1. This writ petition coming on for hearing on Monday, the 20th day of June, 1977 upon perusing the petition and the affidavit filed in support thereof the order of the High Court dated 19.2.1974 and made herein and the counter affidavit filed herein and the records relating to the order in F. 199/27/73/CX. VA dated 11.12.73 on the file of the respondent herein and comprised in the re turn of the respondent herein to the writ made by the High Court and upon hearing the arguments of Mr. V.K. Thiruvenkatachari for M/s. Subbaraya Aiyar and Padmanabhan, Advocates for the petitioner and of Mr. T. Chengalvarayan, Senior Central Government Standing Counsel on behalf of the respondent, and having stood over for consideration, till this day, the court made the following order:
This writ petition is for certiorari to quash the order of the respondent made in F. 199/27/73/CX. VA dt. 11.12.73.
The facts leading to the writ petition are as follows:
The Madras Aluminium Company, Limited, the petitioner is a company registered under the Companies Act of 1956. The aluminium produced by the company is subject to Central Excises and Salt Act of 1944 (hereinafter referred to as the act). The rate of such levy is prescribed under Item 27(a) to the First Schedule of the Act as amended by the Finance Acts and for the purpose of these proceedings, the rate was prescribed by the Finance Act 19 of 1970, the rate being ad valorem 25 per cent plus special duty under Section 33 of the Finance Act of 1970 equal to 20,perc ent of the duty chargeable i.e., an additional 5 per cent ad valorem making a total of 30 per cent.
2. By virtue of the power conferred under the Essential Commodities Act 1955, the Ministry of Petroleum and Chemicals Government of India, issued an order called the Aluminium Control Order of 1970, on 20th March, 1970. The object of the control order is to control and fix the sale price of aluminium in any form covered by the order. On 24.5.1971, the Government of India issued an amended order and a notification. Under the order S.C. 2084 'sale price' in the Control Order was redefined as follows:
'Sale price' means the ex-factory price payable to a manufacturer or producer or seller as consideration for the sale of aluminium inclusive of duties of excise and dealer's commission, but exclusive of central sales tax or local taxes, if any, and also exclusive of transportation charges or Insurance charges, if any.
3. The Government of India also issued a notification No. 53-A/71 dated 24th May 1971 exempting aluminium falling under sub-items (a) and (b) of Item 27 of the First Schedule. According to the said notification, the exemption of duty leviable for a manufacturer is the amount of duty calculated at 30 per cent of the value of Rs. 1257/- per tonne. As per Section 4(a) of the Act, the value is the wholesale cash price, for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the articles chargeable to duty from the factory. The explanation lays down that in determining the price of any article under this section no abatement or deduction shall be allowed, except in respect of trade discount and amount of duty payable at the time of the removal of the article chargeable with duty from the factory.
4. The Company claiming the exemption, made a representation on 2.9.1971 to the Superintendent of Central Excise, Mettur against the assessable value as enhanced by him. The Superintendent after considering the re-presentation made by the company issued an appealable order dated 2.2.1972 confirming the assessable value as enhanced by him. An appeal was preferred to the Appellate Collector of Central Excise, 'Madras. The Appellate Collector accepted the company's plea and by his order dated 22.9.72 allowed the appeal. The Government of India took up the matter for review of the appellate order and issued a show cause notice to the company. After its reply the matter was considered in detail and by the impugned order annulled the order of the Appellate Collector and restored the order of the Superintendent Central Excise, Mettur.
5. Mr. V.K. Thiruvenkatachari, learned Counsel for the petitioner would urge that the Government of India had erred in its interpretation of the notification dt. 24.5.71 in relation to the exemption. According to him, the interpretation placed by theGovernment runs counter to the spirit of the Act and it speaks of duty on Rs. 1,257/-. The deduction should be Rs. 377.10 and not as has been held by the Government of India.
6. Mr. T. Chengalvarayan, learned Counsel for the department takes up the stand that the sale price has been fixed under the Aluminium Control Order 1970. The Duty payable is 25 per cent plus 5 per cent and the factory eligible for exemption would be Rs. 1,437.02. The exemption will be Rs. 377.10 in which case it would be Rs. 1,059.92. It is further submitted, in the case of a factory not eligible for exemption the assessable value after deducting the duty payable from the sale price as contemplated in the explanation to Section 4-A of the Act will be Rs. 4,500/-i.e., Rs. 5,850/- minus Rs. 1,350/- while in the case of factories eligible for exemption it will be Rs. 4,790.08 viz., Rs. 5,850.00 minus Rs. 1,059.92. The extent of benefit in duty to the factoryeligible for exemption is Rs. 377.10 i.e., 30% of the value of Rs. 1,257/- as contemplated in the notification.
7. Having regard to the above contention, I think it will be highly useful to extract the very notification, which runs thus:
New Delhi, the 24th May, 1971.
S.O. In Exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955) the Central Government hereby makes the following order to amend the Aluminium (Control) Order, 1970 namely:
1. (1) The order may be called the Aluminium (Control) Amendment Order, 1971.
(2) It shall come into force at once.
2. In the Aluminium (Control) Order, 1970-
(a) in Sub-clause (2) of Clause 1 the words 'except the State of Jammu and Kashmir' shall be omitted.
(b) for Sub-clause (f) of Clause 2, the following sub-clause shall be substituted, namely:
(f) 'sale price' means the ex-factory price payable to a manufacturer or producer or dealer as consideration for the sale of aluminium inclusive of duties of excise and dealer's commission, but exclusive of central sales tax or local taxes if any and also exclusive of transportation charges or insurance charges, if any.
New Delhi the 24th May, 1971 NOTIFICATION:
S.O. In pursuance of Clause 4 of the Aluminium (Control) Order, 1970 and in supersession of the notification of the Government of India in the Ministry of Petroleum, Chemicals and Mines and Metals No. S.O. 1104, dated the 20th March, 1970, the Central Government hereby fixes the sale prices of Aluminium including its manufactures and semi-manufacturers, but excluding extrusions and foils as specified in the schedule appended to this notification.SCHEDULE
Fair selling prices for aluminium and its products excluding extrusions and foils.
NOTE: Tables 1 to 19 indicate the selling prices for aluminium ingots, wire bars, billets, properzi rods and rolled products,
I. ALUMINIUM INGOTS:
GradePrice Rs./tonneEC Grade(1)EC Grade(2) Rs. 5,187*Commercial Grade Rs. 5,161*A premium of Rs.65 will apply forpurity or 99.7% &above;______________________________________2. EC Grade wire Bar/BilletEC Grade 1 & 2 Rs. 5,447_______________________________________3. PROPERZI (Redraw Rods)EC Grade Rs. 5,850_______________________________________New Delhi the 24th May, 1971
3rd Jyaistha, 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 clearances 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 13,500 tonnes.
8. The simple question would, therefore, be:
How is exemption to be calculated ?
If a tabular statement is made as per the respective contention, it will boil down to this:________________________________________________Accord- Accord-ing to ing tothe theassessees Super-intendent________________________________________________Rs. Rs.Ex-factory price inclusiveof excise duty (per metrictonne) 5,850 5,850Ex-factory price exclusiveof excise duty (per metrictonne) 4,500 4,790.08Assessable value (per 3,243 4,790.08metric tonne)Duty (per metric tonne) 972.90 1,059.92________________________________________________
Section 3 of the Act reads:
(1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods, other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into any part of India as and at the rates set forth in the First Schedule.
(1-A) The provisions of Sub-section (1) shall apply in respect of all excisable goeds other than sale which are produced or manufactured in India by, or on behalf of, Government, as they apply in respect of goods which are not produced or manufactured by Government.
(2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levy 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 and may alter any tariff values for the time being in force.
(3) Different tariff values may be fixed for different classes of description of the same article.
9. In the instant case, the goods being aluminium, the rate as mentioned in the First Schedule was 30 per cent ad valorem. In the absence of any exemption, therefore he would pay only at the rate of 30 per cent of the value of goods. Section 4(d) of the act defines value thus:
'value' in relation to any excisable goods-
(i) Where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee.Explanation-In this sub-clause 'packing' means the wrapper, container, bobbin, pirn, spool, reel of warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound:(ii) does not include' the amount of the 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 practtice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale.
10. These provisions would mean that 30 per cent will have to be calculated excluding the duty payable. In other words, a sum of Rs. 377.10 the duty leviable on Rs. 1,257/-would have to be deducted from the full duty. In my view that is the correct interpretation. The assessable value should be fixed as upder:
Rs. P.price as per aluminiumControl Order (as inthe case properzi Re-draw Rods) 5,850 00Duty payable on priceof Rs. 4,500.00 25% B.E.D. and 20% of B.E.D.as special excise 1,350 00Less Exemption grantedas per notification No.53-A/71 dated 24.5.1971on Rs. 1,257.00 377 10_________Net duty payable Rs.1.350.00 minus Rs. 377.10 972 90_________
If it is not so interpreted as rightly con-tended by Mr. V.K. Thiruvenkatachari, the very benefit of exemption is taken away and it leads to the fixation of an arbitrary assessable value. It should not be so.
Accordingly this writ petition will stand allowed. However, there will be no order as to costs.