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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 ..... ir has been enhanced from time to time and at the material time, for the purpose of this case, the exemption was limited to footwear the value of which was upto Rs. 60/- per pair. 3.Mr. Shanti Bhushan on behalf of the respondent has contended that if excise duty was payable on these shoes, the amount of excise duty had to be deducted from the wholesale price in order to determine the assessable value of the shoes which was less than the limit set by the exemption notification. If this is not allowed, the Department will claim excise duty even on shoes which would otherwise qualify for benefit of exemption notification because of the lower value. To illustrate this point, Mr. Shanti Bhushan has argued that when the exemption notification was limited to Rs. 60/- per pair of shoes, there would be no difficulty in cases where the wholesale price was upto Rs. 60/- or less. There can be no dispute that in respect of these types of shoes, no excise duty will be leviable. If the shoes were priced at Rs. 60/- and above, the excise duty will be levied. But, if the wholesale price was at Rs. 62/- or Rs. 66/- in such a case, after deduction of excise duty at the rate of 10%, the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of the goods. Sub-section (1) (a) of Section 4 makes it clear that "such value shall ...be deemed to be the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade ....". Therefore, the normal wholesale price of the goods must be deemed to be the value of the goods. It is not necessary to refer to the various types of prices that may be charged from the buyer set out in the proviso to Section 4(1)(a). But there cannot be any dispute that excise duty will be levied on the value of the excisable goods and the basic rule is that the normal wholesale price is the value of the goods. The normal wholesale price is the cum-duty price which the wholesaler has to pay to the manufacturer. The cost of production, estimated profit and the taxes on manufacture and sale of the goods are usually included in the wholesale price of the goods. It is only because the wholesale price is usually the cum-duty price that sub-section (4)(d) lays down that 'value' will not include duty of excise, sales tax and other taxes, if any, payable on the goods. But if a manufacturer includes in the wholesale price a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal price, that is the wholesale price will be deemed to be the value of the goods. 9.To revert back to the chart, if value of the goods exclusive of any duty is Rs. 56.36 or Rs. 58.18 or Rs. 60.00, no duty is payable on such goods at all. The wholesale price need not be higher than the value of the goods in such cases. These values are inclusive of profit intended to be made by the manufacturer. The manufacturer can sell these goods at the aforesaid prices and enjoy the tax exemption. But if the manufacturer with full knowledge that no duty is payable when the value of the goods are below Rs. 60.00, raises the prices to above Rs. 60.00, then he has included in the wholesale price something which is not the anticipated duty of excise payable on such goods but an extra amount of profit in another guise. 10.For the purpose of excise duty, the manufacturer has to submit a price-list to the excise authority before removal of the goods from the factory. He has to indicate in the forms and documents relating to assessment, the value of the goods and the amount of duty which will form part of the prices at which such goods are to be sold. Costs and estimated profits are included in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than Rs. 60.00 per pair and yet will be able to claim the benefit of the exemption notification and not pay any duty. An anomalous situation will arise. The consumer will pay ex-duty price of more than Rs. 60/- per pair and bear the brunt of a tax burden which is not payable by the manufacturer in law. The manufacturer will enjoy the benefit of the exemption notification by deducting an amount on account of non-payable excise duty from the price and thereby make profit in the guise of payment of tax. At the same time, the revenue will be deprived of the duty which is payable on footwear valued at above Rs. 60.00. 13.If the ex-duty value of the footwear given in the chart was Rs. 60.00 or less, then that should have been the excise value. There could be no reason for fixing the price at above Rs. 60.00 except for the purpose of making a larger profit. A manufacturer at the time of clearance of the goods has to indicate in all the documents relating to assessment, the amount of duty which will form part of the price at which such goods are to be sold. In the instant case, the manufacturer could not have included any amount by way of excise duty as part of the price of the goods, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation no duty was payable on the goods. In such a situation, a manufacturer could not include in the price of the goods any amount by way of excise duty. 15.Any doubt about this position in law has been dispelled by the Explanation added by Act 14 of 1982 to sub-clause (ii) of clause (d) which is as under :- "Explanation - For the purposes of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be the sum total of : - (a) the effective duty of excise payable on such goods under this Act; and (b) the aggregate of the effective duties of excise payable under other Central Acts, if any, providing for the levy of duties of excise on such goods, and the effective duty of excise on such goods under each Act referred to in clause (a) or clause (b) shall be, - (i) in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to, or reduction of duty of excise under such Act on such goods equal to, any duty of excise under such Act, or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), already paid on the raw material or component parts used in the production o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of duty (sic) excise payable will depend on this valuation. The Explanation has been inserted "for the purpose of this sub-clause" i.e. sub-clause (ii). The amount of excise duty payable has been explained to be the effective duty of excise payable on such goods, in other words, not the duty of excise calculated in the manner laid down in Schedule I only. Regard must be had to any relief or abatement of duty given by any statutory notification or order. It has been made clear by the Explanation that if a notification or order providing for any exemption from duty of excise under the Act is in force, full and complete effect to such exemption will have to be granted for the purpose of computation of the value. "The duty of excise computed with reference to the rate specified" has to be calculated first. Thereafter the duty of excise so computed will have to be reduced in accordance with the exemption notification. For example, if duty on `Footwear' is 10 per cent ad valorem per pair then the duty payable on Footwear valued at Rs. 60 will be Rs. 6. Since there is a notification exempting Footwear valued upto Rs. 60 per pair from duty, under the Explanation or even otherwise the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has adopted a scheme which can easily be seen through. After valuing the footwear at less than Rs. 60.00, he has fixed the price at above Rs. 60.00. He is entitled to make as much profit as he can. But he has tried to claim deduction of a part of the profit as excise duty payable for the goods. In order to claim this deduction, the assessee will have to show that the `value' of the goods became more than Rs. 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. 21.Strong reliance was placed on behalf of the assessee on the decision of this Court in the case of Bata Shoe Co. v. Central Excise, 1985 (21) E.L.T. 9 (SC) = (1985) 3 SCR 960, and particularly, on the passage below :- ".......It is, therefore, plain that before determining the question of availability of the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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