergone a radical change. The petitioners' contention before us, therefore, was that the petitioners should be allowed to withdraw their petition and claim a deduction on account of post-manufacturing expenses only in respect of those items which are held permissible by the Supreme Court in the Bombay Tyres International Pvt. Ltd.'s case as clarified on two further occasions.
4. Mr. Sethna, learned Counsel appearing on behalf of the Union of India, has contended that items Nos. (b) to (e) are expressly held impermissible by the Supreme Court and no useful purpose will, therefore, be served by remanding the matter to the Assistant Collector because once again there will be a fresh round of litigation between the assessee and the Union of India. At the same time, Mr. Sethna also pointed out that if there is some doubt as to whether a part or the whole of the freight referred to in item (a) was permissible or not, the matter could be re-determined by the Assistant Collector.
5. We have heard the Counsel for the petitioners and we do not think that it will be proper for us to keep this petition pending or to require both the parties to go through the whole gamut of enquiry all over again on the expectation that the Supreme Court in future is likely to clarify the earlier decision, as contended on behalf of the petitioners. We do not find that there is any ambiguity, of which the petitioners are entitled to take advantage, in the decision of the Supreme Court in the Bombay Tyres International Pvt. Ltd.'s case.
6. The position with regard to the assessment to excise duty has been now crystallised by the Supreme Court and in clause 4 of the order where the propositions have been set out, the Supreme Court has clearly stated :
'No deductions can be made from the wholesale price determinable under sub-section (1) and (2) of Section 4 save and except in respect of (a) trade discount; (b) the amount of excise duty, sales tax and other taxes, if any, payable in respect of the excisable goods; and (c) averaged freight.'
The fact that no other deductions can be made except those mentioned above is further emphasised by the following observations :-
'No other expenses incurred by the assessee, such as, expenses of advertisement or publicity or expenses of storage of finished excisable goods or expenses of sales organisation or expenses of primary and secondary packing (save and except special packing in terms set out in relation to the unamended section 4) shall be deductible from the wholesale price determinable under sub-section (1) and (2) of section 4 for the purpose of determining the value of the excisable goods for levy of excise duty.'
While delivering the detailed judgment in the Bombay Tyres International Pvt. Ltd.'s case 1983 E.L.T. 1986 the Supreme Court in paragraph 49 then pointed out that where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee up to the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted, but the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold. It was then clarified that the cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery. With regard to averaged freight, the Supreme Court observed in paragraph 50 as follows :-
'Where the freight is averaged and the averaged freight is included in the wholesale cash price so that the wholesale cash price at any place or places outside the factory gate is the same as the wholesale cash price at the factory gate, the averaged freight included in such wholesale cash price has to be deducted in order to arrive at the real wholesale cash price at the factory gate and no excise duty can be charged on it.'
The learned Counsel for the petitioners has pointed out to us that in paragraph 55 the Supreme Court observed that they had considered the claim to deductions under the specific heads enumerated by the assessees and the judgment was, therefore, confined to those items and no other head of expenses had been placed before the Supreme Court for their opinion. Our attention has also been invited to an order made by the Supreme Court on 14/15th November, 1983 in the same case and reported in 1983 Excise and Customs Reporter at page 2233D. This clarification refers to the deductibility of trade discounts, taxes such as additional sales tax, surcharge on sales tax and turnover tax and the cost of insurance which is a part of the cost of transportation. It is also pointed out in the same order that where a company has more than one factory located at different places and the price at the depots is the same irrespective of the lack of identification of the goods from a particular factory of production, the deduction as set out in the judgment and as explained in the order shall be computed and allowed on the basis of such price.
7. Now, taking into consideration all these judgments and observations made by the Supreme Court, it appears to us that items (b), (c), (d) and (e) as claimed do not fall under any heads as being permissible to be deducted for the purposes of the determination of the wholesale price for the purposes of computation of excise duty. What is contended by Mr. Ganesh before us is that there were certain items which have been taken into account under these four major heads which have now been held permissible to be deducted by the Supreme Court and these consist of insurance and discount though they have not been separately claimed under the items (b) to (e). Now, prima facie the items which have been described under the heads (b) to (e) are held not to be deductible by the Supreme Court because it has been expressly laid down by the Supreme Court that except the three items, namely, trade discount, excise duty and other taxes and averaged freight, not other expenses incurred by the assessee will be deductible for the purpose of determining the value of the excisable goods. The claim as made is, therefore, liable to be rejected.
8. So far as item (a) is concerned, a further enquiry may be necessary whether in a given case, the sale was at the factory gate or not and if the sale was not at the factory gate, then where the sale was made and if so what was the quantum of freight which was held to be deductible. Since this aspect of the matter will need a further enquiry, it is necessary to direct the Assistant Collector of Central Excise to redetermine the claim under this head after giving an opportunity to the assessee to place the necessary details in accordance with the law laid down by the Supreme Court.
9. Though we are expressly rejecting the claims as made and laid under items (b) to (e), we must make it clear that now having regard to the law laid down by the Supreme Court, if there are any other particular deductions about which the assessee is able to satisfy the authorities as being permissible, the assessee will be entitled to those deductions, even though they may have formed a part of items (b) to (e). The assessee will furnish the requisite information to the Assistant Collector within a period of six weeks from today. Subject to these observations, the petition is dismissed. However, there will be no order as to costs.