Case: M/S.I.T.C. Ltd Vs. Commnr. Of Cent.Excise,N.D


Decision reasoning: 1[ds]17. There can be no doubt that the Division Bench had rejected the interpretation sought to be put by the appellant on the notification. This is apparent, particularly from paragraphs 98, 110 to 115 of the judgment as reported in 1991 (53) ELT 234. But there are other paragraphs in the judgment which appear to suggest that the Court was merely taking aview of the matter and it was for the Adjudicating Authority to finally decide all the questions including questions of fact (vide paragraphs 5 and 175). Although it is more than likely, as has been rightly contended by the Revenue, that the Division Bench had not intended to leave open the issue whether the Revenue could question the declaration made on the cigarette packages by a manufacturer for the purpose of determining the excise duty payable, the ambivalent expression used by the Division Bench in paragraph 175 quoted by us earlier in this judgment, was understood by both the parties to mean that the issue of interpretation of the notification was at large and could be raised and determined before the adjudicating authority. That was the reason why the special leave petitions challenging the decision of the High Court were withdrawn by the appellants. That was also the reason why the Department categorically asserted before the Adjudicating Authority that the decision of the High Court was not binding on the Adjudicator.Even before the Tribunal the stand taken by the Department was not that the issue relating to the interpretation of the notification had been finally concluded by the High Court. Both the adjudicating authority and the Tribunal also proceeded on the basis that the High Courts decision had merely persuasive value. The issue relating to the interpretation of the notification was argued at length by both parties before the adjudicating authority and the Tribunal, both of whom decided the issue independently of the High Courtsfirst is that the rule of strict construction does not apply to a provision, which merely lays down the machinery for the calculation or procedure for the collection of Tax.In the present case, the two notifications are statutory fiscal provisions. They require that excise duty on cigarettes must be levied on adjusted sale price. Sale price has in turn been defined in relation to a package of cigarettes as meaning the maximum price (exclusive of local taxes only) at which such package may be sold in accordance with the declaration made on suchthese two phrases may be sold and in accordance with together, the definition of sale price in relation to a package of cigarettes would mean the MRP (exclusive of local taxes) at which such package is permitted to be sold in conformity with the printed price. If the word may is construed to mean likely or can then the phrase in accordance with would be rendered meaningless as it would be open to the retailer to sell it at such price as he may think fit notwithstanding the printed MRP.It would be doing violence to the language of the Notification if In accordance with is taken to mean irrespective of. The argument of the Revenue and the reasoning of the Division Bench also overlooks the phrase made on the package. According to the notification it is the declaration made, or the MRP as printed, on the package which alone is the sale price and which furnishes the foundation for the calculation of the adjusted sale price. There is no other basis provided. The construction put by the Tribunal is contrary to the words used, an exercise in interpretation which is clearly impermissible and against thecannot be construction that in construing any statutory provision, words may not be added or amended but must, if reasonably possible, be construed as they stand.34. According to the Revenue, any interpretation other than the one put forward by it and accepted by the Tribunal and the High Court, would lead to the absurd consequence that the cigarette manufacturers could print any price on the cigarette package for the purpose of avoiding excise duty and the Revenue would be bound to accept such price.The SWM Act as well as the Packaged Commodities Rules have been enacted to protect the consumers who are entitled to pay only such price as has been printed thereon. The purpose of printing the MRP on cigarette packages is to achieve a standardization of prices throughout the country and to inform consumers of the appropriate price of the product. There is no scope for under declaration because the consumer can insist on the retailer abiding by the printed MRP. Provisions for penalties under the Act on the retailer ensures this. It is not open to the retailer who may be proceeded against for selling above the printed MRP to contend that it was incorrect or false, nor can the retailer defend any violation of the printed MRP by asking for an enquiry into its reasonableness. If adhering to the MRP unreasonably narrows the retailers margins, the retailer can demand a reduction in the price from the wholesaler or desist from selling the product. This applies similarly to the wholesaler, whose feedback to the manufacturer will either force the manufacturer to raise the MRP or lose distributors. Given these serious economic consequences, the manufacturers cannot print a whimsical or fanciful figure as the MRP. The result is a system of incentives and enforcement that begins with the consumer. When this system is properly enforced, levying tax on MRP according to the notification clearly does not lead to absurd consequences.The submission is unacceptable. As we have already said that notification speaks of a permitted sale according to the MRP. The notification does not itself provide for any sanction or prohibition against the retail sale of cigarettes at any rate other than the printed MRP. All that it does is to accept that printed MRP according to which the cigarettes are permitted to be sold by the retailer, as the sale price for the purposes of grant of concessions under the notification. Besides the notification was an exemption notification. If the cigarettes being manufactured in the State of Sikkim did not fall within the terms of the exemption, the manufacturers in Sikkim would be denied the benefit of the notification, and the Tariff rate fixed under the statute would apply. It would not mean that the notification must be construed in a manner so as to extend the exemption to those cigarettes not expressly covered by the exemption. The second submission is entirely hypothetical. One cannot foretell whether the notification would have continued to operate on the same terms even if the SWM Act or Packaged Commodity Rules were repealed or made inapplicable to cigarettes. Indeed during the operation of the Notifications in question viz. 1983 to 1987, the SWM Act and Packaged Commodities Rules remained on the statute book. They still do.It is true that the proviso does not refer to the SWM Act or the Packaged Commodities Rules, but it does not specifically refer to fixation under any other enactment either. All that it requires is that the price must be the maximum price fixed under a law for the time being in force. What is important is that the proviso statutorily recognizes that the price which may not be the actual price received, could form the basis of levy of excise duty.It has been correctly submitted on behalf of the appellant that declarations required under divers statutes have different characteristics and consequences depending upon the nature of the declaration. A declaration may be (1) an assurance of an existing state of affairs or (2) an assurance of a future course of conduct by the declarant himself or (3) a statement of required conduct by a third party. In the first two kinds of declarations the onus is on the declarant to make good the declaration. In other words the truth of the declaration may be verified. But when all that is stated in the declaration is a requirement to be fulfilled by another, what is to be required into is the compliance with the requirement and not the correctness of the declaration itself. The Revenue has failed to keep in mind the distinction between different kinds of declarations. Most of the cases cited by the Revenue in this context deal with the first and second kinds of declaration where the declaration asserts a present or future state of affairs and seeks to certify as true, facts which may be questioned by the authority which is called upon to act on such certification whereas declarations under the notification fall into the third category.The attempt was clearly to do away with the disputes, litigation and consequent delay involved in determination of the assessable value of the whole sale price of cigarettes. As far as the appellant is concerned, between 1973 to 1981, several proceedings were pending relating to various aspects of the determination of the assessable value in respect of the cigarettes manufactured in its five factories including disputes relating to the permissible deductions on account of post manufacturing expenses.In our opinion the outcome of this would be equally illogical. It envisages an excise officer in one part of the country determining what would be the reasonable market price through out the country for that particular brand, an exercise which the Tribunal itself concedes would require the examination of the cost data and market considerations and would be a "very complicated and time consuming impractical exercise which was rightly not provided for". And yet according to the Tribunals and the Revenues interpretation of the notification, the Excise Officer would have had to do just that. Apart from the patent impracticability of the matter, the question whether the price so fixed by the Excise authority is `reasonable or not would itself be justiciable with the consequent blockage of revenue in the quagmire of litigation. That is precisely what the Notification had sought to avoid.56. The certainty of specific rates which was sought to be achieved by the notification has been undone by the adjudicating authority and the Tribunal. The notification had introduced a system for levy of excise duty on an experimental basis. If the experiment was a failure for whatever reason, it was open to the respondents to do away with it and replace the system by some other as it did in 1987. But as long as the notification stood, it had to be given effect to. In the view we have taken, there is no need to go into other questions debated before us.