ivil Appeal Nos
1373 to 1376 of 1976
525 Appeals by Special leave from the judgment and Order dated the 24th September 1976 of the Andhra Pradesh High Court in Writ Petition Nos
1400 to 1403 of 1976
AND Civil Appeal Nos683 68677 1062 1064 of 1977 885 to 890 of 1978
From the Judgment and Order dated the 31st Day of January 1977 of the Andhra Pradesh High Court in Writ Petition Nos
2898 2940 2946 2948 2899 2900 2904 2901 2902 2903 2941 2947 and 2961 of 1976
Ravinder Narain OC Mathur Talat Ansari Kamal Mehta and Ms Rainu Wallia for the Appellant
Ms A Subhashini and Girish Chandra for the Respondent
The Judgment of the Court was delivered by AMARENDRA NATH SEN J
These appeals and also the Special Leave Petitions arise out Writ Petitions filed by the Appellant as the petitioners in the High Court of Judicature Andhra Pradesh at Hyderabad
The High Court disposed of all the writ petitions by one common judgment
For reasons stated in the judgment the High Court dismissed all the writ petitions
This Court granted special leave to the appellant to file appeals against the dismissal of the writ petitions by the High Court and also directed some of the Special Leave Petitions to be heard along with the appeals
As all the writ petitions were dismissed by one common judgment delivered by the High Court we propose to dispose of all these matters by this judgment
Two questions fall for determination in these appeals
The first question is whether on a true construction of the Notification No 2370 dated 131970 issued by the Government of India the appellant is entitled to claim exemption from the imposition of excise duty on fertilizers which according to the appellant are mixed fertilizers manufactured by the appellant
The other question is whether the amount of commission paid by the appellant to its selling agents should be deducted as trade allowance in computing the value of the goods for assessment of excise duty
526 It may be noted that some of these appeals are concerned with the first question namely the exemption under the Notification No 2370 dated 131970 and in the remaining appeals the question of exclusion of the commission paid to the selling agent is involved
Same questions are involved in the special leave petitions
The broad facts about which there does not appear to be any serious dispute may be briefly noticed
The appellant carries on business as manufacturers of diverse kinds of fertilizers at the factory situated at Vishakhapatnam
The appellant considered that it would be advisable to entrust the sale of its products to organisations with experience in the sale of fertilizers instead of the appellant itself organising sales of the fertilizers manufactured
Accordingly the appellant appointed Ms EID Parry Limited and Ms Rallis India Ltd as their selling agents and entered into agreements with them for sale of fertilizers manufactured by the appellant on terms and conditions mentioned in the agreements entered into by the appellant with the selling agents
Under the terms of the agreements the selling agents were appointed by the appellant and the selling agents were entrusted with the task of arranging the sale of the fertilisers for and on behalf of the appellant in consideration of receiving a commission of 3 12 calculated on the net realisable value ie upon the gross sales realisation less excise duty and sales tax freight expenses and discount and rebate
This commission is the remuneration paid by the appellant to the selling agents for discharging the obligation of the selling agents under the agreement of selling the fertilisers
In the absence of any such agreement the appellant would have been obliged to carry on the activity of organising the sales of its products on its own
The Central Government issued a notification bearing No 2570 dated 1370 which reads as follows In exercise of the powers conferred by sub rule 1 of rule 8 of the Central Excise Rules 1944 the Central Government hereby exempts mixed fertilizers falling under item No 14HH of the First Schedule to the 1 of 1944 manufactured with the aid of power from two or more fertilizers on all of which the appropriate amount of the duty of excise or as the case may be the additional duty under section 2 A of the Indian 527 Tariff Act 1943 32 of 1934 has already been paid from the whole of the duty of excise leviable thereon
Explanation For the purpose of this notification the term mixed fertilizers  means mixtures of fertilizers  containing more than one nutrient nitrogen phosphate or potash and does not include single nutrient fertilizers like super phosphate manufactured from rock phosphate
 On the basis of this notification the appellant had asked for exemption from the imposition of excise duty on fertilisers manufactured by it claiming such fertilisers to be mixed fertilisers within the meaning of this Notification
The appellant had also claimed deduction of the selling agency commission paid by the appellant to its selling agents for sale of the fertilisers manufactured by the appellant as trade discount in the matter of computation of excise duty payable on the fertilisers manufactured by the appellant
The claims on both these accounts were disallowed by the Assistant Collector whose decisions were upheld by the Appellate Collector
Aggrieved by the decisions of the authorities concerned the appellant filed writ petitions in the High Court
As we have earlier observed the High Court by its common judgment refused to entertain the claims of the appellant under these two heads and dismissed all the writ petitions filed by the appellant in the High Court
Against the decision and judgment of the High Court disallowing these claims these appeals with special leave granted by this Court have been filed by the appellant
The case of the appellant in support of its claim for exemption under the Notification may be indicated
The claim is made in respect of the Fertiliser known as Gromor NPK 14 35 14  which according to the appellant is a mixed fertiliser qualifying for relief under the Notification
The petitioner makes the case that Gromor NPK 14 35 14 is manufactured with the aid of power mixing two imported fertilisers namely Rock Phosphate and Muriatic of Potash on which the appellant had paid proper duty
The manufacturing process of the said fertiliser consists of treating Rock Phosphate with Sulfuric Acid which produces Phosphoric Acid
When such Phosphoric Acid is treated with Ammonia Mono and Di Ammonium Phosphate in Slurry form comes into existence
To this slurry Muriatic of Potash is added
Thereafter the said mixed fertiliser comes into existence
During the said process a small quantity of Ammonium Sulphate is formed but it is neither possible to 528 separate it nor is it possible to use it as it is mixed with the other ingredients
According to the appellant Mono and Bi Ammonium Phosphate in Slurry form cannot be used as fertilisers for the reason that they are highly concentrated and in Slurry Form
The contention is that since Gromor NPK 14 35 14 is manufactured with the aid of power from the two fertilisers it qualifies for exemption under the Notification
In Support of the contention that the fertiliser Gromor NPK 14 35 14 comes within the scope of the exemption under the notification Mr Setalvad the learned counsel appearing on behalf of the appellant has argued that on a plain reading of the language used in the Notification this fertiliser clearly comes within the ambit of the Notification and satisfies all the requirements laid down in the Notification for exemption under the said Notification
Mr Setalvad argues that the explanation added to the Notification cannot control or in any way affect the plain language used in the Notification
It is his argument that taxing statutes and rules and notifications issued thereunder will have to be construed and understood with reference to the language used therein and there is no scope for speculation about the true intention or for trying to gather the true intention otherwise than by interpreting the language used therein
Mr Setalvad has further commented that the Trade Notice issued by the Government in November 1974 purporting to qualify the Notification by seeking to lay down that the exemption only applied to physical mixture of duty paid fertilisers and not to mixed fertiliser produced as a result of Chemical reaction is of no material consequence
It is his comment that the exemption granted under the Notification cannot in any way be curtailed or taken away or otherwise affected by the issue of a Trade Notice purporting to qualify the meaning and scope of the Notification and the right of any party entitled to the benefit under the Notification cannot be taken away by any purported clarification of the Notification without amending the Notification itself
It may be noted that before the High Court the very same contention was raised and the very same arguments were advanced
The High Court has elaborately and very carefully considered the case made for exemption under the Notification and the arguments advanced in support thereof
On a careful and proper consideration of the contention raised and the arguments advanced the High Court in our view rightly disallowed the claim for exemption and rejected the arguments advanced
While declining to entertain the claim in this respect the High Court held 529 What is exempted is Mixed fertilisers  falling under item No 14HH of the First Schedule to the Act
Item 14HH 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 word manufactured from two or more fertilisers 
So it follows that a mixed fertiliser in order to win the exemption from duty should be one which has been manufactured from two or more fertilisers
When the notification once again used the word fertilisers  its intention to emphasise that the exemption would be available only to mixtures of fertilisers becomes patent
This meaning is further made clearer by the explanation which gives the meaning of the term mixed fertilisers  as mixtures of fertilisers
Therefore there cannot be any hesitation to understand the meaning of the notification as purporting to grant exemption only to mixed fertilisers manufactured from two or more fertilisers
It is not its purpose to grant exemption to mixtures of fertilisers and other commodities as well
Shri Setalvad for the petitioner company strongly urged that if two or more fertilisers are used in the manufacture of mixed fertilisers such fertilisers would be entitled to exemption dispite the use of other commodities like Sulphuric Acid and Ammonia
According to him what all the notification requires is the use of two or more fertilisers in the manufacture of mixed fertilisers and it does not matter if in addition to two or more fertilisers some other commodities are also used
He also pointed out that had the Government of India wanted to limit the exemption in the manner in which the learned Government Pleader construed then it would have used the word only  before two or more fertilisers 
Since that word does not occur the exemption would be available even if other commodities are used
If that were the intention of the notification then it could have easily said manufactured from two or more fertilisers or other substances 
Not only it omitted to say that but on the other hand the notification throughout emphasises on the use of fertilisers and fertilisers alone
The absence of the word only  before two or more fertilizers  does not stand in the way of understanding the real 530 intention of the Government of India
To our mind consequently the true and natural meaning of the notification is that the exemption is available to mixed fertilisers alone
If other commodities are also used in manufacturing the mixed fertilisers then the said mixed fertiliser walks out of the exemption
 The High Court has further observed We have already noted the averments in paragraph 8 of the writ petition describing the process of manufacture of NPK 14  35  14 and the fertilisers and commodities used therein
The petitioner company itself stated that NPK 14  35  14 is manufactured by mixing with the aid of power from two imported fertilisers viz Rock Phosphate and Muriate of Potash
The Manufacturing process according to the averments in the writ petitions consists of treating Rock Phosphate with Sulphuric Acid which treatment produces Phosphoric Acid
The Phosphoric Acid that is thus produced is further treated with Ammonia as a consequence of which Mono and Di Ammonium Phosphate in slurry form comes into existence
Let us not think at the present of the Phosphoric Acid and Mono and Di Ammonium phosphate which come into existence in the process of manufacture
Let us concentrate on the basic commodities used in the manufacture of this fertiliser
From the averments in paragraph 8 of the writ petition it is obvious that not only the two fertilisers ie Rock Phosphate and Muriate of Potash are used but also Sulphuric Acid and Ammonia are used
The Sulphuric Acid and Ammonia used in the manufacture of NPK 14  35  14 are not created in the process of manufacture
They are brought from outside and utilised in the process of manufacture just like the two fertilisers Rock Phosphate and Muriate of Potash
This much is evident from paragraph 8 of the writ petition
Undoubtedly Sulphuric Acid is an acid
That can be seen not only from the very name it has but also from the list of acids given in item 14 G of the First Schedule under the head acids 
Ammonia as can be seen from item 14HH which is under the heading gases  is a gas Sulphuric Acid and Ammonia are independent commodities which 531 are by themselves eligible to excise duty
In contrast when we come to item 14HH 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 14HH contains the words which the notification used
It deals with mixed fertilisers manufactured with the aid of power from two or more fertilisers
When in the Act itself this distinction between fertilisers including mixed fertilisers on one hand and acids like Sulphuric Acid and gases like Ammonia is pointed out and maintained it is futile to argue that notification No 2570 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 exemption given under the notification
We entirely agree with the view expressed by the High Court
We may also note that the High Court has further aptly pointed out The process of manufacture of NPK 14 35 14 bringing into existence several other 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 2570
 It has to be borne in mind that the Explanation added to the Notification also forms a part of the Notification itself
The Notification has to be construed as a whole and in properly interpreting the Notification the Explanation which has been added to the Notification cannot be ignored
The question as to whether the Explanation seeks to control the operation or the effect of the Notification is indeed immaterial as the Explanation purports neither to control nor to alter but only seeks to explain
What the Explanation provides is not in any way in conflict with or contrary to what the Notification provides
532 Mr Setalvad made a grievance that the authorities concerned had allowed the benefit of the Notification under similar circumstances to a rival company
If the grievance of the appellant is true the appellant may no doubt have reasons to feel sore about it
We have however to point out that the grievance of the appellant even if it is well founded does not entitle the appellant to claim the benefit of the Notification
A wrong decision in favour of any particular party does not entitle any other party to claim the benefit on the basis of the wrong decision
We are therefore clearly of the opinion that the fertiliser manufactured by the appellant in respect of which claim for exemption under the Notification is made is not a mixed fertiliser within the meaning and scope of the Notification and we have no hesitation in rejecting the case of the appellant expressing our agreement with the reasons stated in the judgment of the High Court
The other question raised on behalf of the appellant relates to the appellant s claim for deduction of the commission paid to the selling agents from the assessable value of the goods manufactured in the matter of computation of the excise duty
The agreements which the appellant had with the selling agents clearly go to indicate that the selling agents who were being appointed were the agents of the appellant for sale of fertilisers on behalf of the appellant
The agreement clearly provides that the selling agents will secure orders on behalf of the appellant execute such orders on behalf of the appellant and will also remain liable to the appellant for realisation of the price of goods sold to various parties and for such services rendered by the selling agents the selling agents will be entitled to the commission stipulated in the agreement between the parties
The agreement is essentially an agency agreement and the selling agents were being appointed as agents for sale and distribution of the product of the appellant on the basis of the terms and conditions stipulated in the agreement Clause 2 a of the agreement dated April 1 1971 with Ms Rallis India Limited which deals with the question of appointment clearly states Coromandel hereby appoints the agent as one of Coromandel Sales Agents for sale and distribution on behalf of Coromandel of the product in the territory  
The commission which is paid by the appellant to the selling agents is for services rendered by them as such agents
Such com 533 mission paid to agents for services rendered cannot be considered to be in the nature of any trade discount which may qualify for deduction in determining the assessable value of the goods for the purpose of imposition of excise duty under the Central Excise and Salt Act 1944
The decision of this Court in the case of MCVS Arunachala Nadar etc
vs The State of Madras and Ors
and the decision of the Court of Appeal in England In Relicenced Victuallers  Mutual Trading Association Exparte Audain relied on by Mr Setalvad are not of any assistance in deciding the question in the present case
In the case of MCVS Arunachala Nadar Etc
vs The State of Madras and OrsSupra this Court was concerned with the question of constitutional validity of the Madras Commercial Crops Markets Act Madras XX of 1933 the rules framed thereunder and also certain notifications issued in pursuance thereof
Bye law 25 dealt with Trade allowance applying to the market and notified area
While considering the nature of trade allowance this Court observed at page 109 What is a trade allowance  Trade involves exchange of commodities for money the business of buying and selling and the transaction involves the seller the buyer the commodity sold and the price paid for the sale
Allowance means something given as compensation rebate or deduction
Under the section the said deduction should be in any transaction in respect of commercial crops
The deduction may be out of the commodity or out of the price
The recipient may be the seller the buyer or a third party
When A sells a quantity of cotton to B for a hundred rupees B the purchaser may deduct one rupee from the sale price and pay ninety nine rupees to A he may keep that amount for himself or pay the same to C
So too A the seller may purport to sell one mound of cotton but in fact deduct a small part of it retain that part for himself or give it to C or both A and B may fix the price of the commodity purchased at Rs 102 but the purchaser pays one rupee to C or it may be that payments have nothing to do with the price or the transaction but both the parties pay 534 C a specified amount as consideration for the user of the premises or for the services rendered by him
The question whether a particular payment is a trade allowance or not depends upon the facts of each case
Firstly it must be a deduction in any transaction in respect of commercial crops
If it is deduction out of the price or commodity agreed to be paid or transferred it would be a trade allowance
On the other hand if the payment is de hors the terms of the transaction but made towards consideration for the use of the premises or services rendered it would not be a deduction from the price or in any transaction
 These observations were made in the context of the provisions of the Act and while construing the same
They are of no assistance in considering the question raised in the present case
It may further be noticed that in the instant case there is no sale by the appellant to the agents to whom the commission is paid by way of remuneration for services rendered as agents of the appellant
In the case of Relicenced Victuallers  Mutual Trading Association Exparte Audain supra the Court of Appeal in England on a construction of the agreement observed that the word discount in the agreement must be construed as commission so that the agreement was not one to issue shares at a discount
It is possible that in a given case payment of what is termed as commission may depending on the facts and circumstances of the case be in the nature of trade allowance But every kind of trade allowance does not necessarily qualify for deduction in assessment of excise duty
Commission paid to an agent for services rendered by him in the matter of sale or the product of the appellant on behalf of the appellant on the basis of the agreement the appellant had with its selling agents cannot be considered to be in the nature of such trade discount as may qualify for deduction in the computation of the assessable value of the goods for the purpose of levy of excise duty
The commission paid to the selling agents is not a trade discount given either to the wholesale buyer or to the retail buyer
It is not given to the consumer or the trader
The commission paid on the basis of the agreement to the selling agent by way of remuneration for services rendered by the agent cannot by any process of reasoning be said to be trade discount payable or paid at the time of removal of the goods from the factory or any other 535 premises of manufacture or production for delivery at the place of manufacture or production
The amount of commission paid to the selling agents therefore is not trade discount within the meaning of the Explanation to section 4 of the Act and does not qualify for any deduction
In our view the High Court was clearly justified in rejecting this claim of the appellant
Both the claims made by the appellant therefore fail and have been rightly rejected by the High Court
We accordingly dismiss the appeals as also the Special Leave Petitions
We however propose to make no order as to costs
SR Appeal dismissed


Summary:
The appellant carries on business as manufacturers of diverse kinds of fertilizers at its factory at Vishakhapatnam
The appellant appointed Ms EID Parry Limited and Ms Rallis India Ltd as their selling agents and entered into agreements with them for sale of fertilizers manufactured by the appellant on terms and conditions mentioned in the agreements entered into by the appellant with the selling agents
Under the terms of the agreements the selling agents were appointed by the appellant and were entrusted with the task of arranging the sale of the fertilizers for and on behalf of the appellant in consideration of receiving a commission of three and a half percent calculated on the net realisable value that is upon the gross sales realisation less excise duty and sales tax freight expenses and discount and rebate This commission is the remuneration paid by the appellant to the selling agents for discharging the obligation of the selling agents under the agreement of selling the fertilizers
In the absence of any such agreement the appellant would have been obliged to carry on the activity of organising the sales of its product on its own
Based on a Notification issued by the Government of India bearing No 2370 dated 131970 the appellant in respect of the fertilizers known as Gromor NPK 14 35 14 claimed exemption from the imposition of excise duty as it is a mixed fertilizers qualifying for exemption
The appellant also claimed deduction of the selling agency commission paid to its selling agents for sale of fertilizers manufactured by it as trade discount in the matter of computation of excise duty payable on the fertilizers manufactured by the appellant
The claims on both these accounts were disallowed by the Assistant Collector whose decisions were upheld by the Appellate Collector
Aggrieved by the decisions of the authorities concerned the appellant filed Writ Petitions in the High Court
The High Court by its common judgment refused to entertain the claims of the appellant under these two heads and dismissed all the Writ Petitions filed by the appellant in the High Court
Hence the appeals with Special Leave granted by this Court
524 Dismissing the appeals the Court  HELD 1 1
The fertilizers manufactured by the appellant in respect of which a claim for exemption under the Notification No 23 of 1970 dated 131970 is made is not mixed fertilizers within the meaning and scope of the Notification since the process of manufacture of NPK 14 35 14 brings into existence several other substances and once again utilises them in the process treating one substance with the other
532B C 12
The Explanation added to the Notification also forms a part of the Notification Itself
The notification has to be construed as a whole and in properly interpreting the Notification the Explanation which has been added to the Notification cannot be ignored
The question as to whether the Explanation seeks to control the operation or the effect of the Notification is indeed immaterial as the Explanation purports neither to control nor to alter but only seeks to explain
What the Explanation provides is not in any way in conflict with or contrary to what the Notification provides
531G H 1 3
A wrong decision by the Excise Authorities in favour of any particular party allowing the benefit of the Notification under similar circumstances to a rival company does not entitle any other party to claim benefits on the basis of that wrong decision532B 2 1
The amount of commission paid to the selling agents is not a trade discount within the meaning of the Explanation to Section 4 of the Central Excise and Salt Act 1944 and does not qualify for deduction in determination of the assessable value of the goods for the purpose of imposition of excise duty though it is possible that in a given case payment of what is termed as commission may depending on the facts and circumstances of the case be in the nature of trade allowance
But every kind of trade allowance does not necessarily qualify for deduction in assessment of excise duty
Here the agreements make it clear that the commission paid to the selling agents is not a trade discount given either to the wholesale buyer or to the retail buyer
It is not given to the consumer or the trader
The commission paid on the basis of the agreement to the selling agents by way of remuneration for services rendered by the agent cannot by any process of reasoning be said to be trade discount payable or paid at the time of removal of the goods from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production
534F H 535A MCVS
Arunachala Nadar Etc
vs The State of Madras and Ors
1959 Suppl
1 SCR 92 In Re Licensed Victualler s Mutual Trading Association Exparte Audain 1889 42 Law Reports Chencery Division 1 discussed and held inapplicable