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TMI Blog1980 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... horities a price list as required under Rule 173-C of the rules made under the Act. It may be mentioned, by way of illustration, that according to this price-list, the estimated manufacturing cost of electric bulbs of 100 watts worked out of Rs. 0.91 per piece and that of tube-lights of 40 watts worked out to Rs. 5.38 per piece. It was claimed in a covering letter that the assessable value had been estimated on the basis of manufacturing cost by a practising Cost Accountant to which had been added an ad hoc 10% as manufacturing profit. A certificate of the Cost Accountant was also enclosed. 3. It may be mentioned here that the petitioner not only manufactured the above goods but also marketed them to a considerable extent directly. The sales were affected by the Central Marketing Division (CMD) of the petitioner to independent wholesale buyers. Such sales by the CMD were in respect of 97.5 % of the goods. The Assistant Collector of Central Excise while scrutinising the price-list filed by the petitioner came to know that the goods manufactured by the petitioner were being sold by the CMD at much higher prices. For instance the 100 watt bulbs were sold at Rs. 3.10 per piece and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise on 29-5-1975 requesting that the approval granted may be extended for the period 1975 since there had been no change in the prices subsequently. There had, however, been a change in the marketing system of the petitioner in the meantime. On 23-11-1974 the petitioner appointed by a written agreement, valid for a period of one year, M/s. Pawan Vidyut Agencies as a wholesaler. The agreement dated 23-11-1974 has since been subsequently renewed for further period of one year each till 31-12-1977. On 1-10-1975 an amendment to Section 4 of the Act modifying the definition of assessable value came into force: On 2-6-1976 the petitioner wrote to the Department seeking approval of the prices as already submitted for the period 1-2-1975 to 30-9-1975. It was claimed that the goods were being sold to CMD as well as to Pawan Vidyut Agencies at the same price and this should be taken to be the wholesale cash price and the assessable value for purposes of the Act. This was followed by further correspondence and enquiries particularly regarding the constitution and structure of the firm of Pawan Vidyut Agencies. In the course of the correspondence the petitioner clarified that it had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter deducting the cost of the selling expenses, advertisement expenses interest and freight and/or other selling incidental exepenses from the price at which the goods are sold by the petitioner through its CMD. 6. Mr. Anil Dewan, Counsel appearing for the petitioner,.raised three contentions: (i) that the Assistant Collector, Central Excise having already approved the price-list submitted by the petitioner for the period 1-2-1974 to 31-1-1975 acted without jurisdiction in revising the same and claiming additional duty on a different basis ignoring the price-list which had been approved earlier; (ii) that the respondents should have treated the Sales to Pawan Vidyut Agencies as sales to a wholesaler at the factory gate at arms' length within the meaning of the ruling in Voltas and thus accept the price-list declared by the petitioner for both periods; and (iii) that until Section 4 was amended w.e.f. 1-10-1975 the petitioner was entitled to have the assessable value determined at the wholesale cash price but after excluding any selling expenses or selling profit that may be included therein and that the respondents have erred in refusing to take into account the petitioner's plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the goods envisaged in Section 4 or were these sales liable to be ignored for arriving at the assessable value ? and (ii) Was the petitioner entitled to claim from the above, or any other figure of wholesale cash price that might be adopted any of the deductions (other than excise duty) mentioned by the petitioner in its price-lists ? 8. The court answered the first question in favour of the assessee and held that the price at which the goods were told to the selling agents at the respective packing station would be the wholesale cash price for the purposes of Section 4 prior to its amendment by Act 22 of 1973. 9. Proceeding next to consider the question whether the petitioner was entitled to claim any deduction other than trade discount and excise duty from the wholesale cash price determined as above in order to arrive at the assessable value the court came to the conclusion that the petitioner was so entitled. It was pointed out that once the cash price at the factory gate or packing station was taken into account the assessee would be entitled to claim a deduction only in respect of average selling expenses and marketing overheads but not expenses such as insurance or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich seems at first blush to run counter to the mandate of section 4 that the wholesale cash price at the factory gate less trade discount should be taken as the assessable value but for two important considerations. The first is that the duty levied under the Act is an excise duty within the meaning of Entry 45 of the Central List in the Government of India Act and is intended to be a tax on goods at the stage of manufacture or production and, therefore, as pointed out in Voltas, is a tax on the value of the goods reflecting the manufacturing cost and the manufacturing profits. It is not intended to include within the purview of the duty any selling cost and selling profit. The interpretation of the statute should, therefore, be harmonious with the scope of the legislative entry in pursuance of which it is enacted. Thus, though the language of section 4 is somewhat wide, it should be read so as to carry out, and not militate against, the basic concept of excise duty. It would be, therefore, taken as referring to the wholesale cash price at the factory gate without taking into account any part of the selling cost. The second consideration is that this is the view which appears to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions were accepted initially for the first period but not looked into by the authorities for the second period for the very simple reason that according to the authorities the wholesale cash price for the purposes of Section 4 represented the price at which the CMD sold the goods less the allowable discounts. All the authorities proceeded on the footing that no further deductions were permissible from the wholesale cash price as determined above. There was also some controversy between the parties regarding the items of discount that were allowable from the sale price of the CMD but that question is not in issue before us. The only point before us is whether the petitioner is also entitled to deduction and exclusion from the price as determined by the respondent authorities the element of selling expenses which have become a component element of that cash price. For the reasons discussed above we are of opinion that the petitioner is so entitled. In the view we have taken on this issue it is unnecessary to consider the first two contentions raised on behalf of the petitioner. The question regarding the correctness or otherwise of excluding the sales to Pawan Vidyut Agencies was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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