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TMI Blog1977 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioner in W.P. No. 3114 of 1975 is the Andhra Sugars Ltd., Tanuku. 3. Under the provisions of the Act and the rules made thereunder with effect from 1968, the Government of India introduced a procedure known as "Self Removal Procedure". Under this procedure, the manufacturers could clear the excisable goods without prior assessment by the Central Excise Officer or his counter-signature on the gate pass at the time of clearance of the goods. But, under this Scheme, there was an obligation on the manufacturers to submit to the appropriate Excise Authorities from time to time price lists in the prescribed form for their approval for the purpose of levying excise duty. Till the decision of the Supreme Court in A. K Roy v. Voltas Ltd., AIR 1973 SC 225 : [1977 E.L.T. (J 177)] Vazir Sultan Tobacco Co. Ltd., and the National Tobacco Company Ltd., were showing in their price lists the price which the wholesaler was paying to the case of both these companies, the manufacturer sells the goods to the distributor, the distributor sells the goods to the wholesaler and the wholesaler, in his turn, sells the goods to the retailer. Up to the time of the decision in Voltas case, the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutor to the manufactures 6.15% of the total turnover as marketing and distribution expenses. The Assistant Collector of Central Excise, Rajahmundry, by his order dated 20-3-1974 held that the company was not entitled for deduction of 6.15% on sale price towards marketing and distribution expenses. The Inspector of Central Excise, Biccavole, issued a demand notice for the period from Aug., 1973 to Feb., 1974. The National Tobacco Company filed Writ Petition No. 1748 of 1974 challenging this order. For the subsequent period from March, 1974 to Feb., 1975, a similar order and a similar demand notice were issued by the excise officer concerned, which were challenged in W.P. No. 2274 of 1975. The order and the demand notice for the period from 1st March to 31st Aug., 1975 were challenged in W.P No. 5156 of 1975 and the order and the supplemental demand notice for the period from Aug., 1973 to Feb. 1974 were challenged in W.P. No. 2775 of 1975. 5. In all these writ petitions filed by the National Tobacco Company Ltd., the manufacturer, prayed for the issue of writs of certiorari quashing the orders and the notices of demand basing its claim for deductions in the post- manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and not under Section 4(b). The further contention is that in view of Section 4(a) and Explanation to Section 4, as it stood at the relevant time, deductions sought for by the respective manufacturers are not permissible and that the only deductions, which are permissible, are the trade discount and excise duty from the price paid by the wholesaler to whom first sales are effected by the manufacturer. 10. Since section 4, which is the subject matter of consideration before us in the form as it stood before the substitution of new section 4 by virtue of the Amendment Act, 1973, was enacted by a post-constitution Act, it was necessary to refer to the relevant entry in the List I of Seventh Schedule of the Constitution, to appreciate the background regarding the enactment of section 4 and placing it on the statute book. Item 84 in List I i.e., Union List in the Seventh Schedule to the Constitution mentiones : "84. Duties of excise on tobacco and other goods manufactured or produced in India except - (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drug and narcotics but including medicinal and toilet preparations containing alcohol or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Brothers v. Deputy Commr., (AIR 1967 SC 1512), the Supreme Court after referring to the earlier cases, observed that these cases establish that in order to be an excise duty (a) the levy must be upon 'goods', and (b) the taxable event must be the manufacture or production of goods. Further the levy need not be imposed at the stage of production or manufacture but may be imposed later. 15. As we have observed earlier, if the machinery section in the Act seeks to bring within its scope any item of cost incurred by the manufacturer, which is not referable to production or manufacture of the goods, then it is not an excise duty, but something else altogether and therefore it is not within the purview of the excise authorities functioning under the four corners of the Act and the rules made thereunder while levying excise duty. 16. The first contention of Mr. Subrahmanya Reddy, the learned Standing Counsel for the Central Government in each of these matters before us that the case falls under S. 4 (a) and not under S. 4 (b) is correct, because each of the manufacturers before us actually sells the goods manufactured by it to a wholesaler or consumer. Again, the excise authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the dealers in large quantities Ford vehicles and all parts relating thereto. The Ford Motor Company of India (appellants) issued from time to time a price list and the terms of business were that the retail price to be charged by the distributor to the public was that stated in the price list current at the time of arrival of the vehicles in India and the price payable by the distributor to the appellants was the same price less a discount of 20 per cent. The distributor had to pay this price before obtaining delivery. Delivery was given by the appellants "free on rail" save in the case of the authorised dealers for the district of Bombay itself viz, Ford Automobiles (India) Limited - to whom delivery was made at their own warehouse in Bombay. The price mentioned in the price list was in all cases for a vehicle in running order, and the same was true of the contract between the appellants and the distributors. Each of the cars now in question arrived in India packed in a case, but incompletely assembled in this respect that the battery had to be charged and fixed, the wheels, mudguards, and running boards to be fixed, and other Items of work done to put the vehicle in running o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which customs duty has been charged appears therefore to be a wholesale cash price, less trade discount, for which the goods under assessment were in fact sold at the time and place of importation." 20. It was also pointed out by the Privy Council that the goods under assessment may under Cl. (a) of S. 30 be considered as members of their own class even although at the time and place of importation there are no other members. The price obtained for them may correctly represent the price obtainable for goods of the like kind and quality at the time and place of importation. **** 21. Thus, in the context of S. 4 of the Central Excises and Salt Act. 1944 and especially with reference to S. 4 (a), the Supreme Court had now laid down in Voltas case - 1978 E.L.T. (J 177), that the real value should be found after deducting the selling cost and selling profits and that the real value can include only the manufacturing cost and the manufacturing profit. If in certain case, there are costs necessarily incidental to manufacturing process, they can be rightly said to form part of the manufacturing costs and thus they are also to be included in the real value including only the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l.C.I. and Atul to their dealers. After referring to the Voltas Case, Bhagwati, J., speaking for the Court, in para 10 at page 967 of the report, pointed out : "The wholesale dealings between the appellants and I.C.I. and Atul were purely commercial dealing at arms length and the price charged by the appellants for sales in wholesale made to I.C.I. and Atul less trade discount of 18 per cent was, therefore clearly "wholesale cash price" within the meaning of S. 4 (a) and it did not make any difference that the wholesale clearings of the appellants were confined exclusively to I C.l. and Atul and apart from these two, no independent buyers could purchase the dye-stuffs in wholesale from the appellants." **** 23. Mr. Subrahmanya Reddy for the appellants in the writ appeals and the respondents in the writ petitions with which we are concerned in these cases, has very strongly relied upon the conclusion of the Supreme Court in Atic Industries v. Asst. Collector, Central Excise (supra) as set out in para 13 of the report and contended that, in the instant case, the price charged by the manufacturers to the first wholesalers, be they referred as distributors or wholesalers, is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing costs even in the price charged by the manufacturer to the first wholesaler with whom an agreement was entered into at arms length is permitted, the concept of excise duty being a duty payable on the manufacturer or production of goods, would be violated. We are, therefore, unable to accept this contention of Mr. Subrahmanya Reddy. 24. Mr. Subrahmanya Reddy has very strongly relied upon the decision of a Division Bench of the Gujarat High Court consisting of J.B. Mehta, Acting Chief Justice and M.P. Thakkar J., in Golden Tobacco Co. Ltd., Bombay v. Union of India - 1977 E.L.T. (J 113). The petitioner in that case sought to deduct from the price charged by them to the first Wholesaler 3% of the additional deduction as sought under the Chartered Accountant's certificate by way of marketing expenses and for consequential refund for the period between Dec. 1, 1972 to May 15, 1974. The petitioners had two cigarette factories at Bombay and Baroda. The petitioners had stated that they followed a uniform pattern for marketing goods as they sold the products manufactured by them to distributors who, in their turn, sold the same to the wholesale dealers. The contention of the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1974 (Guj)] referred to the decisions of the Karnataka High Court, the Bombay High Court and the Kerala High Court, but differed from the views taken by those High Courts. 27. For the reasons stated above, we differ from the view taken by the Gujarat High Court and accept the view taken by the Division Bench of this Court consisting of Sambasiva Rao., J., and Punnayya, J., in Coramandel Fertilisers Ltd. v. Union of India (W.P. Nos. 1400 to 1403 of 1976, decided on 24-9-1976).It may be pointed out that the view which we are taking is the view which was taken by the Kerala High Court in Madras Rubber Factory v. Assistant Collector , Central Excise - 1977 E.L.T. (J 85), by the Bombay High Court in Union of India v. Mansigka Industries Private Limited, 1976 Tax LR 1971, by the Karnataka High Court in Union of India v. I.T.C. Ltd., 1976 Tax LR 2003, by the Madhya Pradesh High Court in Universal Cables v. Union of India, 1977 E.L.T. (J 92), and by the Allahabad High Court in I.T.C. Ltd. v. Union of India, 1977 E.L.T. (J 28). It may also be pointed out, as indicated by the Allahabad High Court in I.T.C. Limited v. Union of India (Supra), That the Madras High Court has also taken the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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