P.B. Mukharji, C.J.
1. This is an appeal by Data Shoe Company Private Limited from the judgment and order of P.K. Banerjee J. dated the September 25, 1970, in Civil Revision Case No. 297(W) of 1970.
2. The grounds taken in the appeal are that the learned Judge cried in interpretation of the intent and scope of Section 4 and the Explanation thereto of the Central Excises and Salt Act of 1944 and the rules made thereunder. The essence of that allegation is that the learned Judge failed to appreciate that under the provisions of Section 4 of the Central Excises and Salt: Act, the 'value' of any article must first be determined after deducting the trade discount allowance and the amount of duty payable from the wholesale cash price. It is also alleged that the learned Judge was in error in so far as Item No. 36 of the First Schedule to the Central Excises and Salt Act, 1944 indicates that duty will be paid ad valorem on footwear and therefore it was imperative first to arrive at the 'value' in terms and in the manner prescribed under Section 4 of the Act and then only could it be seen whether such value was below Rs. 5 so as to qualify for the exemption under the notification.
3. There is also a cross-objection by the respondents - the Collector of Central Excise, the Superintendent of Central Excise and the Union of India. In the cross-objection, the grounds are that the learned Judge was wrong in holding that the demands for payment of duty made in the notice annexed to the writ petition were barred by lapse of time and were not recoverable and in holding that the period of limitation was three months. It is their contention that the learned Judge should have held that the demands were made all within time and he ought not to have directed the issue of the writs in the nature of mandamus and certiorari.
4. There are three notifications which are material and relevant. One is G.S.R. 360, dated the 28th February, 1965, whereby under Rule 8 (1) of the Central Excise Rules, 1944, the Central Government exempted excisable goods specified in column (3) of the Table annexed thereto and falling under the items specified in the corresponding entry in column (2) of the said Table of the First Schedule to the Central Excises and Salt Act, 1944, from so much of the duty of excise leviable thereon under the said Act as in excess of the duty specified and subject to the conditions laid down in the corresponding entries in columns (4) and (5) of the said Table. Serial No. 13 and Item No. 36 describe the exemption relating to 'Footwear and parts thereof'. Their duty was said to be nil. In other words, there was no excise duty on footwear and parts thereof by this notification. In the second notification G S. R. 804, dated the 26th May, 1967, in exercise of the powers conferred by Rule 8(1) of the Excise Rules 1944, the Central Government made the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 24/65-Central Excises, dated the 28th February, 1965, to the effect that 'in the said notification, in the Table, the entries against Serial No. 13 relating to Item No. 36 shall be omitted'. That means that the full excise duty was re-imposed again on 'Footwear and parts thereof'.
5. Now, the third notification is dated the 24th July, 1967 - which lays that 'in exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts, with effect from the 26 May, 1967, footwear falling under Item No 36 of the First Schedule to the 'Central Excises and Salt Act, 1944, of which the value does not exceed Rs. 5 00 per pair, from the whole of the duty of excise leviable thereon'. It is on this notification that really the question in the appeal arises.
6. What the meaning of the words - 'the value does not exceed Rs. 5'00 per pair' - is the question raised. How is such a 'value' to be determined Whether Section 4 of the Central Excises and Salt Act, 1944 which is a method followed for 'determination of value for the purpose of duty' should be applicable to the present cases or whether the 'value' in the notification would include excise duty because it is not the value 'for the purposes of duty'.
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15. In Bata Shoe Company Private Limited v. The Collector of Central Excise, Patna and Ors. (Civil Writ Jurisdiction. Case No. 1330 of 1970), a Bench of the Patna High Court had occasion to decide the same question and came to a conclusion other than and different from that arrived by P.K. Banerjee J.P.K. Banerjee He's judgment was given earlier and the Patna High Court judgment was given later, so that the Patna High Court, had the benefit to have that alternative view of this High Court.
The Patna High Court came to the view : -
'The reason is that the liability to excise duty is not determined upon the wholesale price. It is determined upon the assessable value, and the wholesale price is only a basis for arriving at the assessable value, which had to be worked out in accordance with a formula embodied in section 4 of the Act. That formula does not stand amended or abrogated by, the notification of the 24th July, 1967. Nor does the formula contemplate a dissection of the constituents of the wholesale price before allowing the deductions contemplated in the Explanation to section 4. I further think that in proceeding to apply that formula for arriving at the assessable value of a particular category of footwar, it would not be right to start with any presumption that it has qualified for exemption by reason of its assessable value. Rather one must first determine its assessable value and. then see whether it falls within the exemption or not. In other words, while dealing with the question of deduction of the duty element from the wholesale price as contemplated by the Explanation to section 4, that factor cannot ' be left out of consideration on the ground that particular variety of footwar may ultimately be found to have qualified for exemption from excise duty in terms of the said notification. In other words, the duty element has got to be deducted from the wholesale price regardless of any consideration whether in doing so the assessable value will fall within the exemption limit or not.'.
But, then, that argument does not give proper weight to the words 'the amount of duty payable at the time of the removal of the article chargeable with duty' which occurs in the Explanation to section 4. The contention on behalf of the Government is that there can be no deduction of duty element unless it is found that the duty is payable on article in question. But that argument did not find favour with the Patna High Court The Patna High Court on the other hand emphasised the words 'chargeable with duty' in the Explanation to section 4 and construed the words 'the amount of duty payable at the time of the removal of the article', as merely descriptive of the true nature of the duty and the stage when it is payable. On the other hand, P.K. Banerjee J. has held that the import of the words 'the amount of duty payable at the time of the removal of the article chargeable with duty from the factory', which occurs in the Explanation to section 4, is that unless the duty is paid in respect of any article, no duty is admissible.
16. As at present advised, I am not convinced that the Patna view that 'the amount of duty payable at the time of the removal of the article' is merely descriptive of the true nature of the duty and at the stage in which it is payable, is correct.
17. Now, at this stage it is necessary to refer to the notification of the 24th July, 1967, which says : -
'In exercise of the powers conferred by sub-ruled) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts, with effect from the 26th May, 1967, footwear falling under Item No. 36 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) of which the value does not exceed Rs. 5.00 par pair, from the whole of the duty of excise leviable thereon.'
Now, this is clearly an exemption granted. For purposes of exemption I am not convinced that the same principle for 'determination of value for the purposes of duty' as laid down in section 4 should be applied. It is not that 'value' within the meaning of section 4 of the Act. It is that 'value' within the meaning of Rule 8 of the Central Excise Rules, 1944, which gives the Central Government the power by notification to exempt 'any excisable goods from the whole or any part of duty leviable on such goods'. 'This being a Rule, it has the effect of a statute by virtue of section 38 of the Act which says that all such Rules and notifications upon being made and published in the Official Gazette shall have the effect as if enacted in this Act.
18. The words, therefore, in Rule 8 are material and should in our view be decisive. What is exempted is the 'excisable goods'. What is exempted is 'the whole or any part of duty leviable on such goods'. Unless the duty is levied, the exemption cannot be granted. Therefore, I am of the opinion that after the levy of the duty if the value of the goods is below Rs. 5.00 then alone it is exempted. To take the view which the Patna High Court does, 'the liability to excise duty is not to be determined upon the wholesale cash price', is to apply the same meaning to the word 'value' in the notification of exemption dated 24th July. 1967, and to the 'value' in section 4 of the Act and in the Explanation thereto. As at present advised, I do not see any warrant for it All that section 4 of the Act does is to lay down the formula or the principle for 'determination of value for the purposes of duty'. It does not lay down any principle or formula for the determination of the value for exemption from duty. Somehow or other, the position of the appellants is that they claiming exemption upon exemption. They are allowing duty to be exempted once from the value of the goods for the determination of value for the purposes of duty and again they are deducting the value of the duty for the purposes of exemption from duty. I think it is an untenable position.
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21. Therefore, I have come to the conclusion which I am setting in a few words. Construing section 4 of the Act it means 'determination of a value for the purposes of duty'. It does not mean determination of value for the purposes of 'exemption from duty'. Therefore, the 'value' in section 4 is different from the 'value' in the notification for exemption Besides, section 3 of the Act lays down that 'there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods'. The word 'prescribed' means prescribed by the Rules made under the Act within the meaning of section 2(g) of the Act. Under Rule 8 of the Central Excise Rules, exemption is granted in respect of excisable goods from the whole or any part of duty leviable on such goods. That means that the goods should be both 'excisable goods' and be 'leviable' with the duty. Therefore, the 'value' for purposes of exemption from duty is the real actual value after the duty has been paid and calculated and not the deemed value of section 4 of the Act 'for the purposes of duty'. Rule 8 of the Central Excise Rules is a part of the Act by virtue of section 38 of the Central Excises and Salt Act, 1944.
22. In that view of the matter, I dismiss this appeal. The order of the learned Judge is upheld in its entirety including his observations on matters covered by the cross-objection.
23. The cross-objection is dismissed.
24. There will be no order as to costs in this appeal and the cross objection.
25. There will be stay of operation of this judgment and the interim order granted by the Appeal Court will continue until the 31st January, 1972.