1996 (5) TMI 86 - SC - Central Excise

Scope and effect of the Explanation to Section 4(4)((d)(ii) of the Central Excises and Salt Act, 1944 Held that - A clear distinction has been drawn in the section between the amount of duty leviable and the amount of duty payable. Value will not include the amount of duty of excise which is payable. This amount has to be calculated on the basis of the duty levied under the Act and also after taking into account any relief from duty given by any order or notification issued by the Government. The resultant figure is the amount of duty of excise which is payable and deductible from the wholesale price. There is nothing in the Act to suggest that the value has to be calculated by deducting in the first place the tax leviable under the Act, from the wholesale price. Thereafter, a second valuation on the basis of the notification will have to be made. The Explanation clearly states that the duty of excise computed with reference to the prescribed rate in the Schedule will have to be reduced so as to give full and complete effect to such exemption . If the amount of duty calculated according to the Schedule became smaller by virtue of the notification, then the only way to give full and complete effect to the notification is to take only the smaller amount in reckoning for the purpose of determination of value in Section 4(4)(d)(ii). Whatever may have been the position before the amendment of the Act, in view of the Explanation to clause (d) (ii), the value in Section 4(4)(d)(ii) can no longer be computed by reference only to the Act and the Schedule without taking into consideration the exemption notification.

Issues Involved:
1. Interpretation of the Explanation to Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944.
2. Determination of assessable value of goods for excise duty purposes.
3. Impact of exemption notifications on the calculation of excise duty.

Detailed Analysis:

1. Interpretation of the Explanation to Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944:
The Supreme Court addressed the scope and effect of the Explanation to Section 4(4)(d)(ii) added by the Finance Act, 1982. The Explanation was introduced to clarify the amount of duty to be deducted from the wholesale price to arrive at the assessable value of goods. The Court noted that the legislative intent was clear in making the Explanation effective retrospectively from 1-10-1975. The Explanation specifies that the amount of excise duty payable on any excisable goods shall include the effective duty of excise payable under the Act and other Central Acts, reduced by any exemption notifications.

2. Determination of Assessable Value of Goods for Excise Duty Purposes:
The Court emphasized that the determination of the assessable value must take into account the effective duty payable after considering any exemption notifications. The assessable value cannot be computed solely based on the rates specified in the Schedule without factoring in the exemptions. The Court rejected the appellant's contention that the assessable value should be determined first and then the notification applied. The Court held that the "value" under Section 4(4)(d)(ii) must exclude only the amount of duty actually payable, not the hypothetical figure based on the Schedule rates alone.

3. Impact of Exemption Notifications on the Calculation of Excise Duty:
The Court examined the language of various exemption notifications, which provided relief from "so much of the duty of excise leviable thereon as is in excess of" a specified amount. The Court clarified that the duty payable on goods must be the actual amount after applying the exemption, not the full amount leviable under the Act. The Court stated that the notification's effect must be fully and completely given, meaning the duty amount must be reduced as per the exemption before determining the assessable value. The Court concluded that the amendments to Section 4, along with the Explanation, integrated the effect of exemption notifications into the statute, altering the previous method of calculation.

Conclusion:
The Supreme Court affirmed the judgment under appeal, holding that the assessable value of goods for excise duty purposes must consider the effective duty payable after applying any exemption notifications. The Court dismissed the appeals and upheld the legislative changes brought by the Explanation to Section 4(4)(d)(ii), which clarified the calculation of excise duty and assessable value. There was no order as to costs.

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