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TMI Blog1979 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... he depots the stock at the said biding price. The depots in their turn sell to the dealers or consumers. 2. The question agitated in this petition is regarding the levy of excise duty on the articles produced and sold by the petitioner. In brief, the excise duty was sought to be levied on the value of the goods calculated after taking into account not only the post-manufacturing profit but also the post-manufacturing cost. Tbe post-manufacturing costs and expenses taken into account comprise, as indicated, such items as freight transportation charges, interest charges, travelling expenses of agents, insurance etc. The petitioner has 32 depots throughout the country. There are no factory gate sales but the sales ate only through depots to dealers and consumers. The dealer is entitled to 7 1/2% commission from the consumer. Section 3 of the Central Excises and Salt Act, 1944 (referred to for convenience, where necessary, as the Act) provides for the levy of excise duty on excisable goods produced or manufactured in India at the rates set forth in the I Schedule. The Schedule I classifies the commodities and fixes the rates based on the number, area, length, quantity or value. For i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the case. The petitioner was directed to file the declaration in Form No. 7 instead of in Form No. 5. The writ petition is to quash Exts. P2, P2(a), P2(b) and P2(c) as illegal and without jurisdiction. 4. Sections 3 and 4 of the Central Excises and Salt Act as they stood prior to the amendment by Act 22 of 1973, read as follows : ***** After the amendment by Act 22 of 1973, the Sections stand thus : ***** 5. The controversy agitated in this writ petition turns on the scope and significance of the amendment, and how far, if any, it has been effected a change in the law as expounded by judicial decisions prior to the amending Act of 1973. 6. The gist of the argument is that the nature of excise duty is well settled by judicial decisions as a duty on manufacture or production of the goods. Therefore it is said, that post-manufacturing expenses and post-manufacturing cost cannot be taken into account for purposes of excise duty, and if they are, the levy cannot pass as excise duty. 7. The concept of excise duty has been the subject matter of innumerable decisions. The fountain source of these has been the pronouncement of the Federal Court in In re: C.P. Motor Spir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Section 4 would have to be read down to square with that the impost sanctioned by Section 3 and with the legislative powder under Entry 84 of List I of Schedule 7 of the Constitution. 13. Petitioner's counsel further highlighted this aspect of the borderline between excise duty and sales tax, by reference to a decision of the Federal Court, another of the Privy Council, and a third, of the Supreme Court. We proceed to examine those cases. ***** 16. We then turn to the Supreme Court's pronouncement in Tata Iron Steel Co., Ltd.'s case (AIR 1958 SC 452). That related to the provisions of the Bihar Sales Tax Act of 1947 passed under the provisions of the Government of India Act, 1935. The Court stated : "(10), The vires of Section 4(1) read with Section 2(g), second proviso, is also questioned on the ground that it is in reality not a tax on the sale of goods but is in substance a duty of excise within the meaning of Entry 45 in List I of the Seventh Schedule to the Government of India Act, 1935, with respect to which the Provincial Legislature could not, under Section 100 of that Act, make any law. Our attention is drawn to Cl. (ii) of the second proviso which contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, it is permissible and possible to levy a duty of excise on the value of the goods as determined by Section 4. It was pointed out that the criterion for the levy under Section 4(1)(a) was the "normal price in the course of wholesale trade for delivery at the time and place of removal where the buyer is not related personally". It is the case of the petitioner that this Section would not apply to it, as it has no factory gate sale. That is quite apart from its contention that the Section itself is ultra vires. The Central Government Pleader also placed reliance in Section 4(1)(b) where a power is given to determine the value of the goods in such manner as may be prescribed. But neither this power nor the power to determine tariffs as provided in the First Schedule to the Act, and as relied on the Central Government Pleader, would carry with it a power to cross the frontiers of the Levy sanctioned by Section 3 of the Act. Both by reason of the legislative entry-Entry 84 of List I and by reason of the express provision of Section 3, the power is only to levy a duty of excise, as explained by the Supreme Court in Volta's case [A.I R. 1973 S.C. 225 = 1977 E.L.T. (J 177)], Atic Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ordinarily sold to buyers in the course of wholesale trade. It found that there was no force in the contention that Section 4(2) provides for the only deduction that had to be made in assessing the value of the goods; and that other post-manufacturing charges could be included. Counsel also drew our attention to the judgment of the Madras High Court in Writ Petition No. 4497 of 1976 [1979 (4) E.L.T. (J 117)]. There again the contention that post-manufacturing charges will have to be included, was rejected. It was observed that excise duty was one on production and manufacture of the goods and therefore post-manufacturing expenses on profits must excluded from consideration in determining the wholesale value of the excisable goods. 20. Attention was also called to a judgment of the Allahabad High Court in Civil Misc. Writ No. 179 of 1976 [l977 E.L.T.(J 1)]. That was concerned with the question of sale to a related person. Strictly speaking, it has no application to the case before us. 21. The Central Government Pleader strongly urged that even on the argument of counsel for the appellant, we would not be justified in holding the assessment to be unjustified and wrong. The com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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