J.K. Mohanty, J.
1. Petitioner No. 1, M/s. Mamta Drinks and Industries Ltd., Rourkela (hereinafter called the 'Company') is carrying on business of manufacturing and selling Aerated Water/Soft drinks including Goldspot, Limca etc. which do not contain caffeine. The soft drinks manufactured by the Company are products liable to Central Excise duty under Tariff Item ID of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter called the 'Act'). The rate of excise duty payable on soft drinks and aerated water is 60 per cent ad valorem. The Government of India in the Department of Revenue and Banking in exercise of their powers under Rule 8(1) of the Central Excise Rules, 1944 (hereinafter called the 'Rules') exempted aerated waters falling under sub-item (2) of Tariff Item No. ID of the First Schedule (not containing caffeine) from so much of the duty of excise leviable thereon as in excess of thirty per cent ad valorem vide Annexure-1, the Notification No. 28/79-C.E., dated 1-3-1979. The relevant portion of the notification reads as follows :-
'In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 and in supersession of the Notification of the Government of India in the Department of Revenue and Banking No. 211/77-Central Excises, dated the 4th 3uly, 1977, the Central Government hereby exempts aerated waters falling under sub-item (2) of Item No. ID of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty of excise leviable thereon as in excess of thirty per cent ad valorem.
Provided that the exemption contained in this notification shall not apply to aerated waters containing caffeine.'
The petitioner Company being not fully aware of the exact position of the exemption notification (Annexure-1) requested opposite party No. 2, the Superintendent, Central Excise, Uditnagar, Rourkela to advise the Company regarding the procedure to be followed for submission of the fresh classification list effective from 1-3-1979 which it was obliged to submit on any change in the rates of duty brought about by budget proposal of 1979 vide Annexure-2. Copy of the said letter was forwarded to the opposite party No. 1, the Assistant Collector, Central Excise, Rourkela who by his letter dated 12-3-1979 (Annexure-3) advised the Company that while the Tariff rate for the aerated waters described under sub-item (2) of Tariff Item No. ID has been raised to 60 per cent ad valorem by the Budget of 1979, the effective rate for the said aerated waters is 30 per cent ad valorem by virtue of the notification under Annexure-As per the advice of opposite party No. 1, the Company submitted a classification list effective from 1-3-1979 in which the effective rate of duty on the aerated waters which do not contain caffeine was shown at the rate of 30 per cent ad valorem vide Annexure-4. Subsequently, however, the company received the full text of the notification (Annexure-1) and found to its surprise that the advice given by opposite party No. 1, in Annexure-3 was completely misleading and incorrect due to erroneous construction and interpretation of the notification. Accordingly the Company submitted revised classification list effective from 1-3-1979 in which the effective rate of duty on aerated water was shown at the rate of 60 per cent ad valorem and claimed an exemption in excess of 30 per cent ad valorem on the basis of Annexure-1. However, opposite party No. 1 did not accept the contentions of the petitioner in favour of exemption by his order dated 15/24-5-1980 (Annexure-10) and rejected the claim of the petitioner for revised classification list in accordance with the notification of exemption with effect from 1-3-1979. The reason given by the Assistant Collector for such rejection is quoted below :
'As per Notification No. 28/79-CE., dated 1-3-1979 Aerated Water falling under sub-item No. ID of First Schedule to the Central Excises and Salt Act, 1944, has been exempted from so much as duty of excise leviable thereon as in excess of 30% ad valorem. Hence the effective rate of duty in this case is 30% ad valorem for Aerated water falling under Tariff Item 1D(2) of Central Excise Tariff not containing caffeine. As such the contention of the assessee that the rate of duty for the above said product should be 60% ad valorem is untenable. Also equally unacceptable is the assessee's contention that the amount covered by such relief under the exemption Notification would go to the benefit of the manufacturers. The manufacturer is only entitled to collect from the buyers the amount of duty which they actually pay at a particular time.'
Petitioner now challenges the above finding of opposite party No. 1 that 'the amount covered by such relief under the exemption notification would go to the benefit of the manufacturers'. Mr. Mohanty, learned counsel for the petitioner, contends that the benefit of exemption under Annexure-1 is available only to the manufacturer. He further contends that the exemp- tion notification does not itself say that the exemption will not be available to the manufacturers and shall be passed on to the buyers/consumers. In the absence of such provision in the notification the view taken by opposite party No. 1 under Annexure-10 is absolutely illegal, untenable and should not be allowed to stand.
2. On the other hand the contention of the opposite parties is that the petitioner Company as a manufacturer cannot retain the benefit given under the exemption notification in Annexure-1. Learned counsel for the opposite parties laid stress upon the definition of the word 'value' laid down in Clause (d) of Sub-section (4) of Section 4 of the Act (as amended) and submitted that while determining the normal price of the goods under the said provision, only the amount of duty of excise actually paid by petitioner should be deducted and nothing more. Section 3 of the Act provides :-
'3. Duties specified in the First Schedule to be levied. - (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 at the rates, set forth in the First Schedule ...'
The duty can be levied ad valorem or on any other basis, as may be specified. Section 4, prior to its amendment in 1973, prescribed the manner in which the value of the goods was to be determined, where the duty was charged on the basis of value. After the decision of the Supreme Court in the case of A.K. Roy and Anr. v. Voltas Ltd. report in AIR 1973 S.C. 225, Section 4 was amended. In the amended Section 4 the concept of 'normal price' has been introduced in place of 'wholesale cash price'. It provides the mode in which the normal price of the article is to be determined. Section 4(4)(d)(ii) of the Act on which the learned Standing Counsel relies reads as follows :
'4(4). For the purposes of this Section
XX XX XX XX XX(d) 'value', in relation to any excisable goods,
XX XX XX XX XX(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;'
Section 3 is the charging Section. It authorises levy of excise duty on manufacture and production of goods. In the definition of 'normal price' contained in the amended Section 4, the element of sale of goods for delivery at the time and place of the removal has been maintained. The Supreme Court in the case of Union of India and Ors v. Bombay Tyre International Ltd. and etc. reported in AIR 1984 S.C. 420 held :-
'In enacting the new Section 4 in supersession of the old Section, no material departure was intended from the basic scheme for determining the value of the excisable article. The basic scheme for determination of the price in the new Section 4 is characterised by the same dichotomy as that observable in the old Section .4. It was not the intention of Parliament, when enacting the new Section 4 to create a scheme materially different from that embodied in the superseded Section 4. The object and purpose remained the same, and so did the central principle at the heart of the scheme. The new scheme was merely more comprehensive and the language employed more precise and definite. As in the old Section '4, the terms in which the value was defined remained the price charged by the assessee in the course of wholesale trade for delivery at the time and place of removal.'
In another decision of the Andhra Pradesh High Court reported in 1979 ELT (J334) [Indo-National Ltd. Nellore and Ors v. Union of India and Ors] it has been held :-
'It, therefore, follows that under the new Section 4 of the Act, it is not permissible to include in the assessable value any element of post - manufacturing costs or profits attributable to post-manufacturing operations.'
The above decisions thus reaffirm the basic nature of the excise duty. Learned Standing Counsel laid much stress on the word 'payable' occurring in Section 4(4)(d)(ii) of the Act and submitted that the duty of excise payable only should be taken into consideration. He relied on the aforesaid decision of the Supreme Court. He specifically laid stress on the observation made in paragraph 55 of the decision which is quoted below :-
'We have also been referred to Section 2(f) of the Act which defines the expression 'manufacture', and it is urged that the degree of packing to be considered for the purpose of including its cost in the 'value' of an excisable article should be spelled out from that definition. We are unable to accept the suggestion. The expression 'manufacture' is related to the taxable event and refers to a process which enters into the character of the article, while 'packing' has been defined by Section 4(4)(d)(i) in relation to the 'value' of the article.'
But this does not help the learned Standing Counsel in any way.
3. Mr. Rath cited a decision reported in 1980 ELT 768 (Tata Oil Mills Company Ltd. v. Union of India and Ors) of the Bombay High Court In that case the petitioner's case was that they were declaring the assessable vaiue of the vegetable products manufactured by them after deducting the element of duty, i.e. 5% from the price fixed by the Vegetable Oil Products Controller and then from the duty so payable, they were deducting the amount of rebate on cotton-seed oil calculated as per the percentage of cotton-seed oils. According to the petitioners, 6 paise, is the rebate given to the manufacturer because the manufacturer uses the indigenous cotton-seed oil in the manufacture of vegetable product in question, and this has been given by way of an encouragement to a manufacturer to make use of cotton-seeds in indigenous cotton-seed oil in the manufacture of vegetable product. The Court held :-
'This stand was also not taken before the Government of India when the revision application was made to it. These factors are sought to be introduced in the affidavit in rejoinder as indicated above. In this connection, on an enquiry being made during the course of the judgment, Shri Joshi pointed out that these factors are not in dispute, though they might not have been mentioned before the Excise authorities at the three stages at which the matter was geared by them. I am unable to agree that these factors were not in dispute because the impugned order passed by the Government of India in revision in terms says : 'It is not as if some duty is levied and part of it gives away as a subsidy for the use of cotton seed oil'. This observation shows that the Government did not intend to give 6 paise as a subsidy to a manufacturer merely because he was allowed to make use of indigenous cotton seed oil. Even at the stage of show cause notice, it was indicated that the method adopted by the petitioners would give them unintended benefits. Thus, the theory of giving the manufacturers a benefit of 6 paise, as suggested by Shri Joshi, is unwarranted and untenable. On the contrary, this theory introduced at the hearing before me by means of the affidavit in rejoinder and the arguments developed on those basis confuses the issue. The rebate in duty was not a general rebate but on the manufacturer satisfying certain conditions. It is one thing to say that the Government wanted to encourage the use of indigenous cotton seed oil in the manufacture of vegetable oil product, but, it is entirely a different thing that the Government intends to give encouragement to the manufacturer to make use of indigenous cotton seed oil to earn the rebate in duty. Cotton seed oil is probably cheaper and, therefore, the manufacturer was permitted to substitute cotton seed for the other oil-seed employed in the manufacture of the vegetable oil product before the exemption notification in question. Therefore, the manufacturer did not stand to lose on the use of cotton seed oil. Cotton seed oil possibly cost the manufacturer less than what he incurred for the cost of other variety of oil seeds. Assuming that I am not justified in taking into consideration this aspect of the matter, namely, that cotton seed oil was cheaper, though it was not seriously challenged by Shri Joshi when put to him nevertheless I am unable to accept Shri Joshi's submission that the exemption notification was intended to confer a certain benefit as an incentive with a view to encourage consumption of cotton seed oil. This aspect of the case is an afterthought on the part of the petitioners. Even otherwise, there is no material on record to warrant such an approach.
To sum up rebate of 6 paise in duty under Rule 8 has to be deducted from 5 per cent ad valorem duty. As indicated above, the exemption was not by way of windfall for the manufacturer but on account of the use of cotton seed oil, and if that be so, then the manufacturer could not retain 6 paise but the same had to be deducted from 49 paise in order to arrive at the actual amount of duty payable, viz. 43 paise.'
In this case the decision of the Andhra Pradesh High Court reported in 1980 ELT 210 (Andhra Pradesh Paper Mills Ltd. Rajahmundry v. Assistant Collector of Central Excise) has been distinguished on the ground that the notification in the Andhra Pradesh case which came up for consideration seems to have been issued to encourage the production and manufacture of paper as can be gathered from the opening words of paragraph 2 of the judgment. But this is not so in the present case. In the above Bombay case it was observed that the claim of the petitioner that the exemption was meant for the benefit of the manufacturer was only taken in the High Court and was not taken before the Assistant Collector, the Appellate Collector and the revisional authority. This part of the case is an after- thought on the part of the petitioner. The decision of Andhra Pradesh High Court reported in 1980 ELT 210 was only distinguished and not differed from. So this case though apparently supports to some extent the contention of the learned counsel, it does not really help him.
4. In the notification in Annexure-1 nothing has been mentioned that the benefit given thereunder is only available to those manufacturers who pass on the benefit of exemption to the buyers/consumers. In the decision of Delhi High Court in the case of Modi Rubber Ltd., Modinagar v. Union of India and Ors [1978 ELT (3127)] it has been held :-
'If the exemption notification does not contain a condition that its benefit should be passed on to the consumer, the manufacturer can retain the benefit of exemption notification.'
In the decision of our High Court reported in 1982 ELT 109 (Ori.), [Bizi Industries v. Superintendent Central Excise, Cuttack and Ors] it has been held :-
'If the exemption notification does not contain a contention that its benefit should be passed on to the customer, the assessable value cannot be determined to include in it the benefit of exemption notification on the ground that the same has not been passed on to the customer.
XX XX XX XX XXThe conditions for the availment of exemption notification should be a part of the notification, and cannot be imposed by administrative directions, guidelines and press notes.'
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 and press note. In the decision (supra) all the above aspects have been thoroughly considered and it has been held :-
'The Clause (iv) of Section 4(4)(d) merely reiterates the principle that the excise duty is leviable on the manufacturing cost and the manufacturing profits and excludes the amount of excise duty, sales tax, other taxes and the trade discount for arriving at the assessable value under Section 4. Therefore, it cannot be held that the words 'the amount of duty' occurring in Clause (ii) of the definition means only the actual amount of duty paid and not what is leviable in law.
XX XX XX XX XXIf the exemption notification does not contain a condition that its benefit should be passed on to the consumer, the manufacturer can retain the benefit of exemption.'
In the above case there were instructions issued by the Government of India under Rule 233 clarifying the exemption notification (which was applicable in that case) to the effect that in the event of manufacturer not passing on the benefit wholly or in part to the buyer, the assessable value of the goods assessed on ad valorem basis will have to be adjusted according to the formula prescribed and the duty computed on the higher assessable value so arrived at. But it was held that any subsequent instruction cannot qualify, abridge or curtail the statutory provisions. Therefore, any omission in exemption notifications issued under Rule 8 cannot be supplemented by way of instructions issued under Rule 233 of the Central Excise Rules, 1944. It was further held :
'Exemption notification issued under Rule 8 does not take away the levy of duty imposed by Section 3, but only grants exemption from levy of duty in specified circumstances and to specified extent. Therefore, it cannot be said that because of exemption levy of duty is scrapped.
XX XX XX XX XXThe object of the exemption notification is to confer a certain benefit upon the manufacturer or the buyer/consumer as the case may be, as an incentive, with a view to encourage production or consumption. But, it cannot be said that this would virtually amount to adding a part of the excise duty to the manufacturing cost and profits while arriving at the assessable value under Section 4 of the Central Excise Act.,'
5. The definition of the expression 'value' as contained in Section 4(4)(d) of the Act is in relation to any excisable goods where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. Clause (ii) thereof provides that from out of the value of the article, the amount of the duty of excise, sales-tax and other taxes, and the trade discount allowed in accordance with the normal price of the wholesale trade at the time of removal of the goods sold shall be deducted. The duty is leviable only on the manufacturing cost and manufacturing profit alone and the other expenses or costs, including post-manufacturing expenses, cannot be added/ loaded to the manufacturing cost and profit, while assessing the vajue under Section 4 of the Act. The exemption notification issued under Rule 8 does not take away the levy. It only grants exemption from the levy in specified circumstances and to the specified extent. Because of the exemption the levy of duty is not erased. The object of the notification is to confer certain benefit upon the manufacturer or the buyer/consumer through the manufacturer as the case may be. If the intention was to confer the benefit on the buyer/consumer, then the notification, no doubt, does not specifically mention so as has been done in several such notifications issued under Rule 8 of the Rules.
6. Considering the facts and circumstances of the case and the prepondering reasons stated above, we are of the view that the benefit of the notification under Annexure-1 and the subsequent notification under Annexure-II cannot be denied to the petitioner on the ground that the benefit of exemption has not been passed on by the petitioner to the buyer consumers.
7. In the result, therefore, the writ petition is allowed. There shall be no order as to costs.