Case: Central India Spinning, Weaving and Manufacturing Company Limited, Nagpur Vs. Union of India, Ministry of Finance &amp; Others

discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale.Explanation.---For the purpose 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) ... ... ..... and the effective duty of excise on such goods under the 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 any duty of excise on such goods equal to, any duty of excise already paid on the raw material or component parts used in the production or manufacture of such goods) from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act in respect of such goods as reduced so as to give full and complete effect to such exemption; and(ii) ..... ......9. It appears to be quite obvious from the above provisions that the Value of excisable goods is the normal price i.e. the price at which the goods are ordinarily sold by the assessee to the buyers in the course of wholesale trade. Therefore, the value for the purpose of excise duty is the normal price but not including the duty of excise payable. Normally the price under the Sale of Goods Act may contain several ingredients. It may consist of the cost of the raw material, cost of labour, cost of advertisement, cost of packing and so on. But excise duty is not levied on these different items. It is levied only on the normal price of the goods. But if such normal price includes excise duty payable then such amount of excise duty is to be excluded from the price for arriving at the value of the goods for the levy of the excise duty. We have already shown above that, from Notification No. 128/1977 dated 18-6-1977 as also from the explanation to section 4(4)(d)(ii) it is clear that when the effect of exemption notification is a reduction in the rate prescribed in the Act, it is the reduced rate of excise duty which is to be excluded under section 4(4)(d)(ii). The explanation referred to above, in our view makes it clean that the exclusion under section 4(4)(d)(ii) is only of the duty of excise as reduced by the exemption notification. Thus, in our view, the authorities below were justified in holding that what was being collected by the company as excise duty from the customers is not excise duty but the value in substance of the goods. The company is realising from its customers excise duty worked out on tariff rates while it is actually paying duty to Government at concessional rate. It is true that according to section 4(4)(d)(ii) of the Act the value does not include the amount of the duty of excise, if any payable on such goods, but in view of the explanation to section 4(4)(d)(ii) of the Act, the duty of excise means the duty payable in terms of the Central Exercise Tariff read with Exemption Notification issued under Rule 8 of the Central Excise Rules. In this view of the matter, the only deduction that is permissible is of the actual duty paid or payable while fixing the assessable value.10. Shri Bobde has invited our attention to several decisions, but most of them have already been discussed by this Court in B.K. Paper Mills Pvt. Ltd. v. Union of India, (supra) and have been rightly distinguished. Hence it is not necessary to discuss the same over again. Suffice it to say that they do not deal with the point which is directly in issue in our case.11. Shri Bobde has placed the copy of the judgment of the Karnataka High Court, disposing of Writ Petition No. 3548 of 1978 and Writ Petition No. 4766 of 1981 on 3rd October, 1985. In this case the Collector of Central Excise had issued a Trade notice purporting to clarity the levy of excise duty on goods manufactured by the petitioners as detailed in Exemption Notification No. 198/76-CE. On the basis of the Trade Notice, duty was demanded from the petitioners, who paid the duty under protest. The Karnataka High Court has expressed thus :"(35) What emerges from the above discussion is that in determining the assessable value of manufactured goods governed by the exemptions granted by the Government either partial or whole, only that amount of duty actually paid or payable by such manufacturer should be excluded and the benefit of such exemptions cannot be denied on the ground that the extent of such exemptions either in whole or in part had not been passed to the customer."The Karnataka High Court has also referred to the decision of this Court in B.K. Paper Mills Pvt. Ltd. (supra) and expressed thus :"We are of the view that this enunciation made by the learned Judge is in accord with what we have expressed earlier. We are of the view that it is unnecessary to examine the other questions that were decided in that case."In view of what we have stated above, it is difficult to appreciate how this decision supports Shri Bobde.12. Lastly, Shri Bobde urged a question of limitation in Writ Petition No. 2250 of 1983 based on the statement of show cause notices (Annexure 11) at Serial Nos. 12 and 13 as barred by limitation under rule 10 of the Rules in force framed under the Central Excise Salt Act, 1944. The authorities below have dealt with this aspect and, in our view, rightly. We see no reason to take a view different from the one that has been taken by the authorities below.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]9. It appears to be quite obvious from the above provisions that the Value of excisable goods is the normal price i.e. the price at which the goods are ordinarily sold by the assessee to the buyers in the course of wholesale trade. Therefore, the value for the purpose of excise duty is the normal price but not including the duty of excise payable. Normally the price under the Sale of Goods Act may contain several ingredients. It may consist of the cost of the raw material, cost of labour, cost of advertisement, cost of packing and so on. But excise duty is not levied on these different items. It is levied only on the normal price of the goods. But if such normal price includes excise duty payable then such amount of excise duty is to be excluded from the price for arriving at the value of the goods for the levy of the excise duty. We have already shown above that, from Notification No. 128/1977 datedas also from the explanation to section 4(4)(d)(ii) it is clear that when the effect of exemption notification is a reduction in the rate prescribed in the Act, it is the reduced rate of excise duty which is to be excluded under section 4(4)(d)(ii). The explanation referred to above, in our view makes it clean that the exclusion under section 4(4)(d)(ii) is only of the duty of excise as reduced by the exemption notification. Thus, in our view, the authorities below were justified in holding that what was being collected by the company as excise duty from the customers is not excise duty but the value in substance of the goods. The company is realising from its customers excise duty worked out on tariff rates while it is actually paying duty to Government at concessional rate. It is true that according to section 4(4)(d)(ii) of the Act the value does not include the amount of the duty of excise, if any payable on such goods, but in view of the explanation to section 4(4)(d)(ii) of the Act, the duty of excise means the duty payable in terms of the Central Exercise Tariff read with Exemption Notification issued under Rule 8 of the Central Excise Rules. In this view of the matter, the only deduction that is permissible is of the actual duty paid or payable while fixing the assessable value.Shri Bobde has placed the copy of the judgment of the Karnataka High Court, disposing of Writ Petition No. 3548 of 1978 and Writ Petition No. 4766 of 1981 on 3rd October, 1985. In this case the Collector of Central Excise had issued a Trade notice purporting to clarity the levy of excise duty on goods manufactured by the petitioners as detailed in Exemption Notification No.On the basis of the Trade Notice, duty was demanded from the petitioners, who paid the duty under protest. The Karnataka High Court has expressed thus :"(35) What emerges from the above discussion is that in determining the assessable value of manufactured goods governed by the exemptions granted by the Government either partial or whole, only that amount of duty actually paid or payable by such manufacturer should be excluded and the benefit of such exemptions cannot be denied on the ground that the extent of such exemptions either in whole or in part had not been passed to the customer."The Karnataka High Court has also referred to the decision of this Court in B.K. Paper Mills Pvt. Ltd. (supra) and expressed thus :"We are of the view that this enunciation made by the learned Judge is in accord with what we have expressed earlier. We are of the view that it is unnecessary to examine the other questions that were decided in that case."In view of what we have stated above, it is difficult to appreciate how this decision supports Shri Bobde.12. Lastly, Shri Bobde urged a question of limitation in Writ Petition No. 2250 of 1983 based on the statement of show cause notices (Annexure 11) at Serial Nos. 12 and 13 as barred by limitation under rule 10 of the Rules in force framed under the Central Excise Salt Act, 1944. The authorities below have dealt with this aspect and, in our view, rightly. We see no reason to take a view different from the one that has been taken by the authorities below.