Sambasiva Rao, J.
1. These four writ petitions are concerned with levy of excise duty on certain chemical fertilisers. The petitions in all the four petitions is the same, it being the Coromandel Fertilisers Limited. It is a company incorporated under the Companies Act, 1956. As common and related questions are raised, all the four petitions are placed before us in a batch. We will do well in disposing them of under a common order.
2. The petitioners carry on business inter alia as manufacturers of diverse kinds of fertilisers at their factory situated at Visakhapatnam. One of the fertilisers thus manufactured is 'Gromor NPK 14-35-14'. Under the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') excise duty was being imposed on fertilisers manufactured in India with effect from 1.3.1969. The petitioners will have to file, according to the rules, price lists of the fertilisers, which they manufacture showing therein inter alia the assessable value of the goods manufactured by them. Their fertilisers are sold throughout India. Since the demand is all over the country, the manufactured fertilisers will have to be transported from the factory site at Visakhapatnam to all the places where there is demand. Though prior to March 1969 fertilisers were sold within the State of Andhra Pradesh at a particular price, which inter alia included the cost of freight the fertilisers were sold outside the State at the same price, they were collecting in addition a certain amount representing the higher transportation costs involved in sending the fertilisers to different places in India. This policy was, however, changed from 1.3.1969. The new method was that for the purpose of recovering expenses of freight from diverse independent purchasers throughout India, the petitioners divided the country into several regions and recovered different amounts towards freight and related charges from buyers depending upon the region in which such customers were situated. The amount thus recovered from the customers was related to the expenditure actually incurred by the petitioners for freight and related expenses. This system was in vogue until 1.4.1970. Another policy came into force with effect from 1.4.1970, since the petitioners thought it more equitable and satisfactory to recover uniform and equal freight and related charges from all the customers (and related charges from all the customers) throughout India wherever situated. This policy was in accordance with the practice followed by the Government of India in distributing imported fertilisers though the fertiliser pool. In the invoices submitted by the petitioners the freight charges have always been shown separately.
3. Further, the petitioners thought that it would be more economical and satisfactory if, instead of the petitioners themselves appointing dealers and organising sales of the fertilisers, such work was entrusted to a reputable organisation with experience and skill in the sale of fertilisers. In pursuance of this policy the petitioners appointed M/s. E.I.D. Parry Limited and M/s. Pallis India Limited as their selling agents. The selling agents undertook under the agreements the task of selling the fertilisers in consideration of receiving a commission of 31/2 per cent calculated on the net realisable value i e., upon the gross sales realisation less excise duty and sales tax, freight expenses and discount and rebate. This commission is remuneration paid by the petitioners to the selling agents for carrying out the work of selling the fertilisers which work the petitioners themselves would have been obliged to carry on.
4. By a notification dated 1.3.1970 bearing No. 25/70 the Central Government exempted mixed fertilisers from duty of excise, provided that the same had been manufactured with the aid of power from 2 or more fertilisers on which excise duty or countervailing duty has been paid. The notification contains an explanation giving the meaning of the 'mixed fertilisers' as 'mixtures of fertilisers containing more than one nutrient (nitrogen, phosphate or potash) and does not include single nutrient fertilisers like super phosphate manufactured from rock phosphate. This notification was issued by the Government of India in exercise of the powers conferred on it by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 (hereinafter referred to as 'the Excise Rules)'. This exemption is limited to mixed fertilisers falling under item No. 14HH of the First Schedule to the Act.
5. In W.P. No. 1400/76 the fertilisers in question is Gromor NPK 14-35-14. The petitioners state in paragraph 8 of the writ petition that it is manufactured by mixing with the aid of power from two imported fertilisers viz, rock phosphate and muriate of potash on which the petitioners have paid countervailing duty under the provisions of Section 2A of the Indian Tariff Act, 1934. The manufacturing process of the said fertiliser consists of treating rock phosphate with sulphuric acid which produces phosphoric acid. When such phosphoric acid is treated with Ammonia, Mono and Di-Ammonium Phosphate in slurry form comes into existence. With the said slurry, Muriate of Potash is added. Thereafter the said mixed fertiliser comes into existence. During the said process, a small quantity of Ammonium Sulphate is formed but it is neither possible to separate it nor is it possible to use it as it is mixed with the other ingredients. According to the petitioners, Mono and Di-Ammonium phosphate in slurry form cannot be used as a fertiliser for the reason that they are highly concentrated and in slurry form. The petitioners claim is that since Gromor NPK 14-35-14 is manufactured with the aid of power from two fertilisers, it comes within the exemption given under Notification No. 25/70.
6. However, the 4th Respondent viz., the Superintendent of Central Excise, Visakhapatnam held that the petitioners were not entitled to exclude from the assessable value of the fertilisers with reference to the price list filed by the petitioners between 31.5.1969 and 1.4.1970, the equalised freight charges. In appeal, however, the Appellate Collector of Central Excise, who is the 3rd respondent, held freight charges constituted a post manufacturing expense and as such those charges must be excluded from the assessable value of the fertilisers. In regard to the 3 1/2 per cent commission paid to the selling agents, the 3rd respondent left it open for agitating the question afresh. The petitioners filed a number of price lists between 1971 and 1973. But the 4th respondent and the Assistant Collector of Central Excise, Visakhapatnam (2nd Respondent) modified the price lists by excluding therefrom freight charges and the selling agency commission. They held that the petitioners were not entitled to exclude freight charges as the petitioners were recovering the same even from the customers residing at Visakhapatnam and the same therefore constituted cost of production. In respect of the selling agent's commission the two authorities held that it was in the nature of remuneration for services rendered by the selling agents and was not a trade discount within the meaning of Section 4 of the Act. They further held that the mixed fertiliser was not exempt from duty under the provisions of the Notification No. 25/70 because in the process of manufacture here came into existence Mono and De-Ammonium Phosphate and Ammonium Sulphate in slurry form which were fertilisers and in respect of which neither excise duty nor contervailing duty had been paid. These orders were carried in appeal before the 3rd respondent who, in his turn, held that the petitioners were not entitled to exclude freight charges as the freight uniformly charged at the same rate for all destinations had to be considered as an integral part of the assessable value the amount of commission since it was not given at the time of delivery and was not computed on the price. The Appellate Collector also held that this particular fertiliser was not entitled to the benefit of the notification because its ingredients are not duty paid. Revision petitions were filed to the Central Government which were pending by the time the writ petitioners were filed. The petitioners went on filing their price lists as required under the rules claiming deduction in freight charges and selling agency commission from the assessable amount.
7. In November 1974 the Government of India issued a Tariff Advice No. 14/74 saying that the expression mixed fertiliser in Notification No. 25/70 covered only mixtures of fertilisers produced by physical action and would not cover mixtures produced by chemical reaction. The said Tariff Advice also said that fertilisers such as NPK Complex fertilisers or compound fertilisers would not fall within the exemption given by the said Notification. Consequently the Assistant Collector of Central Excise viz, 2nd respondent issued an order dated 31.12.1974 holding that the fertilisers NPK 14-35-14 is not exempt from duty under the provisions of the notification since that benefit is available only to physical mixtures of two or more duty paid fertilisers and all the ingredients in the said mixed fertilisers have not pad duty. He also stated that the uniform freight charge cannot be excluded from asses-table value. Likewise the amount paid to the selling agents cannot be deducted from the sasessable value. As a consequence, the petitioners have become liable to pay large sums by way of excise duty. Notices of demand have been issued against which an appeal was filed. However, by an order dated 6.3.76 he appeal was rejected. Claiming that the fertiliser is exempted from payment of excise duty under the notification No. 25/70 and that freight charges and commission paid to the selling agents should be excluded from the assessable value of the fertilisers, the petitioners, have filed writ petition 1400/76 for the issue of a writ of certiorari quasing the order of the Assistant Collector dated 31.12.74 as confirmed by the Appellate Collector dated 6.3.1976 and the demand notice dated 28.1.1975 issued by the Superintendent.
8. In W.P. Nos. 1401, 1402 and 1403 of 76 there are no mixed fertiliser involved. Therefore, the claim for exemption from duty under Notification No. 25/70 does not arise. These writ petitions are concerned only with freight charges and selling agent's commission. The petitioners claim in regard to the fertilisers like Ammonium Phosphate, Urea etc. for excluding the freight charges and selling agency commission amounts from the assessable value was rejected by the concerned authority. The petitioners went through the same gamut of procedure of preferring appeals and revisions. The revisions to the Government of India are still pending. In W.P. No. 1401/76 they seek of writ of certiorari quashing the order of the Assistant Collector of Central Excise, Visakhapatnam dated 3.8.1974, as confirmed by the order of the Appellate Collector dated 6.3.1976, and the demand notices dated 27.8.74 of the Superintendent of Central Excise, Visakhapatnam. In W.P. No. 1402/76 the quashing of the order of the Assistant Collector dated 7.8.1974 as confirmed by the Appellate Collector by his order dated 6.3.1976 is sought. W.P. 1403/76 is connected with W.P. No. 1402/76 and therein a writ of mandamus is sought for refund of the sum of Rs. 15,46,048.30 demanded and collected from the petitioners as excise duty on the amount of 31/2 per cent commission allowed by the petitioners to their selling agents during the period between 1 3.1969 and 9.7.1971.
9. It may be noted here that in so far as. the claim in these latter two writ petitions is concerned, the petitioners did not claim exclusion of the sailing agents' commission in the first stages. It was only before the Appellate Collector this was included and that officer allowed the petitioners' claim in respect of the freight charges and rejected the same in respect of the selling agents' commission. A request was made to pass a speaking order in respect of the transactions between 16.1.1974 and 30.6.1974. But the Assistant Collector rejected the claim of the petitioners on both the heads for the same reasons he has stated in all his orders. Likewise, the Appellate Collector also rejected the appeal.
10. We will notice briefly the contensions raised by the respondents in their counter affidavits. Since the counter affidavit in W P. No. 1400/76 is a comprehensive one, we will give a brief resume of the material averments of the counter affidavit therein. It was stated that the petitioner company paid countervailing duty on Rock Phosphate and Muriate of Potash and had obtained credit for the amounts under the Proforma Credit. No exemption of duty on NPK 14-35-14 could be given under Notification No. 25/70 as the countervailing duty paid was being refunded on the petitioners request by way of credit to the company. The case of the petitioners is that countervailing duty paid by them on Rock Phosphate and Muriate of Potash was refunded to them at their own request by way of credit in their excise register. Having obtained refund of the duty paid, the petitioners can not now claim exemption under Notification. In regard to freight charges it was averred that the wholesale cash price charged at the factory was accepted as the assessable value, and the petitioner company was including freight charges in the wholesale cash price. It was also alleged that selling commission is not a trade discount within the meaning of Section 4 of the Act. Therefore, it cannot be deducted from the wholesale price in fixing the assessable value.
11. Having noticed these respective contentions we will proceed to note the material events that have taken place. It was only from 1969 excise duty was being imposed on fertilisers. However, the Government of India issued Notification No. 25/70 on 1.3.1970 which is in the following terms:
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts mixed fertilisers, falling under item No. 14HH of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) manufactured with the aid of power, from two or more fertilisers on all of which the appropriate amount of the duty of excise or, as the case may be, the additional duty under Section 2A of the Indian Tariff Act, 1934 (32 of 1934) has already been paid, from the whole of the duty of excise leviable thereon.
Explanation : For the purpose of this notification, the term 'Mixed fertilisers' means mixtures of fertilisers containing more than one nutrient (nitrogen, phosphate or potash) and does not include single nutrient fertilisers like super phosphate manufactured from rock phosphate.
Rule 8 of the excise rules empowers the Government of India to exempt from time to time by notification in the Official Gazette any excisable goods from the whole or any part of the duty leviable on such goods. Item 14HH of the First Schedule to the Act relates to all sorts of fertilisers but excluding natural, animal or vegetable fertilisers and not chemically treated. The duty chargeable is 10 per cent ad valorem. Section 3 of the Act is the charging section and it says that duties specified in the First Schedule are to be levied and collected on all excisable goods which are produced or manufactured in India. NPK 14-35-14 was sent to a Chemical Examiner whose report dated 9.8.1973 is to the effect that the fertiliser is a mixed fertiliser and it answered to the test for Nitrogen, Phosphate and Potassium. The Chemical Examiner also added a note to his report saying that the mixed fertiliser is covered by Notification No. 25/70 only if it is prepared out of ingredients on all of which duty his been paid. However, from the letter written by the Superintendent of Central Excise the Chemical Examiner thought that no duty had been collected on the Nitrogen compound going into the composition and therefore the sample under reference might not be covered under the notification. It appears that the Gentral Board of Revenue issued a confidential Tariff Advice in November 1974 bearing No. 14 of 1974. However, that is not placed before us. The Collector of Central Excise, Guntur issued a Trade Notice bearing No. 130/74 dated 20.11.1974 explaining the scope of the expression 'mixed fertiliser' used in the Notification No. 25/70. Inter alia this Trade Notice mentioned that the Board, patently the Central Board of Revenue, had considered the scope of the expression 'mixed fertiliser' used in the Notification and was of the opinion that the said expression would cover only mixtures of fertilisers which are produced by blending, mixing or granulating duty paid fertilisers (two or more) with any substance wherein such mixtures are produced by physical actions and without chemical reactions. Therefore, it was clarified that the exemption envisaged in the Notification would apply only to physical mixtures of duty paid fertilisers and not to chemically reacted and produced fertilisers from duty paid fertilisers, which are normally known as compound/complex fertilisers. Thereupon the Assistant Collector of Central Excise issued orders dated 31.12.1974 in regard to the approval of the price lists of Gromor NPK 14-35-14. In the said order the Assistant Collector said that freight charges, which are not actually incurred by the petitioner company, were collected from the buyers and therefore it should be considered as an integral part of the assessable value. With regard to the rebate of the selling corn-mission the officer held that the said commission is not trade discount within the meaning of Section 4 of the Act. So, the claim for rebate on this count was rejected. Then coming to the exemption claimed for NPK 14-35-14 under Notification No. 25/70 a reference was made to the Chemical Examiner's opinion that it was not covered by the notification. Therefore, that fertiliser attracted duty at 15% ad valorem. Evidently the rate of excise duty was increased from 10% to 15% by that time. 'Reference was also made to the Trade Notice of 20th of November, 1974 issued by the Collector of Central Excise. The Assistant Collector further referred to the fact that NPK 14-35-14 is not a physical mixture of two or more duty paid fertilisers and hence is not entitled for exemption. The company further availed itself of the proforma credit for the countervailing duty it had paid on Rock Phosphate and Muriate of Potash. Consequently, the claim for exemption of duty on this fertiliser is untenable.
12. Then, an appeal was preferred to the Appellate Collector whose judgment was dated 6-3-1976. He also rejected the claims of the petitioner company. He repelled the claim in regard to the freight charges on the ground that the petitioner company has been charging the freight on consignments delivered at the factory gate itself and does not retain a separate entity. Consequently it has to be included in price for determination of assessable value. On the question of rebate of the selling agency commission of 31/2% the Appellate Collector ruled that the company had not claimed any abatement towards commission at the time when they had filed the price lists and the claim was made only for the first time when they had submitted their earlier appeal to the Appellate Collector. There were only two selling agents and the selling agency was not open to any other party. The commission allowed to the selling agents was for canvassing and booking orders and is therefore in the form of remuneration paid to the agents. This commission was not available to the wholesale dealer who is independent of the manufacturer and who purchases the goods on cash payments. Further, the goods do not actually pass through the selling agents but are sold to the dealers directly. The Appellate Collector was also under the belief that the selling agents are related to the manufacturing company and in fact are selling and marketing organisations of the manufacturers. Therefore, the commission does not qualify for being allowed as abatement for the purpose of assessable value in terms of Section 4. The claim for exemption of NPK 14-35-14 from duty under Notification No. 25/70 was rejected on the ground that mixed fertilisers gain the exemption only if they are manufactured with the aid of power from two or more fertilisers on all of which appropriate amount of duty of excise has been paid. But in the opinion of the Appellate Collector the said fertiliser is being manufactured by the manufacturing company by chemical process and not by physical mixing two or more duty paid fertilisers. These are the grounds on which the claims of the petitioner company were rejected by the authorities. It may also be noted here that in regard to other price lists the company claimed abatement towards the selling agents commission right from the begininng.
13. The dispute between the parties is under three heads. The first point in dispute is whether Gromor NPK 14-35-14 is within the ambit of exemption from duty given under Notification No. 25/70. The second point of difference is whether the freight charges collected from the petitioner company will have to be excluded from the total assessable value. The third and last question is in respect of the exclusion of selling agents commission from the assessable value.
14. On the first question Shri Setalvad appearing for the company maintained that NPK 14-35-14 is clearly within the scope of the exemption given under Notification No. 25/70. One has to go by the plain language of the Notification in order to find out its ambit. Taxing statues, rules and notifications issued thereunder will have to be understood strictly and with the aid of the language emloyed therein. There is no scope for any element of intention or any element of speculation about intention while interpreting taxing statutory provisions and notifications. Learned Counsel further submitted that it was not competent for the Central Board of Revenue to issue any tariff advice or direction amending the statutory notification made by the Government of India. A subordinate agency can not have the power to amend or add to a statutory notification. Therefore, the learned Counsel urged, the Central Board of Revenue and the Collector of Central Excise, Guntur, acted without jurisdiction in issuing Tariff Advice of November 1974 and Trade Notice of 20th November 1974 respectively, purporting to give new dimensions to the meaning of the Notification No. 25/70. While construing taxation provisions extraneous and irrelevant facts cannot be taken into consideration. Since this was done by the authorities concerned while rejecting the claim of the company, their decisions will have to be quashed and the Notification must be given its natural meaning.
15. Sri Subrahmanya Reeldy for the Central Government refuted the claim of Shri Setalvad about the natural meaning of the Notification and that it would bring NPK 14:35:14, in the manner in which it was manufactured, within the scope of the exemption given under Notification No. 25/70. He pointed out that not merely fertilisers but also acid and gas were used while manufacturing NPK 14:35:14. The exemption contemplated by Notification No. 25/70 is limited only to mixed fertilisers manufactured out of fertilisers. Since acid and gas were also mixed in the process of manufacture NPK 14:35:14 walks out of the exemption. Further the notification contemplates simple mixture of fertilisers and not chemical transformation of the fertiliser and the ingredients used therein. He also added that in the process of manufacturing this particular fertiliser, Mono Di-Ammonium Phosphate and Ammonium Sulphate came into existence and they are fertilisers. They were mixed with other ingredients while manufacturing NPK 14:35: 14. But the company has not paid any excise duty on these two fertilisers which came into existence in the process of manufacture. Therefore, the exemption is not available to the fertilisers which is the end-product. Learned Counsel further argued that though countervailing duty has been paid on Rock Phosphate and Muriate of Potash, the company itself applied for the benefit of that duty under Section 56-A of the Act. It is true that he gave up the claim for the benefit later. But the fact remained that he was given credit to this amount as per his request in RG. 23 account. In consequence he must be deemed to have availed of the benefit of the countervailing duty he had paid on the two fertilisers used in the manufacture of NPK 14:35:14. He submitted that the trade notice issued by the Collector of Central Excise is in conformity with the obvious meaning of the Notification.
16. It must be immediately noticed that the excise authorities did not reject the claim of the petitioner company for exemption on a comprehensive consideration of all the contentions raised by the learned standing counsel for the Central Government. Some of the contentions raised now are new. For instance the objection taken by Sri Subrahmanya Reddy to the availability of exemption on the ground that in addition of fertilisers, acid and gas were used in the manufacture of NPK 14:35:14 has been raised for the first time. We have already noted on what grounds the excise authorities repelled the claim of the company for exemption. All the same, the parties, including the petitioner company have had full opportunity of debating these contentions in an ample measure before us. In support of these contentions no new facts are either alleged or sought to be proved. The contentions are founded on the averments already made, particularly the first contention of Sri Subrahmanya Reddy. He spelled out that argument from the averments contained in paragraph 8 of writ petition No. 1400/76.
17. The first point to be considered, which would immediately arise, is about the true and natural meaning of the notification gathered from the language used therein. We have fully extracted the notification above. The exemption is given to 'mixed fertilisers' which fall under item No. 14HH of the First Schedule to the Act. The explanation gives the meaning of the term 'mixed fertilisers' as 'mixtures of fertilisers containing more than one nutrient (nitrogen, phosphate or potash) and does not include single nutrient fertilisers like superphosphate manufactured from rock phosphate'. Therefore, by the expression 'mixed fertilisers the Government of India meant 'mixtures of fertilisers containing more than one nutrient'. These mixtures of fertilisers should be manufactured with the aid of power from two or more fertilisers. If appropriate amount of excise duty has already been paid on all the fertilisers used in the manufacture, then alone the end manufactured product will be exempt from the whole of the duty of excise leviable thereon. Why the Government of India granted this exemption is easily discernible. What is sought to be exempted is a mixed fertilisers manufactured from two or more fertilisers on all of which duty has already been paid. If excise duty is imposed on the end-product also, then it would be double taxation. That is why the Government of India desired to avoid double taxation and gave the exemption.
18. What is exempted is 'mixed fertilisers' falling under item No. 14HH of the First Schedule to the Act. Item 14HH refers to 'fertilisers, all sorts, but excluding natural, animal or vegetable fertilisers when not chemically treated'. It is, therefore, manifest that the notification is concerned with only 'fertilisers' and not with any other commodity. This idea is further demonstrated from the words 'manufactured...from two or more fertilisers'. So, it follows that a mixed fertiliser, in order to win the exemption from duty, should be one which has been manufactured from two or more fertilisers. When the notification once again used the word 'fertilisers' its intention to emphasise that the exemption would be available only to mixtures of fertilisers becomes patent. This meaning is further made clearer by the explanation which gives the meaning of the term 'mixed fertilisers' as 'mixtures of fertilisers'. There-fore, there cannot be any hesitation to understand the meaning of the notification as purporting to grant exemption only to mixed fertilisers manufactured from two or more fertilisers. It is not, its purpose to grant exemption to mixtures of fertilisers and other commodities as well.
19. Sri Setalvad for the petitioner company strongly urged that if two or more fertilisers are used in the manufacture of mixed fertilisers, such mixed fertilisers would be entitled to exemption despite the use of other commodities like Sulphuric Acid and Ammonia. According to him, what all the notification requires is the use of two or more fertilisers in the manufacture of mixed fertiliser and it does not matter if, in addition to two or more fertilisers, some other commodities are also used. He also pointed out that had the Government of India wanted to limit the exemption in the manner in which the learned Government Pleader construed, then it would have used the word 'only' before 'two or more fertilisers'. Since that word does not occur, the exemption would be available even if other commodities are used with fertilisers. If that were the intention of the notification, then it could have easily said 'manufactured from two or more fertilisers or other substances'. Not only it omitted to say that, but on the other hand the notification throughout emphasises on the use of fertilisers and fertilisers alone. The absence of the word 'only' before 'two or more fertilisers' does not stand in the way of understanding the real intention of the Government of India. To our mind, consequently, the true and natural meaning of the notification is that the exemption is available to mixed fertilisers alone. If other commodities are also used in manufacturing the mixed fertiliser, then the said mixed fertiliser walks out of the exemption.
20. We have already noted the averments in paragraph 8 of the writ petition describing the process of manufacture of NPK 14:35:14 and the fertilisers and commodities used therein. The petitioner company itself stated that NPK 14:35:14 is manufactured by mixing with the aid of power from two imported fertilisers viz., Rock Phosphate and Muriate of Potash. The manufacturing process, according to the averments in the writ petition, consists of treating Rock Phosphote with Sulphuric Acid, which treatment produces Phosphoric Acid. The Phosphoric Acid that is thus produced is further treated with Ammonia as a consequence of which Mono and Di-Ammonium Phosphate in slurry form comes into existence. Let us not think at the present of the Phosphoric Acid and Mono and Di-Ammonium Phosphate which come into existence in the process of manufacture. Let us concentrate on the basic commodities used in the manufacture of this fertiliser. From the averments in paragraph 8 of writ petition it is obvious that not only the two fertilisers i.e., Rock Phosphate and Muriate of Potash are used, but also Sulphuric Acid and Ammonia are used. The Sulphuric Acid and Ammonia used in the manufacture of NPK 14:35:14 are not created in the process of manufacture. They are brought from outside and utilised in the process of manufacture just like the two fertilisers Rock Phosphate and Muriate of Potash. This much is evident from paragraph 8 of the writ petition.
21. Undoubtedly Sulphuric Acid is an acid. That can be seen not only from the very name it has, but also from the list of acids given in Item 14-G of the First Schedule under the head 'acids'. Ammonia, as can be seen from item 14H which is under the heading 'gases', is a gas. Sulphuric Acid and Ammonia are independent commodities which are by themselves eligible to excise duty. In contrast, when we come to Item 14HH in the First Schedule, it deals only with 'fertilisers'. It purports to deal with fertilisers of all sorts excluding natural, animal or vegetable fertilisers when not chemically treated. It gives a number of commodities which are treated, under law, as fertilisers. Entry 3 of item 14HH contains the words which the notification used. It deals with mixed fertilisers manufactured with the aid of power from two or more fertilisers. When in the Act itself this distinction between fertilisers, including mixed fertilisers, on ore hand and acids like Sulphuric Acid and gases like Ammonia is pointed out and maintained, it is futile to argue that Notification No. 25/70 grants exemption to mixed fertilisers which are manufactured from two or more fertilisers and acids and gases. To say that is only to introduce something which is not in the notification. We are, therefore, of the view that Gromor NPK 14:35:14 is not within the exemption given under the notification.
22. The same conclusion is arrived at from another perspective of the notification. The exemption is available only if the mixed fertiliser is manufactured with the aid of power from two or more fertilisers. The explanation makes it clear that mixtures of fertilisers containing more than one nutrient is mixed fertilisers for the purpose of the notification. So, what the notification contemplates is a simple mixture of fertilisers with the aid of power. It does not purport to postulate manufacture of mixed fertilisers through chemical transformation of so many commodities. In order to meet this argument, Sri Setalvad placed before us the meaning of the word 'mix' given in Webster's Third International Dictionary at page 1448. The meaning is given as '...to stir, shake or otherwise bring together (different substances) with a loss of separateness or identity. Syn: mingle, commingle, blend, merge, coalesce, amalgamate, fuse; mix, mingle and commingle usu. describe, activities with little or no specific direction, often arising from chance or spontaneous inclination, whereas merge and coalesce frequently suggest the working of time or natural force, and blend, amalgamate and fuse often imply a conscious endeavour toward unity, mix is the most general term.' Relying on this meaning of the word 'Mix', Sri Setalvad took the stand that chemical transformation of all the several ingredients used in the process of manufacture remains within the realm of ''mixture' as used in the explanation. We are unable to accept this argument. The word 'mix' even going by the Webster's Dictionary meaning is to stir, shake or otherwise bring together different substances with a loss of separateness or identity. In other words, the process of mixture contains bringing together different substances. In other words, different substances are mingled or blended or merged or coalesced or amalgamated or fused together. It is also important to note that mix, mingle and commingle are used to describe the activities with little or no specific direction, often arising from chance or spontaneous inclination. Blend, amalgamate and fuse imply a conscious endeavour towards unity. When such is the meaning of the word 'mix', it is difficult to accept that it takes within its meaning the entire process of manufacture of NPK 14:35:14 as described in paragraph 8 of the writ petition. The elaborate process of manufacture as described in paragraph 8 cannot be called 'mixtures of fertilisers' as stated by the explanation. The process of manufacture of NPK 14:35:14, bringing into existence several other substances, and once again utilising them in the process, treating one substance with the other, cannot be said to be ''mixture of fertilisers' as postulated by the notification. So, it will have to be held that NPK 14:35:14 is not entitled to exemption under Notification No. 25/70.
23. In this view, it is not necessary to consider or express any opinion on the other contentions raised by the learned standing counsel for the Central Government as to why this particular fertiliser is not entitled to exemption. Likewise it is also unnecessary to consider the contentions of Sri Setalvad that it is not competent to the Central Board of Revenue or to the Superintendent of Excise to issue tariff advice or trade notice and that no extraneous consideration should be taken into account. We agree with him when he said that the notification, being a part of the Act and statute, must be given its natural meaning as it emerges from the language used in it. That we have endeavoured to do and according to our understanding of the notification, NPK 14:35:14 is not within the ambit of the exemption. For these reasons, we held the first contention against the petitioner company.
24. Now we come to the question of freight charges. The question is whether the freight charges collected by the petitioner company can be included in the assessable value of the fertiliser for the purpose of imposing duty. It is well known that excise duty is duty levied on something which is produced or manufactured. In fact Section 3 of the Act, which is the charging section, says this clearly. According to it, a duty can be levied and collected as specified in the First Schedule on all excisable goods which are produced or manufactured in India. Section 4 refers to determination of value for the purpose of duty. We will do well in extracting that section in its entirety:
4. Determination of value for the purposes of duty-Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value 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 thereto.
Explanation : In determining the price of any article under this section no abatement or reduction shall be allowed except in respect of trade discount and amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid.
According to the section, the duty will have to be levied on the value of the article. Such value, according to Clause (a) is deemed to be 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. However, if a wholesale market does not exist for the article, the wholesale cash price of the article at the nearest place where such market exists will have to be taken into account. The question now is whether freight charges, which are admittedly collected by the petitioner company at its factory gate, are part of the wholesale cash price of the fertilisers.
25. The nature of excise duty has been explained by the Supreme Court on more than one occasion.
In Chhotabhai v. Union of India AIR. 1962 Supreme Court 1006 paragraph 25:
In our view, a duty of excise is a tax-levy on home-produced goods of a specified class or description, the duty being calculated according to the quantity or value of the goods and which is levied because of the mere fact of the goods having been produced or manufactured and unrelated to and not dependent on any commercial transaction in them.
Kapur, J. in his opinion stated the position more elaborately in paragraph 55:
In dealing with excise duty (1) there is no mention of a direct or indirect taxes; the Indian Legislature has avoided this incidence to be characteristic of the tax; (2) taxable event is the manufacture or production of goods; it is inmaterial what happens to them afterwards whether they are sold, consumed, destroyed or given away; (3) it is not a necessary incidence that the manufacturer must be able to pass it on to the consumer or indemnify himself; (4) the general tendency of its being passed on may be there but it may be prohibited by the circumstances, economic or otherwise.
It emerges from this decision that the imposition of excise duty is unrelated to and not dependent on any commercial transaction in them. So, if some amount is incurred subsequent to the manufacture for the purpose of selling the commodity as a commercial pro-position, that cannot be included in the wholesale cash price.
26. In the same volume at page 1281 i.e., R.C. Jall v. Union of India AIR 1962 Supreme Court 1281 is another decision which throws light on the nature of excise duty. Subbarao, J. (as he then was) said the following on behalf of the Court at page 1287:
Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the Said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost.
27. In Shinde Brothers v. Deputy Commissioner, Raichur A.I.R. 1967 Supreme Court 1512 Sikri, J. (as he then was) stated the law after a review of the case law thus at page 1520:
These cases establish that in order to be an excise duty (a) the levy must be upon goods, and (b) the taxable event must be the manufacture or production of goods. Further the levy need not be imposed at the stage of production or manufacture but may be imposed later.
Though the point of imposition may be later after production, the taxable event remains as the manufacture or production of goods. This is the important principle that will have to be noted while estimating the wholesale cash price for the purpose of imposing excise duty Bachawat, J. in his opinion in the same judgement at page 1531 stated thus:
There can be no controversy that a tax levied on a manufacturer or producer with reference to the quantity or value of the article produced at the moment of its production is a duty of excise. But the levy may be made in other ways, and it may then become necessary to asceitain the real character of the tax. In determining whether the tax is a duty of excise, several tests may be suggested. Is the tax levied on the manufacturer or producer Is it levied with reference to the value, quantity, weight or volume of the goods Does it affect the goods as subjects of manufacture or production Is it a levy at the stage of or in connection with the manufacture or production?
28. In A.K. Roy v. Voltas Ltd. AIR 1973 Supreme Court 225 the Supreme Court explained the meaning of the term 'wholesale cash price.' Mathew, J. speaking for the court observed at page 230 after referring to Vacuum Oil Co., V. Secretary of State for India:
The essence of the idea is that the purchase must be a wholesale purchase and not a retail one. In other words, the sale must be wholesale and not a retail one in order that the price realised may be termed the 'wholesale cash price.
The Privy Council in the case referred to in the above decision was examining the scope of Section 30 Clauses (a) and (b) of the Sea Customs Act, 1878 whose provisions are analogous to Section 4 of the excise Act. The learned Judge referred to the following passage in the Privy Council's decision with approval:
The price is to be a price for goods, as they are both at the 'time' and 'place' of importation It is to be a 'cash price', that is to say a price free from any augmentation for credit or other advantage allowed to a buyer, it is to be a net price, that is to say it is a price less trade discount
Then Mathew, J. proceeded to observe further that their Lordships of the Privy Council therefore held that the word? 'wholesale price' were used in the Section i.e., Section 30 of the Sea Customs Act in contradistinction to a retail price, and that not only on the ground that such is a well recognised meaning of the words but because their association with the words 'trade discount' indicates that sales to the trade are those in contemplation, and also because only by attaching that meaning to the word is the 'wholesale price' relieved of the loading representing post-importation expenses which, as a matter of business, must always be charged to the consumer, and which are eliminated. Then the learned Judge proceeded to observe in paragraph 21 that excise it a tax on the production and manufacture of goods. Section 4 of the Act, therefore, provides that the real value should be found after deducting the selling cost and selling profits and that the real value can include only the manufacturing cost and the manufacturing profit. The section makes it clear that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from that post-manufacturing operation, namely selling profit. The section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which gives credit to the wholesale buyer for a period of time and that the price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involved in the transport of the articles. This ruling throws considerable light on the problem on hand. It clearly lays down that the real value of a commodity includes only the manufacturing cost and the manufacturing profit, and that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post-manufacturing operation viz., selling profit. The decision also makes it clear that the wholesale price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involved in the transport of the articles. This enunciation of the law by the Supreme Court is a clear answer to the question as to the inclusion of freight charges in estimating the wholesale price. Freight charges are obviously a post-manufacturing cost incurred by the manufacturer in supplying the goods to the purchaser. By no stretch of imagination could it be said that it is part of the manufacturing cost and the manufacturing profit. Freight charge has nothing to do with the manufacturing or producing cost and profit. It is clearly and definitely a post-manufacturing expenditure and is wholly outside the manufacturing cost and the manufacturing profit.
29. What was stated by Mathew, J. in Volta's Case has been reiterated by Bhagwati, J speaking for the Supreme Court in Atic Industries v. Asst. Collector of Central Excise Amplifying the view of Mathew, J. in Volta's case Bhagwati, J. stated thus in paragraph 12:
The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with post-manufacturing cost or profit from post-manufacturing operation.
The price charged by the manufacturer for sale of the goods in wholesale would, there-fore, represent the real value of the goods for the purpose of assessment of excise duty. If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and the manufacturing profit of the manufacturer but also the wholesale dealer's selling cost and selling profit and that would be wholly incompatible with the nature of excise. It may be noted that wholesale market in a particular type of goods may be in several tiers and the goods may reach the consumer after a series of wholesale transactions.
X X X XOnce the goods have entered the stream of trade and are on their onward journey to the consumer, whether along a short or long course depending on the nature of the goods and the conditions of the trade, excise is not concerned with what happens subsequently to the goods. It is the first immediate contact between the manufacturer and the trade that is made decisive for determining the wholesale cash price which is to be the measure of the value of the goods for the purpose of excise, the second or subsequent price even though on wholesale basis, is not material. If excise were levied on the basis of second or subsequent wholesale price, it would load the price with a post-manufacturing element, namely, selling cost and selling profit of the wholesale dealer. That would be plainly contrary to the true nature of excise as explained in the Volta's case. Secondly this would also violate the concept of the factory gate sale which is the basis of determination of value of the goods for the purpose of excise.
30. It is true that in this case the Supreme Court was dealing with the question whether it is the first sale or second sale that should be taken as the criterion for fixing the wholesale price and that the Court held that it is the first sale that should form the basis for reckoning the wholesale price. But the principle of working out the wholesale cash price as adumbrated in Section 4 and the levy of excise duty on that basis was clearly brought out in this decision.
31. Sri Subrahmanya Reddy sought to distinguish the Volta's case supra' and Atic Industries's case supra on the ground that they were not dealing with the question of exclusion of freight charges in the assessable value and that the observations of the Supreme Court are only incidental. No doubt in neither of the two cases the question of inclusion or exclusion of freight charges, arose. But certainly the question of the impost of excise duty and the nature of wholesale cash price arose in the two cases. The law on the point has been made clear by the highest Court of the land which is binding on all the Courts in India. From what we have extracted from the decisions of the Supreme Court there cannot be any possible doubt that freight charges cannot be included in estimating the wholesale cash price, since they are not part of the manufacturing and producing cost but are only post-manufacturing expenses.
32. Similar view has been expressed by several High Courts, the Andhra Pradesh High Court in W.P. Nos. 1748/75 and batch, the Bombay High Court in Miscellaneous petition No. 293/74, the Madras High Court in W.P. No. 2180/72 and 2742/75, W.P. Nos. 2182 and 2183 of 75 and the Karnataka High Court in W.A. No. 8/75.
33. Another argument addressed by Sri Subrahmanya Reddy in this connection will have to be considered. His point is that the petitioner company has been including freight and associate charges in the invoices, thus making those charges part and parcel of the cost of the fertiliser sold by it. It was further pointed out that irrespective of the place of consumer, a uniform rate of freight charge is being included in the invoice. If the purchaser takes delivery of the fertilisers right at the factory gate of the petitioner company at Visakhapatnam, even then freight charges are being collected. That means according to the learned Counsel, without incurring any expenditure in this behalf the petitioner company is collecting freight charges as part of the sale price in several cases. This argument cannot be accepted. Two illustrative invoices were placed before us. They clearly show that freight and associate charges are clearly shown differently and separately from the actual cost of the fertiliser. They are not deducted from the total cost but are added as a separate item. Therefore, it is abundantly clear that when fertilisers are sold, freight charges are not shown and treated as part of the cost price of the fertilisers but are indicated as a charge for freight and other incidental expenses. It is common ground that a uniform rate for freight and associate charges is being charged by the petitioner company, whether the consumer is in Visakhapatnam itself or in the Punjab, Haryana, or Assam. We have already given a brief resume of the writ petition that from 1970 a uniform rate of freight and associate charges are being collected separately whatever be the place of destination of fertiliser. If the consumer is at Visakhapatnam the actual freight that will be incurred by the petitioner company would be less. But if it is far away in Bombay, the Punjab, Haryana or Assam it will be much more. In order to avoid coteplication, the petitioner company has introduced a uniform rate of freight and associate charge. That does not and cannot mean that it forms part of the wholesale cash price of the fertiliser. We are, therefore, of the view that freight and associate charges collected by the petitioner company cannot be included in the assessable value of the fertilisers they sell.
34. Then survives the claim relating to commission paid to the selling agents. The petitioner company's claim is that this is a commission which they pay to their selling agents and is, therefore, liable to be deducted from the assessable value. We are not, however, persuaded to accept this contention. We have already referred to the principles laid down by the Supreme Court in ascertaining the wholesale price of an excisable commodity. What the petitioner company is paying to its selling agents is 31/2% commission on the price as remuneration to them for the services rendered. Thus a part of the wholesale cash price is paid to them as remuneration. But this amount cannot be abated or deducted from the wholesale cash price, unless it is by way of trade discount or an amount of duty payable at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture as laid down in explanation to Section 4. The commission of 31/2% paid to the selling agents is not a trade discount given either to the wholesale buyer or to the retail buyer. It is not given to the consumer or to the trader. Therefore, it is not trade discount within the meaning of explanation to Section 4. By no stretch of imagination could it be said that it represents duty payable at the time of the removal of the article chargeable with duty from the factory. Therefore, the percentage paid to the selling agent3 out of the total sale price cannot be abated or deducted from the assessable amount. Consequently, this claim of the petitioner company must be rejected.
35. The result of the foregoing conclusion is that Gromor NPK 14:35:14 is not exempt from excise duty under Notification No. 25/70. At the same time, the freight and associate charges incurred by the petitioner company cannot be included in the assessable value-However, the commission paid to the selling agents by the company cannot be deducted from the assessable value. The four writ petitions are allowed only to the extent of freight and associate charges and dismissed in other respects. Since the parties have succeeded in part and failed in part, we direct them to bear their own costs. Advocate's fee Rs. 500 in lump sum.
36. After this court pronounced the judgment this day Sri Anjaneyulu the Advocate for the petitioner and Sri Subrahmanya Reddy Central Government standing counsel on behalf of the respondents orally requested this Court to grant a certificate for leave to appeal to the Supreme Court of India against this judgment and Sri Anjaneyulu counsel for the petitioner sought stay of the operation of this judgment in respect of the excise duty payable on the Gromor NPK. 14:35:14 and to selling Agents Commission on the fertilisers sold by the petitioner company, the Court made the following orders.
Immediately after delivery of judgment Sri Anjaneyulu for the petitioners and Sri Subrahmanya Reddy for the respondents, sought leave for appeal to the Supreme Court. We did not entertain any doubt on any one of the points we have decided. To us the construction of the notification No. 25 of 1970 is simple and unambiguous. Our decision about the freight charges and the sale commission is based on Supreme Court decisions and the criteria laid down by that court for levying excise duty. We therefore see no justification for granting certificate either to the petitioners or to the respondents. The leave is consequently refused.
Sri Anjaneyulu counsel for the petitioners seeks stay of the operation of our judgment in respect of the excise duty payable on the Gromor NPK 14:35:14 and the selling agent's commission on the fertilisers sold by the petitioner company. We grant stay in these two respects for two months from today on condition that the petitioner company furnishes Bank guarantee for these amounts within one month from today to the satisfaction of the Assistant Collector, Central Excise, Visakhapatnam.