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B.K. Paper Mills Pvt. Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMumbai High Court
Decided On
Case NumberWrit Petition No. 200 of 1980
Judge
Reported in1984(3)ECC292; 1984(18)ELT701(Bom)
ActsCentral Excise Act, 1944 - Sections 3, 4, 4(1), 4(3), 4(4), 11A and 11B; Government of India Act, 1935; Central Excise (Amendment) Act, 1973 - Sections 2; Sale of Goods Act - Sections 2(10); Finance Act, 1982 - Sections 47, 47(1) and 47(2); Constitution of India - Article 19(1); Central Excise Rules, 1944 - Rules 8(1), 10 and 173C
AppellantB.K. Paper Mills Pvt. Ltd.
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateA. Hidayatulla and ;Shyam Dilani, Advs., i/b., Bachubhai Munim and Co.
Respondent AdvocateM.I. Sethna and ;J.P. Devdhar, Advs.
DispositionPetition dismissed
Excerpt:
central excise - valuation--exemption--notification exempting paper mills from portion of excise duty subject to conditions--assessee-paper mill availing of exemption--assessee not passing on exemption to customers--short levy--notice--demand of duty short levied by department by proposing to revise assessable value deducting only reduced rate of duty from cum-duty price charged to customers--validity--construction of statutes--words and phrases--'amount of duty of excise payable on such goods' in section 4(4)(d)(ii), meaning of--legislative powers--retrospective legislation--retrospective introduction of explanation to section 4(4)(d)(ii), whether unconstitutional--limitation--change of law-retrospective amendment, whether entitles department to recover duty short levied, etc., subject.....sujata v. manohar, j.1. the petitioners manufacture various types of paper at their factory at vadavali, kalyan. the petitioners are a small unit with an annual licensed capacity for the manufacture of 1500 m. tonnes of paper, the paper manufactured by the petitioners is liable to excise duty under tariff item 17 of the first schedule to the central excises and salt act, 1944 at the rate specified therein.2. under notification no. 45/73 dated 1st of march 1973 an exemption from excise duty to the extent specified in the notification was granted in respect of paper of the types described therein cleared by any manufacturer during any financial year up to the prescribed quantity. the exemption was not applicable to those manufacturing units which had a bamboo pulp making plant attached to.....
Judgment:

Sujata V. Manohar, J.

1. The petitioners manufacture various types of paper at their factory at Vadavali, Kalyan. The petitioners are a small unit with an annual licensed capacity for the manufacture of 1500 m. tonnes of paper, The paper manufactured by the petitioners is liable to excise duty under Tariff Item 17 of the First Schedule to the Central Excises and Salt Act, 1944 at the rate specified therein.

2. Under Notification No. 45/73 dated 1st of March 1973 an exemption from excise duty to the extent specified in the Notification was granted in respect of paper of the types described therein cleared by any manufacturer during any financial year up to the prescribed quantity. The exemption was not applicable to those manufacturing units which had a bamboo pulp making plant attached to the mill.

3. Thereafter under Notification No. 128 of 1977 dated 18th June, 1977 the earlier Notification of 1973 was superseded. Under the Notification No. 128 of 1977 certain types of papers was exempted from so much of the duty of excise leviable thereon as specified in the table set out in the notification on condition that the paper mill did not have a plant attached to it for making bamboo wood pulp and the paper mill manufactured paper out of pulp. The material part of the notification is as follows :

'In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944...the Central Government hereby exempts paper other than...manufactured and cleared from a paper mill of the type described in the table below, from so much of the duty of excise leviable thereon as is specified in the corresponding entry in column (3) of the said Table.

TABLE_________________________________________________________________________________Sr. Description of paper mill Extent of ExemptionNo._________________________________________________________________________________1. Paper Mill whose annual installed capacity Seventy-five per centin respect of all varieties of paper and of the duty leviable.paper boards does not exceed 2,000tonnes.2. Paper mill whose annual installed capacity Sixty per cent of thein respect of all varieties of paper and duty leviable.paper boards exceeds 2000 tonnes but doesnot exceed 5000 tonnes.3. Paper mill whose annual installed capacity Fifty per cent of thein respect of all varieties of paper and duty leviable.paper boards exceeds 5000 tonnes but doesnot exceed 10,000 tonnes.x x x x'_________________________________________________________________________________The petitioner company being a paper mill whose installed capacity is 2000 tonnes, was classifiable at Serial No. 1 of the table in the notification. The petitioners were, therefore, exempted from the payment of 75% of the duty leviable under Tariff Entry 17 of the First Schedule to the Central Excises and Salt Act, 1944.

4. The petitioners sold the paper manufactured by them to wholesale dealers and prepared invoices in respect of such sales by showing in the invoice the price charged for the goods and the trade discount. On the discounted price they added excise duty at the rate specified in Tariff Item 17 of the First Schedule. Additional items such as Octroi, packing charges, sales tax etc. were added thereafter and the total amount payable under the invoice was mentioned at the foot of the invoice. In preparing their invoices in this manner the petitioners did not give to their customers benefit of the exemption notification No. 128 of 1977. The petitioners contend that from the terms of the notification as judged from the past history relating to such exemptions, it is clear that the exemption from payment of excise duty which is granted under this notification is meant for the benefit of small paper mills. The exempted duty of excise is, in effect, a subsidy which is granted to small paper mills by the Government. It is their case that they are not required to pass on the benefit of exemption to their customers.

5. The petitioners filed price lists in respect of different varieties of paper manufactured by them from time to time with the excise authorities under Rule 173C of the Central Excise Rules in respect of the clearance of paper. The present dispute relates to price lists for the period commencing from 1st July 1976 and ending with 31-7-1979.

6. In or about November 1976 the Excise authorities orally intimated to the petitioners that under the first notification of 1973 the petitioners were required to pass on the benefit of exemption from excise duty to their customers. If the said benefit was not passed on to the customers, the assessable value of paper as declared by the company in its price list would have to be revised by including the quantum of benefit retained by the company (under the first notification of 1973) in the value of the goods for calculation of excise duty. Accordingly a show cause notice dated 9/15 March 1977 was issued by the Superintendent of Central Excise calling upon the petitioners to show cause why an amount of Rs. 26,968.77 alleged to be short levied should not be recovered from the company under Rule 10 of the Central Excise Rules in respect of its clearance of paper from 16th March 1976 to 30th June 1976. The petitioners replied to the show cause notice. Ultimately an order was passed against the petitioners by the Assistant Collector on 8th October 1977.

7. Being aggrieved by the order of 8th October 1977 the petitioners preferred an appeal to the Appellate Collector of Central Excise. The Appellate Collector by his order dated 21st June 1972 allowed the appeal of the petitioners and held that there is no provision of law under which the petitioners are required to pass on the benefit of exemption to their customers. The Appellate Collector also directed that the assessable value will have to be determined with reference to the provisions of Section 4 by taking into account the price declared and received by the petitioners after deducting the permissible deductions Under Section 4.

8. In respect of the price lists from 1st July 1976 to 31st July 1979 the Superintendent of Central Excise issued from time to time five show cause notices in respect of the short levy of Central Excise duty under Rule 10 of the Central Excises and Salt Act. These show cause notices are dated 25-6-77, 12-9-77, 21-12-78, 25-5-79 and 6-9-79. The grounds mentioned for the show cause notices are as follows :

'B.K. Paper Mills (P) Ltd. avails the concession under Government of India (M.F.) Notification No. 45/73 dated 1-3-73. They pay the duty at the concessional rate as per the Notification referred to above, at the time of removing the goods from their factory under G.P. I. On verification of their sale Invoices it has been observed that though they are paying duty at a concessional rate they are charging to their buyers full tariff rate of duty. Thus they are liable to pay the differential duty calculated on the revised assessable value by applying the provisions of Section 4 of the Central Excises and Salt Act, 1944 as detailed in the annexure.'

Similar grounds were mentioned in the other show cause notices. The petitioners were also granted a personal hearing. Thereafter a common order dated 6th November 1979 was passed in respect of the five show cause notices. The Assistant Collector directed that the assessable value should be determined in terms of Section 4 by deducting from the actual value the duty payable. He confirmed the demands made in the show cause notices. It was also pointed out that the show cause notices required the petitioners to pay the differential amount of duty which was calculated by revising the assessable value of the goods. The revised assessable value was worked out as follows :-

The sale price (cum-duty) x 100--------------------------------(100 plus reduced rate of duty)

Similarly the revised duty liability was worked out as follows :-

Sale price (cum-duty) X reduced rate of duty--------------------------------------------(100 plus reduced rate of duty).

In other words the assessable value of goods Under Section 4 was proportionately increased and the duty collected proportionately reduced to reflect the correct reduced percentage of duty. The total price, of course, remained the same.

9. The petitioners have challenged the orders of 21st June 1979 and 6th November 1979 as well as the revision of assessable value of the goods as per these orders. In order to adjudge upon the contentions raised by the petitioners it is necessary to examine the scheme of the Central Excises and Salt Act, 1944.

10. Under entry 84 of list 1 of the 7th Schedule to the Constitution, Union Government has the power to levy duties of excise on goods manufactured or produced in India. Entry 45 in list 1 of the 7th Schedule to the Government of India Act, 1935, under which the Central Excises and Salt Act, 1944 was originally enacted is also in similar terms. The duty of excise is therefore levied on goods which are manufactured or produced in India. It is levied on goods and is collected from the manufacturer. Excise being an indirect tax, however, the ultimate burden of such duty falls on the customer. Since excise can be levied only on the value of goods which are manufactured or produced, it was, at one point of time, contended that excise can be levied only on the manufacturing cost of the goods plus manufacturing profit.

11. The controversy on this point has been finally set at rest by the decision of the Supreme Court in the case of Union of India and Ors. v. Bombay Tyre International Ltd. and Ors. reported in 1983 E.L.T. 1896. In this case the Supreme Court considered the provisions of Section 4 of the Central Excises and Salt Act, 1944 as substituted by Section 2 of the Central Excises and Salt (Amendment) Act, 1973 and brought into force from 1st of October 1975. The Supreme Court has observed that it is not possible to accept the contention that because the levy of excise is a levy on goods manufactured or produced, the value of an excisable article must be limited to its manufacturing cost plus manufacturing profit. It said,

'We are of the opinion that a broader based standard of reference may be adopted for the purpose of determining the measure of the levy. Any standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy.'

12. Section 3 provides for the levy of excise and Section 4 gives the method of arriving at the value of goods for the levy. The material parts of the Section are as follows :

'Section 3(1). There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India ... as, and at the rates, set forth in the First Schedule....'

Provided that ... ... ... ...Explanation 1. ... ... ... ...Explanation 2. ... ... ... ...(1A) ... ... ... ...(2) The Central Government may, by notification in the Official Gazette, fix for the purpose of levying the said duties, tariff values of any articles enumerated, either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force.

(3) ... ... ... ...

Section 4. Valuation of excisable goods for purposes of charging of duty of excise -

(1) Whereunder this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be-

(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale;

Provided that-

(i) where such goods are sold by the assessee at different prices to different buyers etc.

(ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof;

(iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail;

(b) ... ... ... ...(2) ... ... ... ...(3) ... ... ... ...(4) For the purpose of this section-

(a) 'assessee' means the person who is liable to pay the duty of excise under this Act and includes his agent;

(b) 'place of removal' means-

(i) ... ... ... ...

(ii) ... ... ...

(c)

(d) 'Value', in relation to any excisable goods,-

(i) ... ... ... ...(ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale.

Explanation.-For the purpose of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be the sum total of-

(a) the effective duty of excise payable on such goods under this Act; and

(b) ... ... ... ...

and the effective duty of excise on such goods under the Act referred to in clause (a) or clause (b) shall be,-

(i) in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to, or reduction of any duty of excise on such goods equal to, any duty of excise already paid on the raw material or component parts used in the production or manufacture of such goods) from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act in respect of such goods as reduced so as to give full and complete effect to such exemption; and

(ii) Section 4 envisages a method of collecting tax at the point of the first sale effected by the manufacturer. Under the present Section 4(1)(a), the value of excisable goods is deemed to be the normal price thereof i.e. the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade, for delivery at the time and place of removal. [I am not here concerned with the other provisions of Section 4(1) ]. Normal price, therefore, in the present case is required to be determined with reference to such a sale. Under Section 4(4)(d), in the value so arrived at, the amount of excise payable on such goods as well as the normal trade discount is not to be included. Hence the value for the purpose of levy of excise is the normal price but not including the duty of excise payable.

13. What is normal price Under Section 2(10) of the Sale of Goods Act, 'price means money consideration for the sale of goods.' Normal price therefore is the amount paid by the buyer for the purchase of goods. It is the sum total of amounts at the foot of the invoice which constitutes price. Price may contain several ingredients all of which may or may not be shown on the face of the invoice, e.g. the price may consist of the cost of raw material, cost of labour, entrepreneurial profit, return on capital, cost of research, cost of market surveys relating to consumer preferences and the like, cost of advertising, cost of packing, duties, taxes and so on. Excise is not to be levied on the manufacturing cost and manufacturing profit. It is levied Under Section 4 on the normal price of the goods at a sale of the kind described therein. Sub-section (4)(d), however, provides that if such normal price includes the excise duty payable, then such amount of excise duty is to be excluded from the price for arriving at the value of the goods for the levy of excise.

14. It is the case of the petitioners that Under Section 4(4)(d) the amount of duty of excise 'payable on such goods' refers to the duty of excise at the rate specified in the relevant tariff entry. Any exemption granted from excise duty under an exemption notification is not to be taken into account for the purpose of determining 'the excise duty payable' Under Section 4(4)(d)(ii).

15. It is not possible to accept this interpretation of Section 4(4)(d)(ii). The amount of excise duty 'payable' on goods necessarily has a reference to the duty of excise payable on the goods by the assessee. Under Section 4(1)(a), for example, the normal price is described as the price at which such goods are ordinarily sold by the assessee in the course of wholesale trade. Similarly in Section 4(1)(a)(i) there is a reference to goods being sold by the assessee to different type of buyers. Sub-section (ii) also has a reference to goods sold by the assessee; as also Sub-section (3). In the same manner in Section 4(4)(d)(ii) also the duty of excise payable on such goods must have a reference to the duty payable on such goods by the assessee. Excise duty payable by the assessee, tnere-fore, may or may not be determinable only with reference to the tariff entry. If there is any exemption notification which applies either to the type of goods manufactured by the assessee or to the assessee by virtue of his being the type of manufacturer covered by the exemption, the duty of excise payable has to be computed with reference to such exemption notification also. The amount covered by Section 4(4)(d)(ii) is the amount of excise duty which is payable by the assessee on the goods in question. It necessarily refers to the actual quantum of excise duty payable on the goods in question by the assessee. In my view Section 4(4)(d)(ii) does not refer to the duty leviable under the relevant tariff entry without a reference to any exemption notification that may be in existence in connection with that entry as contended by the petitioners.

16. This position is now made clear by virtue of an 'explanation' which has been added to Section 4(4)(d)(ii) with retrospective effect from 1st October 1975 Under Section 47 of the Finance Act of 1982. The explanation sets out what is meant by 'the amount of duty of excise payable on any excisable goods.' By the amount of the duty of excise is meant the effective duty of excise payable on such goods under the Act. The effective duty of excise is explained as follows: In a case where there is an exemption notification, the duty of excise computed with reference to the rate specified in the Act in respect of such goods as reduced so as to give a complete effect to such exemption. The effective duty of excise therefore is the duty of excise which is calculated on the basis of the prescribed rate as reduced by virtue of an exemption notification. This alone is excluded from normal price Under Section 4(4)(d)(ii).

17. It was submitted by Mr. Hidayatulla learned counsel for the petitioners, that the explanation postulates that there should be an exemption notification which reduces the rate as prescribed under the Act. He drew my attention to some of the other notifications issued in respect of Tariff Item No. 17. Notification dated 24-4-1971 bearing No. 46/71 provides for a concessional rate of duty for corrugated board. In the table set out in that notification, the three columns consist of (1) Serial number, (2) description of corrugated board and (3) rate of duty. Under the column 'rate of duty', a lesser rate of duty is set out than what is provided under Tariff Item No. 17. Similarly Notification No. 66/76 dated 16-3-1976 provides for a concessional rate of duty for printing paper. In the table set out in the Notification, the columns are, (1) Serial No., (2) description, (3) rate of duty and (4) conditions. Under the rate of duty, the reduced rate of duty is set out. There are a number of such notifications which provide for concessional rates of duty in respect of the goods mentioned therein. It is therefore, the contention of the petitioners that by virtue of such notifications the rate of duty prescribed under the main Tariff Item is expressly reduced. They contend that it is only in such cases that the rate of duty is reduced by the exemption notification. By virtue of the explanation to Section 4(4)(d)(ii), such reduced rate of excise is the rate at which excise is to be calculated for exclusion Under Section 4(4)(d)(ii). In the case of the present notification, however, the table which is set out in the notification does not reduce the rate of duty in this manner. The three columns in the table are (1) Serial No. (2), description of paper mill, and (3) extent of exemption. Under the column 'extent of exemption' the percentage of the duty leviable which is exempted is set out. According to the petitioners the notification does not reduce the rate of duty leviable and hence the explanation does not apply to the present notification.

18. This contention is based upon a wrong interpretation of the explanation. It is undoubtedly true that whenever in a statute or a statutory instrument, there is a departure from the language previously used, one should presume that the use of different words is intended to convey a different idea. A change in wording denotes a change in meaning. (See Maxwell on The Interpretation of Statutes 12th Edition, page 282). But when the words used in the notification expressly provide for an exemption from the payment of excise duty, there can be no question of any different interpretation being put on these words based on a difference in language. As a result of the notification, the paper mills of the description set out in the notification and in the table forming part of it, are exempted from paying a percentage of the duty leviable. The explanation to Section 4(4)(d)(ii) provides that when the effect of an exemption notification is a reduction in the rate prescribed in the Act, it is the reduced rate of excise duty which is to be excluded under Section 4(4)(d)(ii).

19. It is true that in the present case the notification does not, in terms, reduce the rate of duty. It grants an exemption from payment of a certain percentage of duty leviable. But the effect of such an exemption is that the petitioner is required to pay a reduced rate of duty. If this is the effect of the exemption notification, then the explanation in terms applies to such a notification. The petitioners are therefore not right when they contend that only in cases where the exemption notification in express terms provides a reduced rate of duty, will the exemption apply. The explanation makes it clear that the exclusion under Section 4(4)(d)(ii) is only of the duty of excise as reduced by the exemption notification.

20. My attention was drawn to two judgments of the Delhi High Court. The first judgment is in the case of Modi Rubber Ltd. v. Union of India and Ors. reported in 1978 E.L.T.127. In that case there was an exemption notification as a result of which the assessees were granted a concession in respect of payment of excise duty based on certain calculations. The petitioners did not pass on the benefit of this reduction in duty to their customers. It was the contention of the department that the petitioners were entitled to the benefit of duty rebate only if they reduced the price in proportion to the reduction in duty, and thus passed on the benefit to the consumer. Otherwise they were liable to pay the full duty. This submission was rejected by the Delhi High Court as there was nothing in the notification which warranted such an interpretation. In negativing this contention however, the Delhi High Court accepted the argument advanced on behalf of counsel for the assessee, that in order to determine the excise duty leviable on the items produced by the assessee, it is necessary first, to determine the assessable value Under Section 4 of the Act. It is only after the assessable value is determined that the excise duty leviable thereon can be ascertained. It held that it was erroneous to determine the assessable value after taking into consideration the exemption granted under the notification because it was neither intended by the notification, nor was it practicable, that the assessable value should be determined after giving effect to the relief under the exemption. The High Court observed, 'If the price to the customer inclusive of duty remains the same and the duty leviable thereon is calculated and thereafter the relief permissible under the notification is reduced, as the Government intends to do, then.the assessable value would thereafter have to be recalculated and it would be higher than the assessable value in which the excise duty leviable was calculated in the first instance. Having arrived at the assessable value, if the duty is then to be calculated it would not be the same as before and in this manner the calculation would keep on changing. Such a procedure would lead to an absurd situation.'

21. With due respect to the Delhi High Court, this part of its reasoning is a result of a mistake in the method of calculation. The reduced rate of duty is not required to be calculated on the selling price inclusive of the duty of excise leviable as per the original tariff entry. To calculate duty in this manner would be to calculate duty on a portion of the duty. Hence the impossibility of calculating the value of goods as pointed out by the Delhi High Court. The assessable value cannot be arrived at by deducting from the selling price cum leviable duty (under the tarifl' entry without reduction) an amount of duty calculated on it at a reduced rate. The correct method of calculating the assessable value in such cases is by dividing the total price charged into price and duty calculated on it at the applicable percentage. In order to determine which portion of the selling price inclusive of duty which is charged to the wholesale buyer, consists of wholesale value and which portion consists of the duty calculated on it at the reduced rate, a calculation can be easily made. It is done in the show cause notice here by the use of a simple formula set out therein. Secondly, if the assessable value is to be arrived at in the manner set out in that judgment, it would be contrary to the scheme of the new Section 4. Under this scheme the assessable value of goods is the normal price of such goods as stipulated therein but not including the excise duty payable on it.

22. In the case of Appollo Tyres Limited and Ors. v. Union of India and Ors., reported in 1980 E.L.T. 428 .) there was an exemption notification giving certain benefits to the manufacturers. There was no specific condition in the notification that the benefit of rebate should be passed on to the customer. Thereafter a press note and administrative instructions were issued to the effect that the benefit of the exemption notification should be withheld from those manufacturers who did not pass on the benefit of rebate to the consumers. These instructions and press note were challenged before the Delhi High Court. The Court held that the benefit of exemption notification cannot be withheld by any subsequent administrative instructions by way of a press note or a trade notice. In the course of its judgment the Court cited with approval the passage cited earlier from the judgment of the Delhi High Court in the case of Modi Rubber Ltd. In my view, for reasons which I have stated earlier, these observations are based upon a fallacy in calculation. The same observations have been cited with approval by the Orissa High Court in the case of Bizi Industries v. Superintendent of Central Excise, Cuttack and Ors. reported in 1982 E.L.T. 109nd for the same easons set out earlier I respectfully differ from these observations.

23. In the case of Andhra Pradesh Paper Mills Ltd. v. Assistant Collector of Central Excise, reported in 1980 E.L.T. 210 Andhra Pradesh High Court considered the scope of new Section 4(4)(d)(ii) of the Central Excises and Salt Act. In the case before the Andhra Pradesh High Court also there was an exemption notification whose benefit was not passed on by the manufacturer to the customer. The Andhra Pradesh High Court held that if the exemption notification does not contain a condition that its benefit should be passed on to the customer, the manufacturer can retain the benefit of exemption. In the course of its judgment the court considered the scope of Section 4(4)(d)(ii). It said that this clause merely reiterates the principle that excise duty is leviable on manufacturing cost and manufacturing profit. Hence Section 4(4)(d)(ii) excludes the amount of excise duties, sales tax and other charges as also the trade discount while arriving at the excisable value of goods Under Section 4. The learned Judge went on to observe that the words 'amount of the duty of excise' occurring in clause (ii) referred to the duty leviable under the tariff entry and not duty actually paid. Since an exemption notification did not take away the duty leviable under the relevant tariff entry, 'the duty of excise' in clause (ii) referred to the duty leviable under the tariff entry without any reference to an exemption notification. With respect to the learned Judge he has not taken into account the words 'the amount of the duty of excise payable on such goods'. These words, looking to the entire scheme of the section, can only refer to the amount of duty of excise payable on such goods by the assessee. In my view they do not refer to the amount of duty of excise calculated theoretically on the basis of the prescribed rate under the relevant tariff entry.

24. It is not the contention of the Excise Department in the present case that the petitioners cannot retain with them the excess duty collected or that the petitioners are obliged to pass on the benefit of the exemption to the customers. Had they so contended, they would have been wrong. In the case of R. Abdul Quader and Co. v. Sales Tax Officer, 2nd Circle, Hyderabad reported in : [1964]6SCR867 the Supreme Court has observed that if a dealer has collected anything from a purchaser which is not authorised by the taxing law, that is a matter between him and the purchaser, and the purchaser may be entitled to recover the amount from the dealer. But unless the money so collected is due as a tax, the State cannot by law make it recoverable simply because it has been wrongly collected by the dealer. The case before the Supreme Court was in respect of sales tax which was so collected and the case pertains to the period when Entry 54 of List II was not amended. The same principle continues to apply in the case of excise because there is no provision under the Central Excises and Salt Act under which the Excise Department can recover from the assessee any excise duty collected by the assessee from his purchaser, which is in excess of the excise duty payable by the assessee under the Act. The same principle has been reiterated by the Allahabad High Court in two cases. In the case of Govind Sugar Mills Ltd. v. Union of India and Ors. 1978 E.L.T. 151,!, the Allahabad High Court held that the Excise Department cannot demand payment of any further additional sum that is not lawfully due to it. Similarly in the case of Mohan Meakin Breweries Ltd. and Ors. v. Excise Inspector-in-Charge and Ors. reported in 1979 E.L.T. ( 7), the Allahabad High Court observed that if some one has collected anything from the customer which is not authorised by the taxing law, that is a matter between him and the purchaser and the Government cannot recover it unless the money so collected is due as a tax. In other words the Excise Department can only recover from the assessee the duty of excise recoverable in law. It cannot recover any amount in excess of the duty so recoverable, on the basis that such amount has been collected by the assessee from the customer. In the present case however, the Excise Department is merely seeking to compute the value of assessable goods on the basis of Section 4 read with Section 4(4)(d)(ii) and the explanation. There is therefore no question of their not being entitled to so compute the value of the assessable goods.

25. In the present case the petitioners have also challenged the retrospective amendment to Section 4 which has been made by the Finance Act of 1982. As a result of such retrospective amendment the explanation to Section 4(4)(d)(ii) has been added with retrospective effect from 1-10-1975. In view of a decision of the Division Bench of this Court in the case of New Shakti Dye Works Pvt. Ltd. and Ors. v. Union of India and Anr. reported in 1983 E.L.T. 1736 (Bom.) where the Court has held that a retrospective amendment of a taxing statute cannot be considered as an unreasonable restriction on the petitioner's fundamental right to carry on business under Article 19(1)(g) of the Constitution of India, the petitioner have not made any submissions on this aspect of the case before me. The judgment in New Shakti Dye Works Pvt. Limited and Ors. v. Union of India is binding on me. In any case, looking to the provisions of Section 4(4)(d)(ii) and the language used, only the reduced rate of duty can be excluded from the value of the goods. The explanation therefore, does not add something extra to Section 4(4)(d)(ii). It merely explains what is implicit in that Section. Anyway as a result of such retrospective amendment of Section 4(4)(d)(ii), the explanation which is added has to be read in Section 4(4)(d)(ii) as being there as from 1-10-1975.

26. The petitioners have submitted, however, that the provisions of Section 4 including the explanation are subject to the other provisions contained in the Central Excises and Salt Act, 1944. This contention appears to be sound. Under the saving clause to Section 47 of the Finance Act of 1982, (as a result of which Section 4(4)(d)(ii) was amended with retrospective effect from 1-10-1975) it is inter alia provided as follows :

'Section 47(2)

(a) ... ... ... ...(b) ... ... ... ...(c) ... ... ... ...(d) recovery shall be made of all such duties of excise which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, if the amendment made by Sub-section (1) had been in force at all material times.'

This Sub-section merely sets out that recovery or refund of duties of excise shall be made as if the amendment had been in force at all material times. This provision does not give a go by to other provisions of the Central Excises and Salt Act, 1944. Under Section 11A of the Central Excises and Salt Act, for example, it is provided that when any duty of excise has not been levied or paid or has been short levied or short paid, or erroneously refunded, a Central Excise Officer may within six months from the relevant date service notice as prescribed in that section. The section prescribes the time-limit within which such duty can be recovered. The provisions of Section 11A are not overruled by the Amending Act or by making the amendment retrospective. (The Division Bench of this Court in the case of New Shakti Dye Works Pvt. Ltd. has left this question open.).

27. In the case of J.K. Cotton Spinning and Weaving Mills and Anr. v. Union of India and Ors. reported in 1983 E.L.T. 239 (Del) a Division Bench of the Delhi High Court, considered another amendment made in the Central Excises and Salt Act, 1944 by the same Act, namely, the Finance Act of 1982. The amendment which was required to be considered by the Delhi High Court also contained in the Amendment Act a saving clause with a Sub-section identical with Sub-section 2(d) in the saving clause to Section 47 of the Finance Act, 1982. The Delhi High Court has held that this provision means that levy, collection, assessment of penalties etc. would all have to be done in accordance with the provisions of the Act and the rules as in force from time to time. The period prescribed for such collection, either in the Act or in the rules, continues to operate and the provisions of Sections 11A and 11B continue to apply to such recoveries and levies also. I am in respectful agreement with the view taken by the Delhi High Court. To hold otherwise would also invite a challenge to the retrospective amendment itself. It would amount to saying that as a result of the retrospective amendment, the assessees can be called upon to pay taxes retrospectively as from 1975. It would make the provision open to challenge on the ground of arbitrariness and unreasonableness. Such an interpretation is not warranted. The amendment does not affect the application of other provisions of the Act. Hence the amendment does not violate Article 19(1)(g) of the Constitution.

In the premises the petition is dismissed with costs and the rule is discharged.


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