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TMI Blog1996 (5) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods became more than 60.00 per pair because of inclusion of excise duty. If that cannot be done, there is no question of deducting any duty payable on the goods manufactured by the assessee. The conundrum spoken of by Mr. Shanti Bhushan does not exist. Once the principle underlying the mechanism of valuation of excisable goods is borne in mind, this becomes a straightforward case. No intriguing conundrum perplexes our mind. We can easily behold what lies behind the assessee s scheme. Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ree items of which the wholesale price (after trade discount etc.) was Rs. 68.00, Rs. 70.00 or Rs. 72.00. The controversy is restricted to the items in the second category, where the wholesale price after trade discount etc. was in the range of Rs. 62.00, Rs. 64.00 or Rs. 66.00. In these cases, if the excise duty element was taken away, the value will become Rs. 60.00 or less. Applying rules of valuation laid down in Section 4 of the Act, no duty was payable even on shoes under this category. 5.Mr. Shanti Bhushan has contended that if excise duty is payable on these shoes, then the duty element has to be deducted from the wholesale price in order to ascertain the assessable value under Section 4. Once excise duty at the rate of 10% is taken out from the wholesale price of the shoes falling under the disputed category, the assessable value would come to less than Rs. 60.00 and the benefit of exemption notification cannot be denied to the manufacturer in these cases. 6.We are unable to uphold this contention because the normal price charged by the manufacturer at the time and place of removal of goods to the wholesaler is treated by the Act to be the value of the goods. Sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price is not inclusive of any duty payable on the goods, then no question of deduction of any duty for determination of value will arise. Sub-clause (ii) of clause (d) specifically states that what will not be included in the value "is the amount of duty of excise,...... if any, payable on such goods". The phrase "if any" signifies that if no duty is payable, nothing will be deducted from the wholesale price. It is only when excise duty is actually payable that the duty element can be excluded from the wholesale price. Sabyasachi Mukharjee, J. (as his Lordship then was) pointed out in the case of Hindustan Polymers v. Collector of Central Excise - 1989 (43) E.L.T. 165 (SC) = (1989) 4 SCC 323 that the two sub-clauses of Section 4(4)(d) dealt with abatements or deductions in respect of actual burdens, either by way of an expenditure of discount, borne by the assessee. If the assessee has not allowed any trade discount, he cannot ask for deduction of the same from his price. If he does not have to pay any tax as a matter of fact, he cannot ask for it to be deducted from the wholesale price for calculating the value of the goods. In such a case, the normal price, that is the wholesal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of estimated excise duty payable? If so, what were the values on which the manufacturer estimated the amounts at the duties payable? For example, if Rs. 62.00 is the price, the manufacturer will have to explain by giving the breakup, how was this price fixed. If 10% was the rate of duty and footwear valued upto Rs. 60.00 per pair was exempt from duty, Rs. 6 could not be added to the value for fixation of the price. If Rs. 66.00 is an ex-duty price, then duty has not been included in the price. In such a situation, no question of any deduction of duty from the wholesale price under Section 4(4)(d)(ii) could arise. 12.The construction suggested by Mr. Shanti Bhushan will also defeat the purpose of the exemption notification. Exemption from duty has been given to footwear valued at Rs. 60.00 or less per pair. Excise duty is usually passed on to the consumer by including the duty in the price of the goods. The obvious intention behind the notification was to give relief to the consumers who could not afford to buy higher priced footwear. If the argument on behalf of the manufacturer is upheld, he will be entitled to sell footwear at a price of more than Rs. 60.00 per pair and yet wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 or Rs. 66.00, per pair, then these prices were not inclusive of any tax. In such a situation, provisions of Section 4(4)(d)(ii) are not attracted at all. The value of the goods shall be deemed to be the normal price of the goods under Section 4(1) of the Act (Rs. 62.00 or Rs. 64.00 or Rs. 66.00 as the case may be). 14.Unless it is shown by the manufacturer that the price of the goods, includes an amount of excise duty payable by him, no question of exclusion of the duty element from the price for determination of value under Section 4(4)(d)(ii) will arise. What the manufacturer has really done in the instant case is to increase the profit element in the wholesale price. In the chart given by Mr. Shanti Bhushan, in the second category the wholesale price of goods after discounts etc. has been shown to be Rs. 62.00, Rs. 64.00 and Rs. 66.00 inclusive of duty at 10%. These are self-contradictory figures. If the corresponding ex-duty figures come to Rs. 60.00 or less, then no excise duty was payable on the goods. If the ex-duty price of the footwear manufactured by the Company fell short of Rs. 60.00 per pair, then by virtue of the exemption notification no duty was payable on the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not payable. 17.We are unable to uphold the contention of Mr. Shanti Bhushan that the Explanation to Section 4 (4) (d) (ii) comes into operation only when there is a variation in the rate of duty and not otherwise. The duty of excise under Schedule (I) of the Act was imposable on various bases. It could be imposed unitwise as in T.I. 33AA (Parts of Wireless Receiving Sets) or lengthwise as in T.I. 37 (Cinematograph Films) or on the basis of weight as in the case of T.I. 25 (Iron in any Crude Form). The duty has to be calculated at the rates prescribed in the Schedule on the basis of number of units, length or weight or some other basis, as laid down in the Schedule. When the duty is imposed ad valorem, calculation of duty at the prescribed rate will have to be made on the basis of the value of the goods. Section 4 deals with value of excisable goods where the duty of excise is chargeable with reference to value. It has nothing to do with the rate of duty. Sub-clause (ii) of sub-section (d) of Section 4 lays down the `value' will not include the amount of duty of excise, if any, payable on such goods. This is a rule of valuation. What is the amount of duty (sic) excise payable w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng at the problem. The notification by exempting footwear upto the value of Rs. 60 from duty of excise has not removed "footwear" from the list of excisable goods in the first Schedule. It has in effect reduced the ad valorem duty of 10 per cent payable on such footwear upto the value of Rs. 60 to nil. 19.The construction suggested by Mr. Shanti Bhushan will lead to anomaly and should be avoided. It will have to be held that "the amount of duty payable, if any" in sub-clause (ii) of clause (d) will mean the amount of duty payable as computed in accordance with the provisions of the First Schedule which will stand reduced only when relief is granted by reduction in the rate of duty and not otherwise. "A notification or order providing for exemption" in the Explanation will have to be read as a notification or order granting exemption by reduction in the rate of ad valorem duty only. The object of the statute is clearly to exclude the actual burden of excise duty from the wholesale price for determining the value of any excisable goods. The construction suggested by Mr. Shanti Bhushan will defeat the object of the statute altogether. 20.The assessee has adopted a scheme which can e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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