1. The precise question for consideration in this writ petition is how exactly deductions on retail price of patent or proprietary medicines should be made for arriving at the assessable value of the goods for levy of excise duty.
2. The petitioner is a manufacturer of proprietary medicines. Patent or proprietary medicines come under tariff item No. 14-E and they attract levy of excise duty at 12 1/2 per cent ad valorem. Under Clause 8 of the item the methodology for determination of the assessable value of the medicines has been prescribed. This has been done by means of the notification No. 161/66-C. Ex., dated 8-10-1966 as amended by notifications No. 14/68-C. Ex., dated 3-2-1968 and No. 147/70-C. Ex., dated 25-7-1970 by the Government of India, Ministry of Finance (Department of Revenue and Insurance). The notification says that the Central Government has exempted patent and proprietary medicines falling under this item from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of (i) ..., (ii) the value arrived at after allowing a discount of 25 per cent on the price specified in the price list showing the retail price referred to in the said order.
3. There are three provisos which do not require mention. But there is an explanation which certainly requires extraction. It is in the following words : --
'Explanation. - In the price specified in the price list 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.'
The petitioner contended before the Excise Authorities that in respect of the proprietary medicines prepared by him the price has been the same from the year 1956 onwards, that as such the excise content being included in the retail price of his drugs is practically nil and that in any event Clause (2) of the notification referred to above must be interpreted to mean that 25 per cent discount should be made on the price specified in the price list and not after purging the price list of the excise content therein. These contentions were not accepted by the Central Excise authorities. The stand taken by them was that in accordance with the explanation, the element of excise duty must first be deducted and only on the balance amount the deduction of 25 per cent can be allowed. It is with reference to such a stand of the Central Excise authorities the petitioner has come forward with this writ petition. Before approaching this Court, the petitioner has exhausted his remedies under the Central Excises Act. But, having failed in all the forums he has moved this court under Article 226 of the Constitution.
4. Mr. A.S. Raman learned counsel for the petitioner, states that Clause 2 of the notification does not make any reference to a piror discount being made of excise duty or element of excise duty and thereafter a discount of 25 per cent being allowed on the price specified in the price list. He further submits that the explanation, on which the respondent places reliance, cannot detract the direction contained in Clause 2 of the notification because the words used in the explanation are limited in their operation. He points out that the words used are the element of excise duty, if any, added to the price', and therefore the Department cannot proceed on the assumption that excise duty is an inherent component in the price list showing the retail price of the petitioner's products. The second submission is that inasmuch as reference is made in the explanation to the element of excise duty being added to the price of any of the medicine (underlining by me) it should be taken that the deduction of excise duty will arise only when it is separately shown as an item in the price' list and added to the retail price of the medicines. In support of his contention, the petitioner's counsel places reliance on the definition of the term 'value' occurring in Section 4(3)(d) of the Central Excises and Salt Act. That section reads as follows :
'Value in relation to any excisable goods, (i) ...
Explanation: ... (ii) does not include the amount of duty of excise sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale'.
5. The argument of Mr. Raman is that the explanation will make it clear that the excise duty can be deducted only if it is separately added as an item to the retail price of medicines and it cannot be made to suffer deduction on the basis of an assumed inclusion.
6. Mr. Chengalvarayan, learned Senior Central Government Standing Counsel, refutes the contentions of Mr. Raman and points out that having regard to the terms in which the explanation has been worded in the notification, there can be no ambiguity in the matter and the only course that has to be followed is to first eliminate the element of excise duty from the price of the medicine and thereafter allow a discount of 25 per cent on the net price arrived at after deduction of excise duty. He also submits that the words used are not excise duty but 'element of excise duty' and therefore, it is not necessary that the excise duty must be separately shown and added to the retail price of the medicine before deductions can be made on the excise duty.
7. On a consideration of the matter. I am unable to accept the contentions of the learned counsel for the petitioner. No doubt Clause (2) of the Notification merely makes reference to allowing a discount of 25 per cent on the price specified in the price list showing the retail price. However, this clause as well as Clause (1) have to be read and interpreted in the light of the explanation contained in the notification. The explanation makes it abundantly clear that in the first instance the element of excise duty has to be deducted from the price list referred to in Clause (1) or Clause (2) and only thereafter the discount of 25 percent has to be calculated. This is the only view that can be taken of the matter. If the contention of the petitioner is accepted then it will mean that in giving the 25 per cent discount the excise content will also be included for purposes of deduction. Certainly, that is not what the Legislature would have intended when they provided for a discount of 25 per cent on the price list before levy of excise duty. In fact this view fits in with the definition of the term .'value' contained in Section 4(3)(d) where it is stated that 'value' in relation to excisable goods will not include (i) excise duty, sales tax etc. and (ii) trade discount, allowed in accordance with the normal practice of the wholesale trade. No one can contend that the trade discount of 25 per cent should include amounts paid by way of excise duty, sales tax or other taxes. Therefore, I am of opinion that there is no scope at all for any controversy regarding the manner in which the deductions are to be made in pursuance of the notification in question. In that view of the matter, the respondent's, stand has to be upheld and the petitioner's contentions have to be rejected.
8. Another contention raised on behalf of the petitioner is that deduction should be made towards payment of sales tax, but the respondent has failed to make any such deduction. This contention is capable of acceptance if the petitioner has actually paid sales tax. But, it is admitted by him that sales tax has not been separetely charged. Such being the case the petitioner is not entitled to ask for deduction of sales tax not paid by him.
9. For the aforesaid reasons, the writ petition fails and accordingly will stand dismissed. But, not order as to costs.