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Government of India Vs. Madras Aluminium Co. Ltd., Coimbatore - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtChennai High Court
Decided On
Case NumberWrit Appeal 545 of 1977 and Writ Petition Nos. 1302 and 4147 of 1976 and 1530 and 4151 of 1978
Judge
Reported in1981(8)ELT892(Mad)
ActsCentral Excise Rules, 1944 - Rules 8, 8(1), 9, 10, 173B, 173B(2) and 173C; Central Excise Act, 1944 - Sections 3, 3(1), 3(2), 4, 4(1), 4(4) and 37(2)
AppellantGovernment of India
RespondentMadras Aluminium Co. Ltd., Coimbatore
Appellant AdvocateK.N. Balasubramaniam, Adv.
Respondent AdvocateV.K.T. Chari and ;S.V. Subramaniam, Advs.
Cases ReferredModi Rubber Ltd. v. Union of India
Excerpt:
excise - exemption - rules 8, 8 (1), 9, 10, 173b, 173b (2) and 173c of central excise rules, 1944 and sections 3, 3 (1), 3 (2), 4, 4 (1), 4 (4) and 37 (2) of central excise act, 1944 - matter pertaining to calculation of exemption of duty leviable under notification dated 24.05.1971 - deduction to be made straightaway from excise duty leviable under act and not by enhancing assessable value and making deduction therefrom - for applying notification total duty leviable on goods to be calculated and deduct therefrom duty on value of rs. 1257 - method adopted by petitioners gave due effect to notification which provided for deduction of portion of excise duty from total liability for excise duty. - - (i) satisfied in this case has not been disputed. (ii) is also satisfied in this case......order1. since the points involved in the writ appeal and the writ petitions are the same, they are dealt with together. it is sufficient to refer to the facts in w.a. no. 545 of 1977 for the purpose of apprehending the common questions involved in all these cases. 2. the madras aluminium co. ltd., hereinafter referred to as the company, filed a price list for approval before the superintendent of central excise, mettur, m.o.r. for aluminium in various forms produced by them. the said price list was prepared taking into account the notification dated 24th may, 1971, hereinafter referred to as the exemption notification, issued by the ministry of finance (department of revenue and insurance), government of india, granting exemption in respect of certain varieties of aluminium from a portion.....
Judgment:
ORDER

1. Since the points involved in the writ appeal and the writ petitions are the same, they are dealt with together. It is sufficient to refer to the facts in W.A. No. 545 of 1977 for the purpose of apprehending the common questions involved in all these cases.

2. The Madras Aluminium Co. Ltd., hereinafter referred to as the Company, filed a price list for approval before the Superintendent of Central Excise, Mettur, M.O.R. for aluminium in various forms produced by them. The said price list was prepared taking into account the Notification dated 24th May, 1971, hereinafter referred to as the Exemption notification, issued by the Ministry of Finance (Department of Revenue and Insurance), Government of India, granting exemption in respect of certain varieties of aluminium from a portion of excise duty payable thereon. The Superintendent of Central Excise, Mettur before approving the price list enhanced the assessable value of the goods as shown by the company giving effect to his own interpretation of the provisions of the said Notification. Subsequently he passed an adjudication order dated 2-2-1972, in which he justified and confirmed the enhancement made by him in the assessable value. The Company filed an appeal before the Appellate Collector of Central Excise against the order of the Superintendent. He allowed the appeal holding that the said Notification was meant to benefit certain manufacturers, that there was no warrant for including the financial benefit arising from the exemption for getting more duty from the company thereby neutralising to some extent the benefit of the exemption notification and that the decisions of the Madras High Court in M/s. Madras Rubber Factory case and the judgment of the Patna High Court in Bata Shoe Co. case, applied to the case before him. Subsequently the Central Government issued a show cause notice as to why the order of the Appellate Collector should not be set aside and the order of the Superintendent of Central Excise dated 2-2-1972, should not be restored. The Company replied to the show cause notice by their letter dated 2-9-1973, contending that the order of the Appellate Collector could not be revised merely on the ground that the judgments of the Madras High Court and the Patna High Court referred to by him had been appealed against, that the method of working out the exemption to the Superintendent of Central Excise is erroneous, that the spirit of the said exemption notification was to give relief to small producers of aluminium and the relief so granted cannot be taken away or made illusory by an erroneous interpretation of the notification. After giving a personal hearing to the Company, the Central Government held that the Madras and Patna decisions are not applicable to the case, that the Appellate Collector's order varying the Superintendent's order was not legally correct and, therefore, that order has to be set aside and the order of the Superintendent of Central Excise restored. The Company challenged the validity of the order dated 11-12-1975 passed by the Central Government in W.P. 303 of 1974. The said writ petition was allowed by Mohan J. on 8-6-1977 upholding the order passed by the Appellate Collector. W.A. 545 of 1977 has been filed by the Central Government against the judgment rendered by Mohan J. The Company also has filed W.P. No. 1302 of 1976 questioning the collection of excess regulatory duty after 21-1-1972 and 13-3-1972 as fresh sale prices were fixed by the Government.

Messrs. Tata Oil Mills Ltd. hereinafter referred to as the Mills, have also filed similar writ petitions Nos. 4147 of 1976, 1530 and 4151 of 1978, questioning the fixation of higher assessable value by the Superintendent of Central Excise applying the similar exemption notification No. 25 of 1975 dated 1-3-1975 which exempted certain varieties of soaps from a portion of the excise duty leviable thereon.

3. In all the above cases, the Central Government has taken the plea that the relevant notifications had not been properly understood by the parties, that on a proper construction of the said notifications the sale price referred to in S. 4 of the Central Excises and Salt Act, had been correctly worked out by the Superintendent of Central Excise and that the interpretation of the notification suggested by the parties will result in the grant of unintended benefit to the manufacturers. Therefore, the main question that comes up for consideration before us is as to what is the scope of the two exemption notifications referred to above.

4. The exemption notification relating to aluminium products is set out below :

Government of India

Ministry of Finance (Department of Revenue and Insurance)

New Delhi, the 24th May, 1971 ------------------------------ 3rd Jaishta, 1893 (Saka)

Notification (Central Excise)

In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts aluminium falling under sub-items (a) and (b) of item No. 27 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty leviable thereon as is equivalent to the duty calculated on a value of one thousand two hundred and fifty seven rupees per tonne, subject to the conditions that -

(i) such aluminium is manufactured by its manufacturer from bauxite or from alumina or from both; and

(ii) total clearance of all aluminium falling under item No. 27 of the said First Schedule by the said manufacturer or by any person on behalf of the said manufacturer from one or more factories during the financial year preceding the financial year in which assessment is made did not exceed 13500 tonnes.

(No. 53-A/71)

Sd/- S. K. Ghosal,

Under Secretary to the Government of India

[Notification No. 53-A/71-F No. 44/45/70 CX 4.]'

Under the Notification the Central Government has exempted aluminum falling under sub-items (a) and (b) of item 27 of the First Schedule to the Central Excises and Salt Act, hereinafter referred to as the Act, from so much of the duty leviable thereon as is equivalent to the duty calculated on a value of one thousand two hundred and fifty seven rupees per tonne subject to the condition that (i) such aluminium is manufactured by its manufacturer from bauxite or from alumina or from both; and (ii) total clearance of all aluminium falling under item No. 27 of the said First Schedule by the said manufacturer or by any person on behalf of the said manufacturer from one or more factories during the financial year preceding the financial year in which assessment is made did not exceed 13500 tonnes. That condition No. (i) satisfied in this case has not been disputed. Even the limitation of 13500 tonnes referred to in condition No. (ii) is also satisfied in this case. The only controversy between the parties is as to how the exemption of so much of the duty leviable thereon as is equivalent to the duty calculated on the value of Rs. 1257 per tonne is to be worked out. According to the company the exemption granted under the Notification is for the benefit of the manufacturers and not for the consumers and it is a pro tanto gift of excise duty to the manufacturer for reasons considered goods by the Government and, therefore, the deduction to be made straightaway from the excise duty leviable under the Act and not by enhancing the assessable value and making a deduction therefrom. According to the Revenue, however, the notification only gives a general deduction from the excise duty actually payable by the manufacturer and not from the excise duty generally leviable in respect of the goods.

5. To appreciate the rival contentions, it is necessary to refer to the relevant statutory provisions. S. 3(1) of the Central Excises and Salt Act, 1944, is the charging section and it levies 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. Sub-section (2) enables the Central Government to fix, for the purpose of levying the said duties, tariff values of any articles enumerated, either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem. Under sub-section (3) different tariff values may be fixed for different classes or descriptions of the same excisable goods or for excisable goods of the same class or description produced or manufactured by different classes of buyers. S. 4 deals with valuation of excisable goods, for the purpose of charging of duty of excise. S. 4(1) says that where the duty of excise is chargeable on any excisable goods with reference to value, such value shall be deemed to be (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyer is not a related person and the price is the sole consideration for the sale, and where the normal price of such goods is not ascertainable for the reason that each goods are not sold or for any other reasons the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. Sub-section (2) of that section provides that where in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. Sub-section (3) says that S. 4 shall not apply in respect of any excisable goods for which tariff value has been fixed under sub-section (2) of S. 3. Sub-section (4)(d) of S. 4 defines 'value' in relation to any excisable goods as not including the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and the trade discount, if any, allowed in accordance with the normal practice of the wholesale trade at the time of the removal in respect of the goods sold or contracted for sale. S. 37(2)(xvii) enables the Central Government to exempt any goods from the whole or any part of the duty imposed by the Act, Rule 8 of the Central Excise Rules, 1944, enables the Central Government by a Notification in the Official Gazette from time to time to exempt any excisable goods from the whole or any part of duty leviable on such goods. Under Rule 173-B every assessee has to file with the proper officer for approval a list in such form as the Collector may direct showing the full description of the excisable goods produced or manufactured, the goods intended to be removed from the factory and the goods already deposited or likely to be deposited from time to time in the warehouse, the item No. of the First Schedule to the Act under which such goods fall, the rate of duty leviable on such goods and such other particulars as the Collector may direct. Sub-rule (2) of Rule 173-B provides that on approval of that list filed by the assessee, the assessee shall determine the duty payable on the goods intended to be removed in accordance with such list. Rule 173-C provides that the assessee has to file a price list of the goods assessable ad valorem and on approval of that price list by the proper Officer, the duty payable on the goods shall be determined by the assessee himself on the basis of the price list filed by him. In this case the list of goods contemplated by Rule 173-B, and the price list contemplated by Rule 173-C have all been approved by the proper Officer and the goods are being removed from the warehouses by following the self-assessment procedure contemplated in Rule 173-C.

6. There is no dispute that the respondents in the writ appeal are manufacturers of aluminium on which duty is leviable under item 27(a) of the Central Excise Tariff. Under the Aluminium Control Order the sale price of aluminium is fixed by the Government of India from time to time. Such a sale price is inclusive of the basis and special excise duties chargeable on the said goods. The Government of India by their Notification No. 53/A/21 dated 24-5-1971 granted exemption to certain manufacturers from payment of so much of excise duty leviable thereon as is equivalent to the duty calculated on a value of Rs. 1257 per metric tonne subject to certain conditions. There is no dispute that the appellants became entitled to avail such an exemption in terms of the said notification. Subsequently on 13-12-1971, the Government of India imposed a regulatory duty at the rate of 25 per cent B.E.D. on aluminium. The sale price fixed earlier on 24-5-1971 under the Aluminium Control Order did not include the regulatory duty. But the Government of India informed the company by their letter dated 16-12-1971 to provisionally add the regulatory duty to the sale price then in force pending refixation of selling price to include the regulatory duty. On 21-2-1972, the Government of India issued a revised Notification refining the sale price of aluminium. The regulatory duty was increased from 25 per cent to 33-1/3 per cent of B.E.D. with effect from 17-3-1972. The said sale price fixed under the notification dated 21-1-1972, did not include the increased regulatory duty. The Government of India informed the appellant by their letter dated 25-3-1972, to provisionally add the increased regulatory duty to the sale price fixed by the Government of India under the Notification dated 21-1-1972. The notification fixing the regulatory duty was issued on 2-5-1972. Thus for the period from 13-12-1971 to 20-1-1972 and from 17-3-1972 to 1-5-1972, the sale price fixed under the aluminium control order did not include the regulatory duty or the increased regulatory duty. But all the same the appellant added to the sale price the regulatory duty and increased regulatory duty and collected the same from the customers. The price shown in the invoices did not take into account the exemption in duty availed of by them but included the excess amount charged by them. These facts are not in dispute. According to the respondents, the price shown in the invoices should be taken as the wholesale cash price for purpose of assessment under S. 4 of the Act and that the regulatory duty collected by them from the customers in full in payable to the Government. A notice was issue to the company to show cause why a sum of Rs. 2,27,587.92 which represents the difference between the regulatory duty collected from the customers which is payable to the Government and what was actually paid to the Government should not be collected under Rule 10 of the Central Excise Rules. The company made its representations. After cinsidering these representations the appellant demanded on 29-5-1973 the difference in duty for the period 13-12-1971 to 20-1-1972 and 17-3-1972 to 1-5-1972. The respondent preferred an appeal to the Appellate Collector of Central Excise who by his order dated 27-3-1974 rejected the appeal observing that it could never be the intention of the Government to allow the assessee to collect from the customers regulatory duty and appropriate a portion to themselves. A revision to the Central Government having been dismissed on 12-11-1975, the company filed W.P. No. 1302 of 1974 for quashing the said revisional order dated 12-11-1975 on the ground that the regulatory duty is part of the excise duty, and therefore, the exemption notification applies not only to basic excise duty but also to the regulatory duty which is levied and collected as part of excise duty. Thus the two questions that arise for consideration in these cases are - (1) whether the exemption notification applies to the regulatory duty as well and (2) how the exemption granted under the notification is to be worked out.

7. On the first question, the learned counsel for the appellant relies on the decision in C.I.T. v. K. Srinivasan, 83 ITR 346, wherein the Supreme Court has ruled that the term 'income-tax' occurring in S. 2 of the Finance Act, 1964 included surcharge, special surcharge and additional surcharge wherever provided as they form part of the income tax. Under the Finance Act of 1963 income-tax was increased by a special surcharge and additional surcharge while super tax was increased by a surcharge and a special surcharge in the manner provided in the said Act. But sub-section (2) of S. 2 of the Finance Act, 1964 did not mention any of these surcharges. The assessee, whose total income included Rs. 42,900 under the head 'salaries' contended that the salary portion of his total income was chargeable only to income-tax and super tax and not to any of the surcharges. The Supreme Court held that in assessing income-tax and super tax, on the salary received by the assessee in accordance with Section 2(2) of the Finance Act of 1964 not merely the income-tax and super tax at the rates applicable under the Finance Act, 1963, but the surcharges prescribed thereunder had to be charged. The above decision of the Supreme Court clearly supports the company's stand that the regulatory duty which is in the form of surcharge on the excise duty should be treated as part of the excise duty, and, therefore, the 'duty leviable thereon' referred to in the Notification dated 24-5-1971, took within it the regulatory duty and the additional regulatory duty leviable in respect of aluminium products manufactured. Therefore, the contention of the State that the exemption notification will apply only to the basic duty payable by the manufacturers and not to the regulatory duty or increased regulatory duty cannot be accepted.

8. Coming to the next question, the exemption notification dated 24-5-1971, exempts aluminium falling under sub-items (a) and (b) of Item 27 of the First Schedule to the Act from as much as the duty leviable thereon as is equivalent to the duty calculated on a value of Rs. 1,257 per tonne subject to certain conditions. There is no dispute that the Company has fulfilled these conditions and the exemption under the notification is available to the company. A plain reading of the notification contemplates exemption being granted to the company on much of duty calculated on the value of Rs. 1257 per tonne. It is in this basis the company calculated the exemption and paid the duty. The method of calculation adopted by the appellant and company in W.A. No. 545 of 1977 was as follows :-

Appellant Company1. Ex-factory price inclusiveof duty 5850 58502. Duty 1060 13503. Ex-factory price exclusiveof Duty 4790 45004. Assessable value (Rs. 4500-1257) 4790 32435. Duty at 30% 1437 972.906. Exemption 377 nil7. Duty payable 1060 972.90

The question is which of the two calculations accords with the true intent and object of the exemption notification.

9. The ex-factory price which is the price fixed under the Aluminium Control Order is Rs. 5850. Since the ex-factory price includes excise duty also, excise duty has to be separated to find out the assessable value, we have held already, duty includes regulatory duty of 25 per cent and the increased regulatory duty of 20 per cent thereof. Thus overall duty is 30 per cent. The assessable value can be determined by multiplying ex-factory price fixed under the Aluminium Control Order by 100/130. This gives us a sum of Rs. 4800 and the duty payable thereon comes to Rs. 1350. The exemption provided in the notification is in respect of the duty payable on Rs. 1257. This works 1257 x 30 out to --------- = Rs. 377.10. After excluding the duty exempted 100 the net duty payable by the Company is Rs. 1350 - 377.10 = Rs. 972.90. This is the calculation made by the company. The calculation made by the Revenue (appellant) is somewhat confusing and is a round about method. Taking the ex-factory price at the same figure of Rs. 5850, instead of deducting the excise duty leviable thereon, the Revenue has deducted the actual duty that is payable by the company on their calculation and determined the ex-factory price exclusive of duty at Rs. 4790. Then the duty payable on Rs. 4790 is calculated at Rs. 1437 and then the duty payable on Rs. 1257 is deducted to find out the duty payable by the Company. According to the calculation of the company the ultimate duty payable comes to Rs. 972.90 and according to the calculation made by the Revenue the excise duty payable is Rs. 1060.

10. We are of the view that the method of calculation of the excise duty payable by the Company adopted by the Revenue is faulty in that the exemption provision is sought to be applied twice, once at the stage of the exclusion of duty from the ex-factory price and another at the stage of calculating the amount of excise duty to the exempted. Once excise duty is added to the assessable value of the goods, the actual assessable value of the goods can be determined by excluding the duty payable on the assessable value by multiplying the total value by the figure 100/130 and from the assessable value, we have to deduct Rs. 1257 and determine the duty for the balance with a view to give effect to the Notification. Without following this simple procedure, the Revenue has adopted a cumbersome method merely because it brings in a higher duty. For determining the assessable value, the duty leviable has been deducted. But the excise duty payable by the company can be determined only after applying the exemption notification. If the exemption notification has been applied and the excise duty payable by the company is determined, then there is no necessity to separate the excise duty from the ex-factory price to determine the assessable value. The notification says that out of the duty leviable on the goods, the duty on a value of Rs. 1257 has to be exempted. For applying the notification we must find out the total duty leviable on the goods (and not on the party) and deduct therefrom the duty on the value of Rs. 1257. The Revenue has adopted a method of calculation which does not fit in with the language of the notification. In this view of the matter, we hold that the method of calculation adopted by the company brings out the true spirit and intent of the notification.

11. Similarly Tata Oil Mills Co. Ltd. who are the petitioners in W.P. 4147 of 1976 and 1530 and 4151 of 1978 are questioning the method of calculation of the duty exempted under notification No. 25, dated 1-3-1975. The Mills have calculated the duty payable by them as follows after applying the from so much of the duty leviable thereon as is equivalent to the amount of duty calculated at the rate of three rupees and fifty paise per metric tonne of such soap for each additional percentage point increase in the use of indigenous rice bran oil which is in excess of 25 per cent of the total oils used in the manufacture of such soap :

List price Rs. 4,992.72 per M.T.Less discount 3% 150.36----------Price including excise duty of 5% 4,849.36100Assessable value x ----- 4,618.26105Excise duty price x 5/105 231.00Actual user of indigenous rice bran oil 82.33%Deduct 25.00%----------Excess user 58.33%Amount of duty exempted 58.33 x Rs. 3.50 = 204.15Balance of excise duty payable 26.77%

However, the Revenue has adopted a similar circutious and faulty method as they have done in the case of the notification dated 24-5-1971 relating to aluminium products. The method adopted by the revenue overlooks the obvious facts that the concessional rate of duty on soaps is intended for the benefits of the manufacturers who use indigenous rice bran oil as against imported edible oils for the manufacture of soaps and the manufacturer is entitled to collect the full duty from the buyer buy pay less to the Government and retain the duty of Rs. 3.50 par metric tonne of excess percentage of rice bran oil over 25 per cent of the oils used. The exemption notification on soaps and the one relating to aluminium, both contemplate the benefit of exemption of duty being granted to the manufacturers and that benefit cannot be taken away or whittled down by an erroneous interpretation of the notification or by an erroneous of calculation of the duty exempted. The notifications cannot be understood as has been done by the Revenue as conferring benefit on the consumers rather than on the manufacturers.

12. A somewhat similar question arose for consideration before a Division Bench of the Delhi High Court in Modi Rubber Ltd. v. Union of India, 1978 E.L.T. (J 127). There, the court was concerned with the scope of notification GSR 409(C), dated 16th June 1976, issued under rule 8(1) giving 25 per cent exemption from the payment of excise duty on the articles listed in the table at the end of the said notification. Tyres and tubes were items 18 and 19 in the said schedule. The exemption provided in the notification was to the following effect. In respect of the goods listed in the table at the end of the notification 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 leviable thereon as in excess of 75 per cent of such duty. The base clearance is the clearance of excisable goods, which is liable to payment of full excise duty. The exemption of 25 per cent is available only on that clearance which is in excess of the base clearance during the basic period. If the base clearance is to be found out with reference to the value of the goods as if to be done in respect of tyres and tubes manufactured by the manufacturer, then the method set out in paragraph 2(1)(b) of the notification is to be followed which is as follows :-

'For the purpose of determining the basic period, where the clearance of all specified goods are compared in terms of value as specified in column (4) of the said table, such value shall be value as determined under S. 4 of the Central Excises and Salt Act, 1944..... As adjusted with reference to the average index number of wholesale prices in India for manufacturers.'

There also the excise authorities had taken the view that since the benefit of exemption had to go to the consumer, the manufacturer was not entitled to the benefit of adjusting the actual money value of the goods in terms of the normal wholesale price with the index number for wholesale price manufactures current for the relevant years in India. The stand of the excise authorities was questioned in a writ petition before the High Court. The manufacturer contended that the benefit of paragraph 2(1)(b) of the notification requiring the actual value of the goods manufactured by the manufacturer under S. 4 modified by adjustment with the index under the wholesale price manufactures for the relevant years under paragraph 2(2)(b) was not in consonance with the object of the notification. The contention of the excise authorities was that the petitioner would be entitled to the benefit of the duty rebate only if it reduces the price proportionate to the reduction in duty so as to pass on the benefit of reduction of duty to the purchasers of tyres and tubes. The Division Bench after referring to the various provisions of the Central Excises and Salt Act, observed -

'When we turn to the First Schedule column 3, we find that the duty is imposed either ad valorem or according to the weight or measurement. It could also be according to the number of the goods. Reading the Act with the schedule, it would appear that while the duty is imposed by the statute on the goods as they re produced the assessment of the question of the duty is made in the schedule. The value of the goods is not the only criterion for such assessment. Even the value may be either the normal wholesale price or a fixed tariff value and different tariff value may be fixed for different articles as is made clear by S. 3 itself. S. 3. itself does not refer to the clearance of the goods, from the factory. The time and the manner of payment of duty is stated by rule 9 and it is there that it is stated that no excisable goods shall be removed from the factory or godown of a factory until excise duty thereon has been paid in such a manner as is prescribed in the Rules. The contention of the respondents that the effective rate of duty is chargeable only on value of the goods at the time of the clearance of the goods from the factory does not, therefore, fix the point of the incident of the duty. It only fixes the point of the assessment of the duty. It is true that Section 4 of the Act refers to the value of the goods which is the normal selling price of the goods and ordinarily the producer of the goods would add the excise duty leviable on the goods to his cost of production and the margin of profit before fixing tariff wholesale price of the goods. But Section 4 is not the charging section. That is Section 3. Section 4. is the manner of the levy of duty according to selling price. It is true that in assessing the duty the Government would take into consideration either the selling price or the weight or the volume or the number or the tariff value of the goods. Nevertheless, this does not mean that the excise duty is imposed on the selling price of the goods. This is demonstrated by the fact that it may be imposed only on the weight or volume or number irrespective of either the selling price or the tariff value.

Further, it is quite open to the Government to grant an 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. For instance, notification GSR 1089, dated 29th April, 1969 expressly stated that the benefit of the exemption was to be available only to those manufacturers who produce the proof to the satisfaction of the Collector that such benefit has been passed on by them to whom they have sold the goods. Such a condition has to be a part of the exemption notification. For the notification is 'law'. But after enacting the law, such a condition cannot be imposed by administrative directions, guidelines or press note. These administrative acts cannot go contrary to the statutory notification.'

On the question as to how the exemption provided for the in the notification has to be worked out, the Bench pointed out :

'In order to determine the excise duty leviable on the items produced by the petitioner, it is necessary first to determine the assessable value under S. 4 of the Act. It is only after the assessable value is determined that the excise duty leviable thereon is ascertained. It is erroneous to suggest, as is done by the Government, that assessable value will have to be again determined after taking into consideration the relief and exemption granted under the notification, dated 16th June, 1976. It is neither intended by the notification nor is it practicable that the assessable value should be determined after giving effect to the relief and the exemption contemplated under the said notification. This is effect should be the stand of the Government by its insistence that it is only when the benefit of the rebate in duty is passed on by the manufacturer to the consumers that the manufacturer becomes entitled to the benefit of exemption from duty. In other words, if the price to the customer inclusive of duty remains the same and the duty leviable thereon is calculated and thereafter the relief permissible under the notification is reduced, as the Government intends to do, then according to the suggestion in the show cause notices, the assessable value would thereafter 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. Having arrived at this assessable value, if the duty is then to be calculated it would not be the same as before and in this manner the calculation would keep on changing. Such a procedure would lead to an absurd situation.'

The learned Judges also pointed out that any other interpretation of the notification would lead to discrimination in that the benefit of rebate of duty is required to be passed on to be consumers only in cases where the duty is to be calculated on the basis of the assessable value determined under S. 4 of the Act and not in cases where the duty is calculated on the basis of fixed tariff values or weight or number. With respect, we are inclined to agree with the view taken in that case.

13. The plain wording of the notifications indicates that from the excise duty leviable certain are to be made. We do not see how the notification could be interpreted as applicable only in cases where the excise duty is reduced from the wholesale price and the benefit of exemption is passed on to the consumers. As already pointed out the number in which the exemption notification is interpreted by the excise authorities involves the application of the notification twice, while the method adopted by the petitioners in the writ petitioners is a simple method giving due effect to the notification which provides for deduction of the portion of the excise duty from the total liability for excise duty.

14. In this view of the matter, the writ appeal is dismissed and the writ petitions are allowed and the rule nisi issued in each of the writ petitions is made absolute. There will be no order as to costs.


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