1. The petitioner-company was incorporated in the year 1974. This was established as a joint sector limited company with 50 per cent of the shareholdings held by the Tamil Nadu Industrial Development Corporation Limited and the remaining 50 per cent being held by private individuals. The petitioner-company took out the necessary licences in form L4, etc., under the Central Excises and Salt Act, 1944, for the purpose of manufacture of cigarettes in their factory at Hosur, Dharmapuri District. According to the petitioner, the Central excise duty is leviable under the provisions of the Central Excises and Salt Act, 1944, under item 4 II and the present duty of excise on 'Duke' cigarette manufactured by the petitioner-company is a specific duty of Rs. 21 per 1,000 plus ad valorem rate of duty based on the slab in which the assessable value of cigarettes falls. Under the Act and the Rules made thereunder, the petitioner is assessable on the basis of the value of the goods. The approval of the first respondent is also to be obtained in accordance with the requirement of rules under 173C and 173CC as amended. Accordingly, the petitioner submitted its price list for the cigarettes manufactured under the brand name 'Duke' on 21st September, 1979, effective from 1st October, 1979. In that the assessable value of 'Duke' cigarettes manufactured by the petitioner was shown as Rs. 9.94 per 1,000 cigarettes. While so, the first respondent by his proceedings dated the 11th October, 1979, has given the break-up for the wholesale selling price at Rs. 49.40 per 1,000 cigarettes as follows :
The assessable value approved for 'Duke' 10s is Rs. 10.362 per 1,000 cigarettes. Therefore the break-up for the wholesale selling price of Rs. 49.40 per thousand cigarettes of 'Duke' 10s is as follows: Assessable value Rs. 10.362Post manufacturing expenses at 2.955 per cent on Rs. 49.40 1.460Ad valorem duty at 160 per cent 16.579Specific duty 21.000______49.491Rounded off to 49.40.
2. On this basis, on 11th October, 1979, itself the actual duty was made on the provisional assessment, the details of which will be set out later. Subsequent to this order, the petitioner was clearing the goods on the basis of the earlier order. Aggrieved by the order dated 11th October, 1979, the present writ petition has been filed contending as follows :
The first respondent has erred in determining the post-manufacturing expenses on the basis of the selling cost to turnover which included excise duty paid by the petitioner on tobacco cigarettes. The first respondent has further erred in calculating the assessable value by deducting post-manufacturing expenses from the selling price and then deducting excise duty leviable. If the assessable value is to be arrived at on this basis, it will come to Rs. 9.94 per thousand. Therefore the excise duty will have to-be deducted from the selling price and then post-manufacturing expenses to be added so as to arrive at the correct assessable value. If in arriving at such assessable value the turnover falls under a lower slab, the rate of duty payable will be at a rate which is applicable to that slab after deducting the post-manufacturing expenses. The first respondent appears to be of the view that a large quantum of excise duty is deducted from the cum-duty selling price for arriving at the assessable value while in fact on the basis of determined assessable value duty payable works out to a lesser amount.
3. The learned Government Pleader would contend that actually the petitioner wants a deduction for the post-manufacturing charges. This is not permissible in view of the ruling of the Supreme Court in Civil Appeal No. 2269 of 1980. Reported as Union of India v. Bombay Tyre International Lid. : 1983ECR653D(SC) .
4. In order to appreciate the controversy between the parties, it is necessary for me to extract the following statement:
DETERMINATION OF VALUE UNDER SECTION 4 OF Range: HOSUR M.O.R
THE CENTRAL EXCISES & SALT ACT, 1944. Division: I.D.O. SALEM
EFFECTIVE FROM: 1-10-1979 Collectorate: MADRAS
Name & Address of the Factory: ASIA TOBACCO Range SI. No: 51/79
COMPANY LIMITED Dn/PI No. 939/79-80
Warehouse of the Assessee: Plot No. 35, Rajaji Nagar,
Hosur-635 126, Dharmapuri District.
Central Excise Licence No: L4/l/Cig./75.
Part I: for excisable goods for sale by the assessee to buyers (not being related person)
in the course of wholesale trade, Section 4(1)(a)--main definition case.
Excisable Tariff clas- Price at which such If price in Col. 3 Normal trade dis-
goods & sification goods are ordinarily does not include the counts (not being
descrip- sold in the course cost of packing-- discounts refunda-
tion of wholesale trade -------------------- ble on any account
------------------ Nature of Cost of whatsoever)
Price Unit of Sale such pack-such ------------------
ing packing Nature Amount or
% of the
1 2 3 4 5 6 7 8
Other deductions if any Value Value as R
claimed from such price [of claimed approved E
Section 4(2) and Section 4(4)(d)] for ap- together M
--------------------------------- proval with A
Nature Extent date R
-------------------- signature K
Excise Post manu- of proper S
duties facturing officer.
9 10a 10b 11 12 13
1 2 3 4 5 6 7 8 9 10a 10b 11 12 13
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Cigare- 4.II(2) 49.50 1000 ciga- All packings Not Not ap- Not ap- Not ap- Excicse 2100 0.983 9.940 10.362
ttes rettes. which are es- (torn) plicable. plicable. plicable duty and advm. 12
'Duke'10s sential for the specific 14.910 The value as at colum
sale of pro- Post ma- (s)approved provisio-
duct, viz., nufactu- ----- ally under Rule 9B
shells,slides ring ex-35.910 of centeral Excise
& outers are penses ----- Rules, 1944 with
provided by effect from 1.10.1979.
and the costs
in the price.
WE DECLARE THAT: (i) the price shown in column 3 is the sole consideration and no other consideration flows or
willflow directly or indirectly from our buyer to us.
(ii) the particulars herein furnished are true and complete to the best of our knowledge and belief.
(iii) particulars in pro forma parts (ii) to (vii) are not applicable to us.
Asst. Collector of Central Excise,
Integrated Divisional Office, Salem.
Note: Where the value is approved is different from the value as claimed, reasons may briefly
be indicated by the officers in the 'remarks'column.
Sd/- Sd/- Sd/- Sd/-
K. Kannian Ananthasubramanian, For ASIA TOBACCO CO. LTD., Factory Manager.
Inspector of Central Excise, Superintendent of Central J. SAINATHAN
Hosur MDR. Excise, Commercial Manager.
Hosur NDR, Hosur PO, Dharmapuri ASSESSEE.
5. Therefore, the question is whether the excise duty will have to be deducted from the cum duty selling price and then the post-manufacturing expenses to be arrived at the assessable value or not. I think the stand of the petitioner is well-founded. The excise duty on the cum-duty selling price will have to be first deducted and to that undoubtedly the post-manufacturing charges can be added. It is on this basis the duty will have to be levied. Otherwise what will happen. No duty can be levied much less payable by the petitioner. I make it clear that the petitioner cannot question the applicability of the ruling of the Supreme Court. What is now agitated before me is only the method of calculation. Therefore the writ petition will stand allowed and the matter is remitted to the assessing authority for fresh assessment in the light of the observation made above, of course, after notice to the petitioner to put forth his representation either in person or through his counsel. No costs.