S.S. Chadha, J.
1. This writ petition under Article 226 of the Constitution of India raises the question of scope and true interpretation of Notification No. 198/76-C.E., dated June 16, 1976 issued in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 granting excise duty relief in respect of selected commodities to the extent of 25 per cent of duty payable on goods produced in excess of production in a selected base year.
2. Indian Aluminum Company Ltd. (hereinafter referred to as the company) petitioner No. 1 is an existing company within the meaning of the Companies Act, 1956. Petitioner No. 2 is a share holder of the Company and is a citizen of India. The Company carries on the business, inter alia, of manufacturing and selling Aluminum and its allied products. For the purpose of the said business the company owns three Aluminum smelting plants at Hirakund in the State of Orissa, at Alupuram in the State of Kerala and at Belgaum in the State of Karnataka. By virtue of the Aluminum (Control) Order, 1970, promulgated under Section 3 of the Essential Commodities Act, 1955, the Central Government has been given the power to regulate the sale of Aluminum to specified persons or companies and to control and fix the sale price thereof. By reason of the orders and/or directions issued by the Central Government under the said order, the company is obliged to sell 50 per cent of its total production of Aluminum to specified customers at fixed prices (such Aluminum is hereinafter referred to as levy Aluminum). Aluminum manufactured by the company is an excisable commodity and falls under Item No. 27 of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). The dispute in this writ petition relates to the two financial year, namely, 1976-77 (1st April, 1976 to 31st March, 1977) and 1977-78 (1st April to 31st March, 1978).
3. The rate of excise duty on Aluminum is, from time to time, specified under the relevant provisions of the Act. During the financial year 1976-77 the rate of excise duty on Aluminum falling under Item No. 27 of the First Schedule to the Act commonly known as basic duty of excise was '30 per cent ad valorem plus Rs. 2,000/- per metric tonne.' By Notification No. 164/75-C.E., dated July 15, 1975 as amended by Notification No. 49/76-C.E., dated March 16, 1976 under Rule 8(1) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) the Central Government exempted Aluminum falling under the said Item No. 27 from so much of the duty of excise livable thereon as was in excess of '30 per cent ad valorem plus Rs. 600/- per metric tonnes.' This exemption was not applicable to levy Aluminum. By Notification No. 164/75-C.E., dated July 15, 1976 as amended by Notification No. 49/76-C.E. dated March 16, 1976 and further amended by Notification No. 113/77-C.E., dated June 18, 1977 under Rule 8(1), the Central Government exempted Aluminum falling under the said Item 27 from so much of the duty of excise livable thereon as was in excess of '40 per cent ad valorem plus Rs. 600/- per metric tonne, for the financial year 1977-78. This exemption was not applicable to levy Aluminum.
4. By Clause 36 of the Finance Bill, 1976, which was later replaced by Section 36 of the Finance Act, 1976, an auxiliary duty of excise equal to 20 per cent of the value of the goods as determined in accordance with the provisions of Section 4 of the Act was levied in the case, inter alia, of Aluminum. By Notification No. 113/76-C.E. dated March 16, 1976 issued under Rule 8(1) the Central Government exempted Aluminum falling under the said Item No. 27 from so much of the said auxiliary duty livable thereon as was in excess of 33-1/3 per cent of the duty livable under the Act. This exemption was not to & apply to levy Aluminum. The said auxiliary duty of excise imposed by the Finance Act, 1976 was continued by the Finance Act, 1977 (No. 11 of 1977) but was repealed with retrospective effect by the Finance (No. 2) Act, 1977 (Act 29 of 1977). By the Finance (No. 2) Act, 1977, the basic rate of excise duty applicable to Aluminum falling under the said Item No. 27 was amended so as to make the same '50% ad valorem plus Rs. 2000/- per metric tonne.'
5. At the time of presentation of the Central Budget for 1976-77, the Finance Minister of India made an announcement to the effect that the Central Government would introduce what was called a 'Production Incentive Scheme' to encourage higher industrial production by, inter alia, providing for certain reliefs in excise duty. Consequently, and with a view to give effect to the said Production Incentive Scheme, the Central Government published a Notification No. 198/76-C.E. dated June 16, 1976 (hereinafter referred to as the main notification) under Rule 8(1) by virtue of which the Central Government exempted excisable goods of the description specified in column (3) of the table annexed to the said notification and falling under such item number of the First Schedule to the Act as was specified in the corresponding entry in column (2) of the said table and cleared from one or more factories in excess of the base clearances by or on behalf of a manufacturer, from so much of the duty of excise livable thereon under the said item (read with any relevant notification under Rule 8(1) in force for the time being), as was in excess of 75 per cent of such duty, subject to the conditions mentioned in the said notification. The entry against Seriall No. 26 of the said table referred to in the main notification describes the exempted item as 'Aluminum in any crude form produced wholly out of virgin metal.' The main notification came into force on 1st July, 1976 and remained in force in the relevant financial years. Certain amendments were made in the main notification by Notification No. GSR 767(2) dated August 26, 1976, by Notification No. GSR 871(E) dated November, 1976 and by Notification No. GSR 70(E) dated February 8, 1977.
6. A trade notice No. 114/GL 30/76 dated July 1, 1976 was issued by the Board of Central Excise & Customs on behalf of the Central Government laying down the procedure for fixing the base period and the base clearance in respect of the manufacture. As there is no dispute to this notice and the fixation of base period and base clearance, I am not making a detailed reference to it. On or about January 19, 1977 the Assistant Collector, Central Excise Sambalpur fixed the base clearance for the financial year beginning April 1, 1976 and ending with March 31, 1977 at 76,690.773 M.T. Due to power cut at Belgaum plant, the company was not in a position to raise production in 1977-78 beyond the base clearance. On December 28, 1977 a decision was taken by the competent authorities that clearance from Belgaum plant will not be taken into account for the financial year 1977-78. By order dated February 22, 1978 the base clearance was re-fixed at 36,984.584 M.T. after excluding the figures of the Belgaum plant.
7. At all material times during the relevant period the company removed and/or cleared Aluminum manufactured from all its aforesaid smelting plants under the procedure laid down in Chapter VII-A of the Rules, commonly referred to as the Self Removal Procedure. The company cleared the goods during the period beginning from February 6, 1977 and ending with March 31, 1977 under the Self Removal Procedure on the basis of the concessional rate granted by the main notification as amended with regard to the exempted goods.
8. On or about 19th February, 1977 the Central Government issued a press note which was published, inter alia, in the Times of India dated February 20, 1977. The Central Government clarified in regard to the scheme under which manufacturers of specified commodities would be entitled to 25% reduction in the excise duty livable on clearance of their manufacture which were in excess of the clearances in the base period, that it is for the manufacturer to decide whether the benefit of the duty exemption earned by him should be retained by him or not. It was stated that it may be noted that in the event of the manufacturer not passing on the benefit in whole or in part to the buyer, the assessable value of the goods will have to be adjusted accordingly and the duty computed on the assessable value so adjusted. A formula was specified for working out the assessable value. After the issue of said press note the respondents took the stand that the assessable value at the time of removal of the goods has to be determined by deducting the amount of duty from the whole-sale price and thus purported to levy and/or collect and/or threatened to levy and/or collect excise duty on the exempted goods for the relevant period on the basis of the said press note ; the details of which I will refer while considering the question of relief in this writ petition.
9. Three of the questions raised in the writ petition are :
(i) Whether in the matter of interpretation and of granting relief under an excise notification issued under Rule 8, which is a quasi-judicial function, it is open to the Central Government in its administrative capacity to issue directives to various subordinate authorities exercising quasi-judicial functions, to interpret the main notification in a particular manner directed by the Central Government ?
(ii) Whether on a true interpretation of the main notification which is primarily issued for granting relief and incentive for increase in production, the benefit of the exemption under the notification must necessarily be passed on to the consumer when there is no specific condition to that effect laid down in the main notification (iii) In cases where the benefit of the relief contemplated under the notification is not passed on to the consumer, whether the assessable value duly determined at the time of manufacture and clearance of goods is required to be re-determined keeping in view the fact that ultimately the benefit under the main notification is not passed to the consumer ?
10. Identical questions relating to the interpretation of the main notification dated June 16, 1976 read with the notification dated February 8, 1977 in the light of press note dated 19th February, 1977, issued by the Central Government, came up for consideration before a Division Bench of this court in CM. Petition No. 411 of 1977, Modi Rubber Ltd. v. Board of Central Excise & Customs and Ors. - : 1978(2)ELT127(Del) . The submission of Mr. Charanjit Talwar learned counsel for the respondent is that if the petitioners do not pass on the benefit of the duty exemption to the consumers, the correct assessable value is necessary to be arrived at under Section 4 of the Act and the only reduced rate of duty is to be taken into consideration for deriving assessable value from the sale price of the goods, which is inclusive of the duty element. The correctness of the view of the Division Bench is also not accepted. The main defense in that writ petition was also that under Section 4 of the Act, the specific method of determination of assessable value for purposes of payment of Central Excise Duty provides that the assessable value has to be so assessed but the benefit of the relief has to be passed on to the consumers, that admittedly the petitioner there had not passed on any such relief either in part or in whole to the consumers and that the petitioners there would not be entitled to the benefit of the rebate as it would not reduce the price appropriately to the reduction in duty, so as to pass on the benefit of the reduction of the duty to the purchasers of the tyres and tubes there. For the reasons recorded in the judgment of the Division Bench dated February 8, 1978, with which I am in respectful agreement, it is not understandable why the benefit of the rebate in the duty is required to be passed on to the consumers and which could form the foundation of levy and/or collection of excise duty and/or rejection of the claim of the petitioners for the refund of the duty, when there is no specific condition to that effect laid down in the statutory notification. It is not open to the Board in its administrative capacity to issue, directives to various subordinate authorities exercising quasi-judicial functions to interpret excise notifications in a particular manner and to restrict relief there under. Since the impugned levy and/or collection of excise duty and/or demands in show cause notices gives effect to the direction of the Board, the same is illegal and void.
11. Mr. Talwar pleads the bar of alternative remedy available before the authorities under the Act. It is well settled that existence of an alternative remedy is not a bar to the exercise of powers under Article 226 and this court can in appropriate cases grant the relief. The main points raised in this writ petition stand decided by the judgment of the Division Bench and relate to the jurisdiction of the authorities in raising the impugned demands on the basis of the impugned press note. The rule regarding exhausting alternative remedy is purely a rule of convenience and discretion and not a rule of law debarring jurisdiction of this court.
12. One additional argument which has been addressed by Shri Charanjit Talwar, learned counsel for the respondents is the basis of assessing the value of excisable goods for purposes of charging of duty of excise. He invited my attention to Section 4(ii)(d)(2) of the Act. He contends that the value in relation to any excisable goods does not include the amount of the duty of the excise, Sales Tax and other taxes, if any, payable on such goods. He submits that the amount of duty on excise payable on the goods is only to be excluded and not by reference to the relief which has been granted. Excise duty is a duty on the manufacture of goods and is chargeable on the value of goods manufactured. It is, thereforee, necessary to determine the value of the goods manufactured. The value of the goods for purposes of excise is to take into account only the manufacturing costs and the manufacturing profit and it is not to be loaded with post-manufacturing cost or profit arising from post-manufacturing operation. In Atic Industries Ltd. v. H.H. Dave, Assistant Collector of Central Excise and Ors - : 1978(2)ELT444(SC) their lordships of the Supreme Court held :
'In the first place, as pointed out by Mathew J. in Voltas' case (supra), 'excise is a tax on the production and manufacture of goods. Section 4 of the Act, thereforee, provides that the real value should be found after deducting the selling cost and selling profit 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 post-manufacturing operation, namely, selling profit'. 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 arising from post manufacturing operation.'
It is clear from the statement of the Finance Minister and the main notification that the whole object was to encourage higher industrial production by , providing relief to the concerned manufacturers. The statutory notification does not specify in any manner as to whether the benefit of the exemption should be passed on to the consumer or not. If the object of the Government in granting an exemption is to benefit the consumer, then the Government notification should say so, as was done on earlier occasions. If the notifications does not say so, then such a condition cannot be imposed by a press note. The impugned press note is merely an administrative direction and as it affects the rate of excise duty, it is ultra-vires and void. [See Modi Rubber Ltd. v. The Board of Central Excise and Customs - : 1978(2)ELT127(Del) ]. The company is entitled to relief in respect of clearances in excess of the base clearance figures under the main notification as amended from time to time to the extent of 25% of the normal excise duty calculated under the Act and the Rules. The vexed question is whether the benefit of the main notification is also applicable to auxiliary duty of excise or not. The stand of the respondents is that the extent of exemption applicable to excess clearances in the main notification was only 25% of the effective basic duty and that the exemption did not extend to auxiliary duty for the reasons that there is no notification under Section 36 of the Finance Act, 1976 exempting the manufacturer from the auxiliary duty to the extent of exemption granted under the main notification which was issued only under Rule 8 in respect of the basic excise duty. The contention of Mr. Charanjit Talwar is that whenever the intention was to exempt a notification under Section 36(1) of the Finance Act, 1976 was issued. Reliance is placed on notification No. GSR 192(E) dated March 16, 1976 which was issued in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 read with Sub-clause 5 of the Finance Bill, 1976, by force of which the Central Government exempts Aluminum, falling under Item 27 of the First Schedule to the Act from so much of the auxiliary duty of excise livable thereon under Sub-clause (1) of Clause 36, as is in excess of thirty three and one third per cent of duty livable under the Act. Another submission of the counsel is that the exemption must be construed strictly and thus the main notification extends the relief to the basic duty of excise.
13. Section 36(1) of the Finance Act, 1976 provides that in case of goods mentioned in the First Schedule to the Act there shall be levied and collected as an auxiliary duty of excise an amount equal to twenty per cent of the value of the goods as determined in accordance with the provisions of Section 4 of the Act. This auxiliary duty of excise is in addition to any duties of excise chargeable on such goods under the Act or any other law for the time being in force. 'Auxiliary' in common parlance is understood as for augmenting a basic power, potential or ability. Auxiliary is one that functions or serves in a supplementary often subordinate position. Auxiliary duty of excise levied and collected under the Finance Act, 1976 is thus supplementary to the duties of excise chargeable on the goods under the Act. When sum total of the duty of excise chargeable on the goods is considered, then auxiliary duty of excise constitutes one of its elements. Auxiliary duty of excise cannot be apart from or distinct from duty of excise,
14. The main notification is issued in exercise of the powers conferred by Sub-rule (1) of Rule 8 exempting the excisable goods of description specified in column (3) of the Table thereto annexed and falling under such item number of the First Schedule to the Act, as are specified in the corresponding entry in column (2) of the said Table and cleared from one or more of the factories in excess of the base clearances by and on behalf of a manufacturer, from so much of the duty of excise livable thereon under the said item, as is in excess of seventy five per cent of such duty, subject to the specified conditions. Aluminum is at Seriall No. 26. Item No. of the First Schedule of the Act is given as 27(a)(i). Para 3 of the main notification reads as follows :-
'Notwithstanding the exemption granted by this notification, in respect of the excisable goods of the description specified against Seriall numbers 23, 25 and 26 of the said Table and falling respectively under Items Nos. 26(A)(1), 26(B) (1) and 27 (a) (i) of the First Schedule to the Central Excises and Salt Act, 1944 (1) of 1944 and subject to confessional rate of duty under this notification, the liability in relation to such goods, for payment of duty in full at the rate applicable but for this notification shall, for the purpose of Rule 56A of the Central Excise Rules, 1944 or adjustment of duty, be deemed to have been discharged and the manufacturer shall indicate separately in the gate pass prescribed under Rule 52A, read with Sub-rule (2) of Rule 173G, of the said rules:
(i) (a) The duty which he would have otherwise paid but for this notification, and
(b) the duty actually paid by him under this notification; and
(ii) (a) the auxiliary duty which he would have otherwise paid but for this notification, and
(b) the auxiliary duty actually paid by him under the relevant notification relating to auxiliary duty read with this notification.
Explanation.-In this clause, 'auxiliary duty' means the duty livable under Section 36 of the Finance Act, 1976 (66 of 1976).'
Inbuilt guidance is available in the main notification which makes it clear that when the Central Government issued the main notification, it intended to give the benefit of exemption to auxiliary duty of excise also. The manufacturer is required to indicate separately in the gate pass the auxiliary duty actually paid by him and the auxiliary duty which he would have otherwise paid 'but for this notification'. Intrinsic evidence is available that the main notification grants relief to the manufacturers in payment of auxiliary duty of excise as otherwise paras 3(ii) (a) and (b) of the main notification would be redundant. The Central Government makes it clear in the Explanationn that the auxiliary duty means the duty livable under Section 36 of the Finance Act, 1976. The words 'This notification' used both in paras 3 (ii) (a) and (b) above are significant and are pointer to the exemption being applicable both to the basic duty of excise livable thereon under the Act and the auxiliary duty of excise livable under Section 36 of the Finance Act, 1976. The exemption clause appearing in taxation laws should be reasonably interpreted. It should be given its full and reasonable scope and amplitude so long as violence is not done to the language used. The exemption is 'from so much of the duty of excise livable thereon' as is in excess of 75% of such duty. It would include the auxiliary duty of excise and there is nothing in the language to restrict its scope of application only to the basic duty of excise. The exemption notifica. corporation must be interpreted in a way so that the remedy provided by the legislature may be availed of by the tax-payer. The Finance Minister's statement is to the effect that the Central Government would introduce what was called a 'Production Incentive Scheme' to encourage higher industrial production by providing relief in excise duty. The main notification was to give effect to the policy statement. The relief in excise duty is intended to cover in its scope both the basic duty of excise and the auxiliary duty of excise. For these reasons, I am inclined to hold that the exemption under the main notification covered the auxiliary duty of excise livable under Section 36 of the Finance Act, 1976.
15. The notification No. C&R; 192 (E) dated 16th March, 1976 exempted Aluminum from so much of the auxiliary duty livable thereon as was in excess of 33-1/3% of the duty livable under the Act. The auxiliary duty was imposed by the Finance Act, 1976. Sub-section 5 of Section 36 extended the provisions of the Act & Rules made there under, including those relating to exemptions from duties, to the levy and collection of the auxiliary duties of excise livable under Section 36. If any exemption was to be made in respect of only the auxiliary duty of excise, then a notification had to be issued in exercise of the powers under Sub-section (5) of Section 36 read with Rule 8(1). But if the relief was to the duty of excise, then no reference need specifically be made to Sub-section (5) of Section 36. Apart from it, even if the source of power is not mentioned in the notification, it can be traced and notification upheld.
16. The writ petition succeeds with these reliefs. For the financial year 1976-77 the Superintendent, Central Excise, Hirakud relating to Hirakud Smelting Plant has issued Assessment Memoranda on the relevant R.T. 12 forms dated 10th March, 1977 and 7th April, 1977 amounting to Rs. 6,15,700.43 (annexure 'N' to the writ petition) assessing the company to excise duty on the basis of the impugned Press Note. Similarly, Superintendent, Central Excise Unit, Udyogamandal relating to the Alupuram Smelting Plant has issued Assessment Memoranda dated 9th September, 1977 amounting to Rs. 3,67,211.74 (Annexure V). Similarly, Superintendent of Central Excise MDR-Belgium relating to the Belgaum Smelting Plant has raised a demand of Rs. 1,02,006.72 (Annexure JJ). Since these demands are based on the impugned Press Note which has been held as ultra virus and void, these demands are quashed. The respondents are restrained from giving any effect to these demands. The petitioners have also paid under protest a sum of Rs. 4,26,033.78 for the year 1976-77 relating to the Belgaum Smelting Plant and a sum of Rs. 5,86,187.95 for the year 1977-78 relating to the Hirakud Smelting Plant. The applications for refund are pending. The respondents are directed to decide those applications within three months in the light of the decision in 'Modi Rubber Ltd. v. The Board of Central Excised Customs', I.L.R. 1978 2 Del and of this case and in accordance with law. The respondents have also issued show cause notices for payment of short levy of the auxiliary duty to the extent of Rs. 7,69,733.34 in respect of Alupuram Smelting Plant (Annexure 2) and of Rs. 14,15,372.82 in respect of Belgaum Smelting Plant (Annexure 00). These show cause notices are based on the stand that the appropriate rate of auxiliary duty payable on levy Aluminum remained to be 20% ad valorem and was not affected by the exemption envisaged in the main notification. In view of my findings above, these two show cause notices are quashed.
17. On the facts and circumstances of the case, I make no order as to costs,