1. The petitioner is a manufacturer of soaps among other products. The soaps manufactured by the petitioner are liable to excise duty under Tariff Item No. 15 of the First Schedule to the Central Excises and Salt Act, 1944, hereinafter referred to as 'the Act'. The listed price at which the petitioner is marketing its products is the same irrespective of the place where they are marketed. The petitioner also charges Rs. 6 per card board box from its customers towards delivery charges and the delivery charges are stated to be for transporting the goods from the petitioner's factory to the wholesale dealers' godown. The authority under the Act wanted to include this delivery charges as part of the normal price within the meaning of S. 4(1)(a) of the Act. The question that arises for consideration is as to whether this delivery charge of Rs. 6 per card board box is to be included for arriving at the assessable value or not.
2. The Authorities under the Act, including the third respondent as the appellate authority, opined that the said charges, for exclusion from the assessable value, should actually be the cost of transportation and since the delivery charges in the instant case are nothing else than equalised from freight and not the actual cost of transportation, they cannot be excluded. Attention of the third respondent was drawn to the judgment of Mohan J. in The Calcutta Chemical Co. Ltd. v. The Government of India and another, W.P. 237 of 1978, judgment dated 2nd March, 1978, 1978 ELT (J 671) wherein the learned Judge held as follows :-
"It is well settled in law that excise is on th incidence of the manufacture. It is admitted in this case that the petitioner does incur expenditure by sending the consignment and therefore, he is entitled to charge the freight. Merely because he charges a uniform rate of freight, it does not follow that should also be included as the cost price of manufacture. As rightly contended by the learned counsel for the petitioner, it is a post-manufacturing operation. In my view, there is no warrant for holding that fright should be construed as one actually incurred. Merely because freight comes to be charged when the goods leave the factory, it cannot be contended that it should go into the cost price."
The third respondent sought to get over the above dictum of this Court by pointing out that it was rendered with reference to S. 4 of the Act as it stood prior to its substitution by Act 22 of 1973 with effect from 1-19-1975.
3. A similar contention was urged before Padmanabhan J. in M/s. Dunlop India Ltd. v. The Union of India and another, W.P. 1031 etc., of 1978, judgment dated 17-12-1980. The learned Judge held that the amendment of S. 4 has not altered the situation. It is needless to point out that for the purpose of arriving at the assessable value within the meaning of S. 4 of the Act, all post-manufacturing expenses will stand excluded. It cannot be disputed that delivery charges, which are separately billed, cannot come within the incidence of manufacturing expenses.
4. The same contention between the petitioner and the authorities under the Act was agitated before the High Court of Bombay is Misc. Petn. No. 508 of 1975 and Pendse J. held that the delivery charges partake the character of post-manufacturing expenses. Reliance was placed by the learned single Judge on the ratio of the Division Bench of the High Court of Bombay in Indian Tobacco Co. Ltd. v. Union of India and others, 1979 E.L.T. 476. Delivery charge can come only under the category of marketing and distribution expenses which would ordinarily be referable to selling activity and as such they cannot be treated as part of manufacturing expenses. The judgment of Pendse J. has in fact been confirmed on appeal by a Division Bench of the High Court of Bombay in App. No. 506 of 1079. The fact that the decisions of the High Court of Bombay were rendered with reference to periods prior to the amendment of Section 4 of the Act, does not alter the situation and the relevant principles already recognised in judicial precedents do not stand altered. I am inclined to follow the ratio of the decisions of the High Court of Bombay.
5. In this view, I find that the adjudication by the authorities under the Act cannot be sustained. This obliges me to interfere in writ proceedings and accordingly the writ petition is allowed and the order of the third respondent in App. No. 1474 of 1978 dated 20-9-1978 is quashed and the authorities under the Act are directed to approve the price list filed by the petitioner on and from 5-10-1978 without including the delivery charges. There will be no order as to costs in this writ petition.