M.N. Chandurkar, C.J.
1. The appellant-company, who is the write petitioner, is a manufacturer of certain ointments which are sold by it at retail prices at Rs. 4.50, Rs. 3.37 and Rs. 3.00. These are ointments for skin troubles, which admittedly are patent and proprietary medicines as defined under Entry 14-E of the First Schedule to the Central Excises and Salt Act, 1944. Admittedly, these products were subjected to excise duty only in 1961. It is not now in dispute that even after the excise duty came to be levied for the first time since 1961, the medicinal products are sold by the Company at the same old price. In other words, the excise duty paid by the Company is on the footing that the prices of the different sizes of tubes are Rs. 4.50, Rs. 3.37 and Rs. 3.00 respectively.
2. A Notification came to be issued on 8th October, 1966, being Notification No. 161/66, dated 8th October, 1966 in exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944. By this notification the patent or proprietary medicines falling under Item 14-E of the First Schedule to the Central Excises and Salt Act, 1944, hereafter referred to as the Act, were exempted from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis indicated in Clause (i) and (ii) of the Notification. Clauses (i) and (ii) along with the relevant Explanation read as follows :-
'(i) the value arrived at after allowing a discount of 10 per cent on the prices specified in the price list showing the wholesale prices referred to in the Drugs Prices (Display and Control) Order, 1966, issued under Section 3 of the Essential Commodities Act, 1955 (10 of 1955), or
(ii) the value arrived at after allowing a discount of 25 per cent on the price specified in the price list showing the retail prices referred to in the said Order .... ..... ....
Explanation. - In the prices specified in the price lists referred to above, the element of excise duty, if any, added to the price of any of the medicines shall be deducted before allowing the discount.'
It is common ground that the case of the appellant is governed by Clause (ii). It is also common ground that having regard to the provision made in Clause (ii) for the purposes of assessable value, a discount of 25 per cent of the price specified in the price list showing the retail prices, is to be determined after excluding the excise duty if the excise duty is included in the price. The effect of this is that if the price list shows Rs. 100, as the retail price. then the assessable value for the purposes of excise duty will be Rs. 100 minus Rs. 25, that is, Rs. 75 if Rs. 100 does no include an element of excise duty.
3. Now according to the appellant, it had not added any amount by way of excise duty to the price which it was charging the retail consumer and, therefore, the company was entitled to deduct a discount of 25 per cent from Rs. 4.50, Rs. 3.37 and Rs. 3.00 respectively. The contention of the department, however, was that in the price list theses prices have been shown by the appellant as including the excise duty and therefore, for the purposes of ascertaining the 25 per cent discount, the excise duty will have to be deducted from the retail prices shown in the price list with the result that when 25 per cent of the discount was to be given the prices, according to the Department, should be Rs. 3.19, Rs. 2.39 and Rs. 2.13 respectively.
4. The Assistant Collector of Central Excise, having rejected the contention of the appellant that the 25 per cent discount must be determined on the basis of the retail prices shown in the price list, the appellant-company had preferred and appeal which was unsuccessful and the revision filed by the Company therefrom also met with the same fate. The Company then filed the Writ petition in this Court. The learned Single Judge, who heard the writ petition, took the view that since the Explanation made it abundantly clear that in the first instance the element of excise duty had to be deducted from the price list referred to in the Clause (i) or Clause (ii) and only thereafter the discount of 25 per cent had to be calculated, if the appellant's contentions were accepted, it would mean that the appellant who is being given a 25 per cent discount will have the benefit of the excise content also and that this was not contemplated by the notification. The learned Judge, therefore dismissed the writ petition.
5. This appeal is now filed against the said order. Mr. A. S. Raman, learned counsel, appearing for the appellant, had reiterated before us the same contentions which he had canvassed before the learned Judge. According to the learned counsel on the admitted fact that from the price at which the ointments were being sold prior to 1961, and after 1961, when the excise duty was levied for the first time, it is not possible to say that any element of excise duty has been added to the price of the medicinal ointment. Therefore, according to the learned counsel, no deduction was permissible from the price of the respective tubes towards the excise duty for purposes of determining the 25 per cent discount contemplated by Clause (ii).
6. Mr. Somasundaram, on behalf of the department have vehemently contended that on the admission of the Company, the prices which it has displayed in the price list are inclusive of excise duty. Therefore, according to the learned counsel, if the prices of Rs. 4.50, Rs. 3.37 and Rs. 3.00 respectively contained an element of excise duty, then that element has to be excluded for the purposes of computation of 25 per cent discount. The learned counsel, however, did not dispute the fact that when excise duty was charged to the Company, the assessable value was taken at Rs. 4.50, Rs. 3.37 and Rs. 3.00 respectively. Now this admission, in our view, is destructive of the contention raised on behalf of the department. If the department was charging excise duty on the footing that the prices shown in the price list were to be treated as the assessable value, it is not open to the department to contend that there is an element of excise duty included in the price displayed in the price list. If this contention is accepted, it will mean that the department has been recovering the excise duty on excise duty which forms a part of the price amount. On the admitted position that the company did not change the price which it was charging to its retail consumer prior to 1961, it was clear that there was no element of excise duty added to the price after the excise duty came to be levied in 1961. The fact that in the price list, the price was stated to be inclusive of the excise duty did not necessarily mean that any particular amount was added to the original prices so as to make a provision for the additional burden of the excise duty. We must remember the fact that the Explanation will come into the picture only where the element of excise duty if any' is added to the price of any of the medicines. The department has not been able to show and indeed it is impossible for them to show that any element of excise duty has been added to the price of any medicines. The very fact that the price of the medicines continues to be the same as it was before the excise duty was levied, clearly indicates that no element of excise duty is added to the price of the medicinal ointment.
7. In our view, the stand taken by the department, is wholly unsustainable. The appellant is, therefore' entitled to a deduction of 25 per cent of the price specified in the price list for the purposes of levy of excise duty in accordance with the Notification dated 8th October, 1966.
8. The other point, as to whether the sales tax is to be excluded for the purpose of discount, which was argued before the learned single Judge, has not been argued before us, by the appellant. Hence, we are not interfering with the finding of the learned Judge with regard to this point.
9. The departmental authorities will now determine, if necessary, the exact amount of excise duty payable on the footing that 25 per cent discount has to be deducted out of the price shown in the price list.
10. Accordingly, the writ appeal is allowed to the extent indicated above, with costs, Rs. 500.