N.K. Das, J.
1. Petitioner runs a small scale Industry under the name and style of 'M/s Bizi Industries'. Besides taking Job orders of fabrication, petitioner is engaged in manufacture of steel furniture at Cuttack. The steel furniture are subject to levy of Central Excise Duty as per entry 40 of the First Schedule of the Central Excises and Salt Act. This entry provides for duty at the rate of 20% ad valorem. By two notifications dated 1-4-1971 and 17-3-1972 issued under Section 3 of the Central Excises and Salt Act, it was provided : (1) Nil rates applicable only to the first clearances up to a value not exceeding rupees one lakh in a financial year, and (2) Nil rates applicable only in case of a manufacturer whose value of steel furniture cleared in the preceding financial year had not exceeded rupees two lakhs. In case of a manufacturer who had no clearance in the preceding financial year 'nil' rates should be applicable only in case where the value of steel furniture during the financial year does not exceed rupees two lakhs. In the earlier notification dated 1-4-1971, exemption was provided upto Rs. 50,000/- and in the latter notification this exemption was raised to rupees one lakh. Petitioner contends
Central Excise authorities have demanded duty from the petitioner on the ground that the value of steel furniture cleared exceeded rupees one lakh in the years stated above in which he has claimed exemption The controversy between the parties rests on a single question. According to the Central Excise authorities, when the petitioner had collected Centra Excise duty on those goods,the duty so collected would be included in the value, whereas, the petitioner takes the stand that such duty is not to be included in the value of the goods for the purpose of assessment of Central Excise duty. As demands were made on the petitioner he went in appeal and revision, but his claims were rejected and hence this petition.
2. In the return, it is stated that when the goods marketed by the manufacturer during the relevant period were not required to be assessed with manutacturer during the revalant period were not required to be assessed with excise duty, the manufacturer having shown in the bills collection of excise duty, the said duty amounts to value of the goods and cannot be exempted under the notifications.
3. Section 3 of the Central Excises and Salt Act 1944 (hereinafter referred to as the Act) provides levy and collection of excise duty at the rates set for in the First Schedule on all excisable goods which are produced or manufactured and the levy and collection shall be in the manner as may be manufactured and the Schedule provides the rates of tariff on excise sales tax and other taxes if any, 'payable on such goods .Section 37 of the Act authorises the Central Government to make Tules and Sub-section (2)(XVII) authorises framing of Rules for exemption of any goods, either whole or in part, from duty. Rule 8 of the Central Excise Rules authorises the Central Government to exempt any goods from duty in special cases by notification.
4. According to item 40 of Schedule 1 of the Act, Excise duty is vi-able on steel furniture the rate of 20% ad valorem. As petitioner is a manufacturer of steel furniture, he is liable to pay excise duty at the above rate. The question is how the value is to be computed. For the purpose of computing the value, according to Section 4(4)(d)(ii) of the Act the value, in relation to any excisable goods, does not include the amount of excise duty, if any, payable on such goods.
5. The notifications dated 1-4-1971 and 17-3-1972 were issued under the authority of rule Rule 8. We have already mentioned the Rules above. Accord-ing to these notifications, excise duty would be at 'nil' rate during the first clearance upto the value not exceeding rupees one lakh and this 'nil' rate shall not be applicable if the manufacturer has cleared in the preceding financial not be applicable if the manufacturer has cleared in the preceding financial year goods not exceeding worth rupees two lakhs.
6. Petitioner has appended a list of the value of the goods cleared on payment of duty and the value of the goods claimed to be exempted from duty on the basis of the aforesaid notification (Annexure 1 to the writ petition). As in the year 1972-73, the total value of the goods cleared was more than rupees two lakhs, petitioner was not entitled to exemption for the year 1973-74. But for the other years, he claims that he would be entitled to such exemption. According to the opposite parties, although petitioner has availed the concession of duty, he has charged duty at the rate of 20% on such goods while selling and therefore the valuation is to be computed including this excise duty (vide Annexure 3 series). According to the Department, the value of goods cleared free of duty is raised by the amount equivalent to the duty charged from the purchasers. To illustrate this point, if the customer has been charged Rs. 10,000/-, the duty element being Rs. 4000/- according to the Department, for the purpose of computing exemption, the limit shall be Rs. 10,00,0/-. But according to the petitioner, the value of the goods shall be taken as Rs. 5003/- for the purpose of exemption limit. The Central Government as per Annexure 5, has taken the stand that on verification of the bills and vouchers of the petitioner.it was noticed that he has charged Central Excise duty at the rate of 20% of the value from the customers although they were not required to pay any such duty and since the goods were not leviable with duty, the amount represented as a part of the value and the value of steel furniture should be increased for computation of the exemption limit.
7. Unlike other statutes, viz. sales tax etc. it is not necessary that the exemption which did not pass to the consumer shall pass to the State. It is contended by the petitioner that unless the notification itself contains a condition that its benefits should pass to the consumer, the manufacturer can retain the same.
8. The statute does not provide for disgorging the duty collected. In absence of such a provision, no demand can be made for payment of the same to the Central Excise Authorities. The intention is that the benefit should go to the manufacturer. The Excise duty is a levy on manufacture. The point of collection may be shifted. Exemption is qua manufacturer as appears from Rule 8.
9. Reliance has been placed by the petitioner as an analogy on Madras Rubber Factory Ltd. v. The Assistant Collector of Central Excise and Ors., 1976 Tax L.R. 1263. While dealing a case of Excise duty, the Company objected to payment of Excise duty on its billing price. It was held by the Kerala High Court that the Company was justified in its stand and the Excise authorities were not entitled to levy duty on the billing price without making allowance for all the items of operation subsequent to manufacture. This can be taken as an analogy for the proposition that the excise duty even though included in the billing price cannot be taken as the value of the goods as envisaged under Section 4 of the Act. Reliance has also been placed on Modi Rubber Ltd. v. Union of India and Ors. reported in Cen-Cus 1978 Vol. VI at page 48D. Dealing with Sections 3 and 4 of the Central Excises and Salt Act, the Delhi High Court held that it is open to Government to take into consideration either the selling price or the weight or the value or the number of tariff value of the goods. It is also open to Governmsnt to grant exemption subject to conditions. If the object of the Government in granting an exemption is to benefit the consumer by the reduction of the selling price of the goods, then the Government notification granting the exemption should itself say so. Such a condition has to be a part of the exemption notification. After enacting the law, a condition in a notification which is not in consonance with the provisions of the statute, cannot be imposed by administrative directions, guidelines or press note. The Administrative acts cannot go contrary to the statutory notification. This decision has also held that if the price to the consumer inclusive of duty remains the same and the duty leviable thereon is calculated and thereafter the relief permissible under the notification is reduced, then the assessable value would 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. If after having arrived at the assessable value, duty is to be calculated, it would not be the same as before and in this manner the calculation would keep on changing and such a procedure would lead to an absurd situation.
10. The learned Standing Counsel for the opposite parties had relied on a decision of Bata Shoe Company Private Limited v. Collector of Central Excise reoorted in 1979 E.L.T. (J 464) (see Valuation and Price List under Central Excise by R.K.- Jain at page 380). The Calcutta High Court is of the view that Section 4 of the Act means determination of a value for the purpose of duty and it does not mean for the purpose of exemption from duty. The Calcutta High Court has referred to a Bench decision of the Patna High Court in Bata Shoe Company Private Limited v. The Collector of Central Excise Patna The Patna High Court has held that the duty element has got to be' deducted from the wholesale price regardless of any consideration whether in doing so the assessable value will fall within the exemption limit or not The Calcutta High Court has not accepted the Patna view, but as we have stated above, the Patna view gets full support from the view expressed by the Delhi High Court.
On the aforesaid analysis, we are of the view that the Central Excise authorities are not justified in making the impugned demands and are liable to refund the amounts already collected, as we hold that 'Value does not include Excise Duty'.
11. In the result, the writ petition is allowed. The demand dated 12- and 25-5-1973 raised by the Central Excise Authorities and the suo motu revision initiated by virtue of notice dated 24-4-1976 are hereby quashed. The opposite parties are further directed to refund Rs. 3,962.25 collected as per order dated 5-11-1976, and the order of adjustment stands cancelled. In the circumstances of the case, there will be no order as to costs.
J.K. Mohanty, J.