K. Veeraswami, C.J.
1. The appeal is from an order of Ramprasada Rao, J. dismissing a batch of petitions under Article 226 of the Constitution. We are concerned with only one of them. The appellant questions the legal propriety of the tariff values notified under Section 3(2) of Central Excises and Salt Act, 1944, as not being in accord with Section 4. The Appellant is the Managing Director of the South India Sugar and Steels Limited, Madras, which pays every year a large amount by way of excise duty on sugar manufactured and sold by it.
2. Sugar under Item 1 of the First Schedule to the Act is chargeable to excise duty in terms of Section 3 which is the charging section. It says that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods produced or manufactured in India at the rates setforth in the First Schedule. The rates of coarse are settled every year by the relative Finance Act as indicated in column 3 of the first Item of the First Schedule. The duty is levied and collected on the manufacture of sugar ad valorem and at the rate obtaining for the specific year of charge. Sub-section (2) of Section 3 empowers the Central Government to fix, by notification in the Official Gazette, for the purpose of levying excise duty, tariff values enumerated in the First Schedule as chargeable to duty ad valorem and alter any tariff values for the time being in force. Determination of values for the purpose of duty is done under Section 4 which applies to any article chargeable to duty at the rate dependent on the value of the Article. Section 4 is as follows :--
'Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be --
(a) the wholesale cash price for which an article of the like kind and quality is sold or incapable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or (b) where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at such place, at any other place nearest thereto.'.
We are not concerned with the Explanation in the present case. This procedure envisaged by the section controls, as it seems to us, fixation by the Central Government of the tariff values under Sub-section (2); That this is so has not been disputed before us.... The contention for the appellant is that, inasmuch as the tariff values fixed by the Centra) Government for sugar and notified on September 25, 1970 and May 25, 1971, did not. conform to the provision of Section 4, they were invalid. In other words, the appellant says that the tariff values so notified were higher than what was justified by the actual realisation by his factory.
3. Dealing with that averment, the first respondent in their counter affidavit stated that, as the tariff value reflects the average realisation by sugar factories in the country during the previous month, it could be higher or lower or even at par with the price prevalent in any particular market or in any particular factory'. Sugar being a controlled commodity under the Essential Commodities Act, 1955, the Central Government has from time to time acting under the Sugar Control Order made under that Act, specified the quantum of levy sugar and the price at which the former should be sold. Elaborate procedure has been adopted by the Central Government for fixing this price. In fact, it is done by a Committee appointed by the Central Government which from time to time determines the tariff value for free Market sugar, which is guided by the price data and clearances pertaining to the previous month compiled-by the Indian Sugar Mills Association and certain other officers of the Departments. Before fixing the price, the Committee also hears the representatives of the Indian Sugar Mills Association and the National Federation of Co-operative Sugar Factories, who, while equipped with their own data explain the future trends in prices to the Committee. After referring to this matter. the counter affidavit says : --
'As the tariff value for free market sugger is reviewed every month such an elaborate procedure could have justifiably been avoided but as the Government are keen that the tariff values should be as close to the average actual all India prices as possible this laborious process is being followed by them.'.
4. It being clear from the statement in the counter affidavit that the tariff values notified under Section 3(2) of the Central Excises and Salt Act were based on the average realisation by sugar factories in the country during a given period and were approximately close to the average actual all India prices. It is pressed upon us for the appellant that such fixation of tariff values for free sugar is contrary to Section 4.
5. We are of opinion that there is force in the appellant's contention. Section 4 visualises that the wholesale price for an article of the like kind and quality shall be such wholesale cash price at which such article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable to duty from the factory or any other premises of manufacture or production, for delivery at the place of manufacture or production, or if the wholesale market does not exist for such article at such place, at the nearest place where such market exists. Where such wholesale cash price is not ascertainable, more or less the same procedure is appllied for fixing the traiff values. In other words, the contributory factors to be taken into account in fixing the tariff value are the kind and quality of the article, the price thereof ex-factory or premises of manufacture or production at which it is sold or is capable of being sold at the time of the removal of the article therefrom. Such price is for delivery at the place of manufacture or production or, if the wholesale market does not exist for the article at the factory or premises of manufacture or production, the nearest place where such market day exists. In substance, the value determined for the purpose of duty has to be the actual value and not any value arrived at as close to the average actual all India prices.
6. The notification Nos. 168/70-C.E., dated Sep. 25. 1970 and 54/8/71-CE, dated May 25,1971, which were made under Section 3(2) of the Central Excises and Salt Act fixed the tariff value at Rs. 130 and Rs. 125 respectively per quintal for sugar falling under sub-item (1) of Item 1 of the First Schedule to the Act and chargeable to duty ad valorem. The values so fixed being on the average actual all India prices basis, such tariff values are not fixed in accordance with and as directed by the provisions of Section 4, which have to be followed in fixing the tariff values to be notified under Section 3(2). These notifications cannot, therefore, afford legal basis for levy of duty under Section 3(1) on sugar, the actual price of which even at the control price under the Essential Commodities Act, 1955, varies from State to State and even place to place.
7. We, therefore, direct that the tariff value for ad valorem charge on free sugar of the appellant's factory be fixed in the light of the provisions of Section 4. On that view, W make no directions on the other prayers in the writ petition. The appellant is entitled to-his costs throughout. Counsel's fee Rs. 250.