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TMI Blog1977 (9) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... s manufactured in India with effect from 1-3-1969. The petitioners will have to file according to the rules, price lists of the fertilisers, which they manufacture showing therein inter alia the assessable value of the goods manufactured by them. Their fertilisers are sold throughout India. Since the demand is all over the country, the manufactured fertilisers will have to be transported from the factory site at Visakhapatnam to all the places where there is demand. Though prior to March 1969 fertilisers were sold within the State of Andhra Pradesh at a particular price, which inter alia included the cost of freight the fertilisers were sold outside the State at the same price, they were collecting in addition a certain amount representing the higher transportation costs involved in sending the fertilisers to different places of India. This policy was, however, changed from 1-3-1969. The new method was that for the purpose of recovering expenses of freight from diverse independent purchasers throughout India, the petitioners divided the country into several regions and recovered different amounts towards freight and related charges from buyers depending upon the region in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Excise Rules). The exemption is limited to mixed fertilisers falling under Item No. 14 H.H. of the First Schedule to the Act. 5. In W.P. No. 1400/76 the fertilisers in question is Gromor NPK 14 : 35 : 14. The petitioners state in paragraph 8 of the Writ Petition that it is manufactured by mixing with the aid of power from two imported fertilisers viz., rock phosphate and nuriate of potash on which the petitioners have paid countervailing duty under the provisions of Section 2A of the Indian Tariff Act, 1934. The manufacturing process of the said fertiliser consists of treating rock phosphate with sulphuric acid which produces phosphoric acid. When such phosphoric acid is treated with ammonia, mono and di-ammonium phosphate in slurry form comes into existence. With the said slurry, nuriate of potash is added. Thereafter the said mixed fertiliser comes into existence. During the said process, a small quantity of ammonium sulphate is formed as it is mixed with the other ingredients. According to the petitioners, mono and di-ammonium phosphate in slurry form can not be used as a fertiliser for the reason that they are highly concentrated and in slurry form. The petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctured with the aid of power from two or more fertilisers. If appropriate amount of excise duty has already been paid on all the fertilisers used in the manufacture, then alone the end manufactured product will be exempted from the whole of the duty of excise leviable thereon. Why the Government of India granted this exemption is easily discernible. What is sought to be exempted is a mixed fertilisers manufactured from two or more fertilisers on all of which duty has already been paid. If excise duty is imposed on the end-product also, then it would be double taxation. That is why the Government of India desired to avoid double taxation and gave the exemption. 18. What is exempted is "mixed fertilisers" falling under Item No. 14 HH of the First Schedule to the Act. Item 14 HH refers to "Fertilisers, all sorts, but excluding natural, animal, or vegetable fertilisers when not chemically treated". It is, therefore, manifest that the notification is concerned with only 'fertilisers', and not with any other commodity. This idea is further demonstrated from the words "Manufactured.... from two or more fertilisers". So it follows that a mixed fertiliser, in order to win the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst Schedule under the head "Acids". Ammonia, as can be seen from Item 14 HH which is under the heading "Gases" is a gas. Sulphuric acid and ammonia are independent commodities which are by themselves excisable to excise duty. In contract, when we come to Item 14 HH in the First Schedule, it deals only with "fertilisers". It purports to deal with fertilisers of all sorts excluding natural, animal or vegetable fertilisers when not chemically treated. It gives a number of commodities which are treated under law as fertilisers. Entry 3 of Item 14 HH contains the words which the notification used. It deals with mixed fertilisers manufactured with the aid of power from two or more fertilisers. When the Act itself makes this distinction between fertilisers, including mixed fertilisers, on one hand and acid like sulphuric acids, gases like ammonia as pointed out and maintained. It is futile to argue that Notification No. 25/70 grants exemption to mixed fertilisers which are manufactured from two or more fertilisers and acids and gases. To say that is only to introduce something which is not in the notification. We are, therefore, of the view that Gromor NPK 14 : 35 : 14 is not within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 as described in paragraph 8 of the writ petition. The elaborate process of manufacture as described in paragraph 8 cannot be called "mixtures of fertilisers" as stated by the Explanation. The process or manufacture of NPK 14 : 35 : 14, bringing into existence several others substances, and once again utilising them in the process, treating one substance with the other, cannot be said to be `mixture of fertilisers' as postulated by the notification. So, it will have to be held that NPK 14 : 35 : 14 is not entitled to exemption under Notification No. 25/70. 23. In this view, it is not necessary to consider or express any opinion on the other contentions raised by the learned standing Counsel for the Central Government as to why this particular fertiliser is not entitled to exemption. Likewise it is also unnecessary to consider the contentions of Sri Setalvad that it is not competent to the Central Board of Revenue or to the Superintendent of Excise to issue tariff advice or to issue trade Notice and that no extraneous considerations should be taken into account. We agree with him when he said that the notification, being a part of the Act and statute, must be given its na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the value of the article. Such value, according to clause (a), is deemed to be 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 article chargeable with duty from the factory or any other premises of manufacture or production. However, if a wholesale market does not exist for the article, the wholesale cash price of the article at the nearest place where such market exists will have to be taken into account. The question now is whether freight charges, which are admittedly collected by the petitioner company at its factory gate, are part of the wholesale cash price of the fertilisers. 28. In A.K. Roy v. Voltas Ltd. - A.I.R. 1973 Supreme Court 225, the Supreme Court explained the meaning of the term "wholesale cash price". Mathew, J speaking for the court observed at page 230 after referring to Vacuum Oil Co. v. Secretary of State for India , A.I.R. 1932 P.C. 168 :- "The essence of the idea is that the purchase must be a wholesale purchase and not a retail one. In other words, the sale must be wholesale and not a retail one in order that the price realised may be ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s down that the real value of a commodity includes only the manufacturing cost and the manufacturing profit, and that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post-manufacturing operation, viz., selling profit. The decision also makes it clear that the wholesale price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involved in the transport of the articles. This enunciation of the law by the Supreme Court is a clear answer to the question as to the inclusion of freight charges in estimating the wholesale prices. Freight charges are obviously a post-manufacturing cost incurred by the manufacturer in supplying the goods to the purchaser. By no stretch of imagination could it be said that it is part of the manufacturing cost and the manufacturing profit. Freight charges has nothing to do with the manufacturing or producing cost and profit. It is clearly and definitely a post-manufacturing expenditure and is wholly outside the manufacturing cost and the manufacturing profit. 29. What was stated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrespective of the place of consumer, a uniform rate of freight charges is being included in the invoice. If the purchaser takes delivery of the fertilisers right at the factory gate of the petitioner company at Visakhapatnam even then freight charges are being collected. That means according to the learned counsel, without incurring any expenditure in this behalf the petitioner company is collecting freight charges and are not shown and treated as part of the cost price of the fertilisers but are indicated as a charge for freight and other incidental expenses. It is common ground that a uniform rate for freight and associate charges is being charged by the petitioner company, whether the consumer is in Visakhapatnam itself or in the Punjab, Haryana, or Assam we have already given a brief resume of the writ petition that from 1970 a uniform rate of freight and associate charges are being collected separately whatever be the place of destination of fertiliser. If the consumer is at Visakhapatnam the actual freight that will be incurred by the petitioner company would be lost. But if it is far way in Bombay, Punjab, Haryana or Assam it will be much more. In order to avoid complicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of freight and associate charges and dismissed in other respect. Since the parties have succeeded in part and failed in part, we direct them to bear their own costs. Advocate's fee Rs. 100 lumpsum. 36. After this Court pronounced the judgment this day Sri Anjaneyuly, the Advocate for the petitioner and Sri Subrahmanyam Reddy, Central Government Standing Counsel on behalf of the respondents orally requested. This Court to grant a certificate for leave to appeal to the Supreme Court of India against this judgment and Sri Anjaneyuly, Counsel for the petitioner sought stay of the operation of this judgment in respect of the excise duty payable on the Gromor NPK 14 : 35 : 14 and to selling agents commission on the fertilisers sold by the petitioner company, the Court made the following orders. ORDER Immediately after delivery of judgment Sri Anjaneyuly for the petitioner and Sri Subrahmanyam Reddy for the respondents sought leave for appeal to the Supreme Court. We did not entertain any doubt on any one of the points we have decided. To us the construction of the Notification No. 25 of 1970 is simple and unambiguous. Our decision about the freight charges and the sal ..... 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