Madhava Reddy, C.J.
1. The short question that falls for consideration in this petition under Article 226 of the Constitution of India, is whether the petitioners herein are entitled to claim the benefit of exemption on the whole of the customs (sic) duty granted under Notification No. 171 of 1967 dated 24th July 1967 issued under Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, framed under the Central Excises and Salt Act, 1944.
2. The Petitioners are a company incorporated under the Companies Act and carrying on business of manufacture and sale of 'footwear'. Footwear were subject to the levy of excise duty under Item No, 36 at 10% ad valorem with effect from 28th February 1965. Under notification No. 24/65 dated 28th February 1965, footwear were wholly exempted from the levy of customs duty. This exemption was withdrawn under Notification No. 92/67 dated 26th May 1967. However, by another Notification No. 171/67 dated 24th July 1967 with which we are presently concerned and which Notification is hereinafter referred to as 'the exemption notification', footwear falling under Item 36 of the First Schedule duty to the Central Excises and Salt Act, 1944 of which the value does not exceed Rs. 5/- per pair were exempted from the whole of the duty of excise leviable thereon. On 4th August 1967, trade notice No. 109 was issued making the exemption notification applicable to all goods cleared with effect from 26th May 1967 and the manufacturers who had paid excise duty on footwear, the assessable value of which did not exceed Rs. 5/- per pair and which were cleared on and from 26th May 1967 were declared entitled to the refund of excise duty paid for such footwear. The wholesale price of some of the footwear manufactured by the Petitioner-Company was fixed at Rs. 5.50 per pair by the Petitioners. That price was inclusive of excise duty payable at 10% ad valorem. The Inspector of Excise addressed a letter to the Petitioners on 22nd August 1967 intimating them that the footwear priced at Rs. 5.50 manufactured by the Petitioner-Company was chargeable to excise duty. The Petitioners represented that the wholesale price of Rs. 5.50 includes 50 paise excise duty which is deductible in arriving at the value of the footwear; as the value of the footwear, on such deduction, falls below Rs. 5/-, they are entitled to the benefit of the Exemption Notification. Rejecting the claim for Exemption, the Inspector issued a Demand Notice dated 22nd August 1967 for a sum of Rs. 12,690.38. The Petitioner-Company preferred an appeal against the said order which was rejected by the Assistant Collector on 13th September 1967 holding:
If trade discount and duly payable in respect of any footwear are NIL, it is quite obvious that assessable value would be equivalent to wholesale price: as such assessment of footwear, whose wholesale price is more than Rs. 5/- would be made accordingly.
The Petitioners carried the matter in appeal to the Collector, Central Excise. The Collector, Central Excise was of the view that-
the abatement duty admissible is to the extent of duty actually paid at the time of removal of the goods.... Since the duty is not actually paid, abatement of duty cannot be given.
The Petitioners seek a writ of certiorari to quash the said orders and a writ of mandamus or any other appropriate direction to withdraw or cancel the demand notice dated 29th August 1967 and prohibit the Respondents from enforcing the same. The exemption Notification with which we are concerned reads as under:
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPTT. OF REVENUE & INSURANCE)
New Delhi. The 24th July, 1967
2nd Sravana, 1889 Saka.. ... ... ...
G.S.R. In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts, with effect from the 26th May, 1967, footwear falling under item No. 36 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), of which the value does not exceed Rs. 5.00 per pair from the whole of the duty of excise leviable thereon.
Under Secretary to the Government of India.
3. It is common ground that the wholesale price of the footwear in question was fixed before the exemption notification was issued, at Rs. 5.50 per pair and it continued to be Rs. 5.50 even after the said notification was issued. The excise authorities refused to apply the exemption notification and give the Petitioners the benefit of the exemption because the value of the footwear exceeded Rs. 5/- per pair. The Petitioner-Company claimed out of the wholesale price of Rs. 5.50 fixed for the footwear 50 paise which represents the excise duty payable at 10% ad valorem chargeable under Item 36 is deductible by virtue of the explanation to Section 4 of the Act and hence the wholesale cash price of the goods is really Rs. 5/- per pair.
4. Section 4 of the Central Excises and Salt Act, 1944, reads as follows:
4. Determination of value for the purpose of duty:
Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be-
(a) the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or
(b) where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production or if such article is not sold or is not capable of being sold at such place, at any other place nearest
Explanation:-In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or outer premises aforesaid.
5. There can be no dispute that for earning exemption from levy of excise duty under the exemption notification the value of the footwear should not exceed Rs. 5/- per pair. For the purpose of levying duty the value has to be determined under Section 4 of the Act. Section 4 lays down that the value of the article chargeable to duty under the Act shall be deemed to be the wholesale cash price for which an article of like kind and quality is sold. It is unnecessary to refer to other provisions of Section 4, for in this case, the wholesale price at which the footwear in question is sold is admittedly Rs. 5.50 per pair. Explanation to Section 4 directs that in determining the price of any article, trade discount and the amount of duty payable at the time of removal of the article chargeable with duty from the factory should be deducted. It is common ground that the footwear in question no trade discount is allowed and therefore, nothing is deductible on that account from the wholesale price of Rs. 5.50 for which the footwear is sold. If the footwear were to be valued at Rs. 5/- per pair, no duty would be payable. In such a case nothing is deductible under the Explanation. Mr. Talyarkhan, the learned Counsel for the Petitioners however contends that the wholesale price itself having been fixed at Rs. 5.56, inclusive of excise duty, the duty chargeable thereon @ 10% ad valorem being 0.50 paise must be deducted as directed by the Explanation to Section 4. The wholesale price arrived at after such deduction is the value of the footwear for the purpose of determining whether the goods are chargeable to the excise duty or not. In support of this contention, he relies upon the judgment of the Patna High Court in the case of Bata Shoe Co. Pvt. Ltd. v. Collector of Central Excise, Patna and Ors. reported in 1972 T.L.R. 1833 wherein the contention of Bata Shoe Co. Pvt. Ltd. was upheld and the benefit of the exemption notification was given. The Court held:
Liability to excise duty is determined upon the assessable value and the wholesale price is only a basis for arriving at the assessable value which has to be worked out in accordance with a formula embodied in Section 4. That formula does not stand amended or abrogated by the notification of the 24th July 1967. Nor does that formula contemplate a dissection of the constituents of the wholesale price before allowing the deductions contemplated in the Explanation in Section 4.... In proceeding to apply that formula for arriving at the assessable value of a particular category of footwear it would not be right to start with any presumption that it has qualified for exemption by reason of its assessable value. Rather one must first determine its assessable value and then see whether it falls within the exemption or not. Otherwise, as rightly urged by Mr. A.C. Mitra of the Calcutta Bar, appearing on behalf of the petitioner, it would be tantamount to putting the cart before the horse. Therefore, the question of exemption under the notification of the 24th July 1967 should not be taken into consideration while proceeding to determine the assessable value of any variety of footwear in accordance with the formula laid down in Section 4 of the Act. It is only after the assessable value is thus determined that it would be relevant to enquire whether it falls within the terms of the notification of the 24th July, 1967 or not. In other words, while dealing with the question of deduction of the duty element from the wholesale price as contemplated by the Explanation to Section 4, that factor cannot be left out of consideration on the ground that that particular variety of footwear may ultimately be found to have qualified for exemption from excise duty in terms of the said notification.... At the stage when we are dealing with the question as to whether the article is chargeable with duty or not it would not be relevant to enquire whether the exemption envisaged in the notification of the 24th July 1967 will ultimately extend to it or not. That will be a relevant consideration after the assessable value has been determined as laid down in Explanation to Section 4.
6. We are unable to accept the Petitioners' contention. The exemption notification speaks of the exemption from the whole of the duty of excise leviable on footwear falling under Item No. 36 of the First Schedule to the Central Excises and Salt Act, of which the value does not exceed Rs. 5/- per pair. The value mentioned therein must necessarily be the value referred to in Section 4 of the Act. If the Act prescribes a particular mode of valuing goods for the purposes of levying excise duty, neither the Rules can provide otherwise nor the court hold that they should be valued differently. Section 4 primarily lays down that the value shall be deemed to be the wholesale price at which the goods are sold. When even according to the petitioners the wholesale price of the footwear in question is Rs. 5.50, then that is deemed to be the value and the question of determining the wholesale price does not arise. But if the wholesale price has to be determined because it is not fixed or there is a dispute about what the wholesale price is, then in arriving at that price abatement or deduction of only two out of the several components which go to constitute the price, may be allowed; they are: (1) trade discount and (ii) 'the amount of duty payable at the time of removal of the article chargeable with duty' have to be deducted. According to the petitioners, duty of 0.50 paise chargeable on the said footwear at 10% under Item No. 36, should be deducted and after such deduction as the price comes to Rs. 5/- or less per pair, the benefit of the exemption notification should be given. In other words while the manufacturer fixes the wholesale price of footwear at Rs. 5.50 and includes therein 0.50 paise as excise duty and collects it as part of the price on the footing that excise duty is payable. When it comes to paying that excise duty, he claims that he is not liable to pay excise duty because the whole price of the footwear having regard to the Explanation to Section 4 is only Rs. 5/- and not Rs. 5.50 and he is entitled to exemption under the Notification. Acceptance of this argument leads to a wholly inequitable and unconscionable situation. It enables the manufacturer to exploit the consumer in the name of the State and avoid payment of duty. However, if that is the correct position, we would have no option but to accept, for there is no equity about a tax or duty. But in our opinion, this contention ignores the fact that Section 4 speaks of Article chargeable with duty at a rate dependent on the value of the Article. Section 4 is enacted for the purpose of determining the value of goods chargeable with duty and not for valuing the goods exempt from duty. If the goods are chargeable with duty and if the duty is payable at a rate dependent on the value, then that value is to be determined as laid down therein. If the footwear are exempt, as contended by Petitioners, then the question of determining the value of the footwear under Section 4 does not at all arise. In other words if the wholesale price is Rs. 5.00 and if the exemption Notification were not to be issued, the duty payable under Section 4 read with item 36 of First Schedule at 10% ad valorem would have been 0.50 paise; What the Explanation to Section 4 directs is, even though the wholesale price is fixed by the manufacturer at Rs. 5.50 per pair and that is the value of the goods under Sub-section (1) of Section 4, do not value the goods at Rs. 5.50 and charge 10% on Rs. 5.50 i.e. 0.55 paise but only charge 0.50 paise deducting the excise duty component of 0.50 paise from out of Rs. 5.50 which is the wholesale price or the value of footwear in question. In order that duty chargeable may be deducted under the Explanation to Section 4, duty must be both chargeable and payable. In view of the exemption Notification if it is not chargeable with duty, duty is also not payable, then it is also not deductible under the Explanation, and if it is payable, then exemption cannot be claimed. When even according to the Petitioners, the footwear was neither chargeable to duty nor was the duty payable in view of the exemption Notification and yet the wholesale price was not only fixed at Rs. 5.50 per pair but they were actually sold at that price, we cannot accept that any portion of this wholesale price is deductible as duty under the Explanation and hold that the value is only Rs. 5/- per pair and not duty is payable. With due respect, we think the Patna High Court has merely considered whether the duty is chargeable and overlooked the effect of the expression, 'the amount of duty payable at the time of removal' occurring in the Explanation. To determine whether duty is chargeable and payable, it would not be correct to consider only the Schedule and ignore the notification granting exemption. Both the provisions must be kept in view in arriving at the value of the goods and only after so arriving at the value of the goods, the exemption notification has to be given effect. In our view, in order to claim deduction of the duty from the wholesale price, to ascertain the value of the goods under Section 4, the duty must not only be chargeable but also payable at the time of removal. While the duty was chargeable under Item No. 36 of the First Schedule of the Act, in view of the exemption Notification, it was not payable. The Explanation to Section 4 does not authorise the deduction of the entire duty chargeable from the wholesale price in arriving at the value of the goods if the duty was not payable it only authorises the deduction of duty chargeable if payable. Where there is exemption from payment of whole of the excise duty, the entire wholesale price of Rs. 5.50 would be the value of the goods. Hence no amount whatsoever can be deducted from that wholesale price to arrive at the value of the footwear. Acceptance of petitioners' contention would lead to a very queer situation. While for the purpose of determining whether footwear in question is chargeable to excise duty, 10% ad valorem duty would have to be calculated and deducted from the wholesale price of Rs. 5.50 on the footing that it is chargeable and hold that the value is Rs. 5/-. But in fact the manufacturer would be collecting excise duty as part of wholesale price although no excise duty is chargeable thereon and would then avoid paying excise duty and hold that it is not liable. If duty was not leviable and yet it was collected, it could not be duty, it could only be wholesale price and nothing is therefore deductible from that wholesale price. The Calcutta High Court in Bata Shoe Co. Pvt. Ltd. v. Collector of Central Excise, Calcutta and Orissa and Ors. in 1979 E.L.T. 464, has also refused to grant the benefit of the exemption under the said notification on the ground that the value of the footwear mentioned in the exemption notification is not the value envisaged by Section 4 of the Act, but value within the meaning of Rule 8 of the Central Excise Rules, 1944, which gives the Central Government power to exempt by notification any excisable goods from the whole or any part of the duty leviable on such goods. We find ourselves in respectful agreement with the conclusion though not with the entire reasoning.
7. Mr. Talyarkhan, the learned Counsel for the Petitioners next contended that if two interpretations of a provision of an enactment or an exemption notification are possible, the court should lean towards a liberal construction especially in interpreting a fiscal statute and drew our attention to the decision in Bank of India v. Commissioner of Income-tax, Bombay City II reported in : 72ITR157(Bom) . He also contended that there is no question of ascertaining the intendment of notification, the court has to be guided by the terms of the notification and not by the object it seeks to achieve. Reliance in this behalf was placed on what Supreme Court said in Mst. Dhani Devi v. Sant Bihari Sharma and Ors. reported in : 2SCR253 . It is no doubt so. But as discussed above, in our view, the plain meaning of the Explanation to Section 4 is that the duty should not only be chargeable but payable, and under the exemption notification if the value of the goods is Rs. 5/-, no duty was payable and therefore nothing was deductible. But if the duty was not only chargeable but also payable then that could be deducted under the Explanation. As even according to the petitioners, on the goods in question, the duty was not payable nothing is deductible. In determining the value of the goods as discussed above, we are in fact, giving effect to the Explanation as well; we are only holding that before deducting the trade discount and the duty one has to ascertain whether any trade discount is allowed and whether any duty is chargeable and payable at the time of removal. If it is not chargeable and payable either because it is not chargeable under the Act or not payable because of the exemption granted under the notification, there is no amount that is required to be deducted from the wholesale price fixed by the manufacturer. It could never have been the intendment of the legislature to permit the manufacturers to fix the wholesale price of the footwear including the excise duty at Rs. 5.50 and claim deduction under the Explanation to Section 4 as payable and claim exemption from payment of duty under the Exemption Notification asserting that it is not payable and retain that amount as part of the wholesale price of the goods. As no duty was chargeable on footwear, the value of which was Rs. 5.00 per pair and yet the manufacturer fixed the wholesale price at Rs. 5.50 after footwear valued at Rs. 5/- was exempt from duty, Rs. 5.50 would be the wholesale price. No portion of that wholesale price could be termed as duty payable and as such nothing was deductible therefrom. The value of the footwear thus being more than Rs. 5.00, even as per Section 4 read with the Explanation thereto, the petitioners are not entitled to claim the benefit of Exemption Notification.
8. The position with regard to the goods cleared between 26th May 1967 and 24th July 1967, is however different. Though the Exemption Notification was issued on 24th July 1967, under the trade notice No. 109 dated 4th August 1967, the Exemption Notification which applied to footwear of the value not exceeding Rs. 5/- was made applicable with effect from 26th May 1967. During this period between 26th May 1967 and 24th July 1967, the duty was not only chargeable but inasmuch as the Exemption Notification was not in force, it was also payable and, therefore, footwear, the wholesale price of which was fixed by the Petitioners at Rs. 5.50 inclusive of excise duty comprised of excise duty. As this duty was both chargeable and payable in determining the wholesale price for the purpose of Section 4 and for giving effect lo the Exemption Notification, as directed by the Explanation to Section 4, it had to be deducted from the wholesale price of Rs. 5.50. On such deduction, the price being only Rs. 5/-, the Petitioners would be entitled to the benefit of the Exemption Notification. The Respondents are therefore not entitled to recover excise duty for the said period on footwear valued at Rs. 5.00.
9. In view of the above discussion, this Writ Petition succeeds to the extent of the duty sought to be levied and recovered on the footwear valued at Rs. 5/- and cleared between 26th May 1967 and 24th July 1967 and in other respects the claim of the Petitioners is rejected. The Writ Petition is allowed to the extent indicated above and in all other respects it is dismissed but in the circumstances, we make no order as to costs. Rule made absolute as indicated above.