Case: Modipon Fibre Company, Modinagar, U.P Vs. Commissioner of Central Excise, Meerut

under the Act and, therefore, effective duty of excise is the duty calculated on the basis of the prescribed rate as reduced by the exemption notification. This alone is excluded from the normal price under section 4(4)(d)(ii). 12. It is true that the Explanation to section 4(4)(d)(ii) only refers to the amount of duty of excise payable on excisable goods, however, as held by the Bombay High Court in the case of B.K. Paper Mills (supra), the Explanation expressly sets out what is implicit in section 4(4)(d)(ii) which states that "value" in relation to excisable goods does not include the amount of duty of excise, sales tax and other taxes if payable on such goods. Therefore, the test to be applied is that of the "actual value of the duty payable" and, therefore, there is no merit in the argument advanced on behalf of the assessee that the Explanation is restricted to the duty of excise. This principle can therefore apply also to actual value of any other tax including TOT payable. Even without the Explanation, the scheme of section 4(4)(d)(ii) shows that in computing the assessable value, one has to go by the actual value of the duty payable and, therefore, only the reduced duty was deductible from the value of the goods. 13. To the same effect is the judgment of the Division Bench of the Bombay High Court in the case of Central India Spinning, Weaving and Manufacturing Co. Ltd. and ors. v. Union of India and ors. reported in 1987 (30) ELT 217 (Bom.). We quote herein below para 7 of the said judgment, which reads as follows: "It is true that according to Section 4(4)(d)(ii) of the Central Excises Act, the value does not include the amount of duty of excise, if any payable on such goods, but in view of Explanation to Section 4(4)(d)(ii), the duty of excise means the duty payable in terms of the Central Excise 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. Thus where the company/ manufacturer whose goods were liable to excise duty at a reduced rate in consequence of an exemption notification, while paying duty at reduced rate collected duty at a higher rate i.e. tariff rate from its customers the authorities were justified in holding that what was being collected by the company as excise duty was not excise duty but the value in substance of the goods and therefore, the excess value collected by the petitioner from the customers was recoverable under Section 11A of the Central Excises and Salt Act, 1944." 14. Applying the above tests to the facts of the present case, it is clear that on the date when the assessee filed its price declaration under Rule 173-C the assessee was aware that there was an exemption Notification dated 19.10.1993 in the State of Gujarat; that there were depot sales in Surat; that there were two types of sales, namely, backward area sales and normal area sales and that the rate of TOT in respect of backward area sales was 0.5% whereas the rate of TOT for normal area sales was at 2% and yet the assessee after suppressing the aforestated data claimed the TOT deductions at the rate of 2% across the board for all clearances and, therefore, the Department was justified in calling upon the assessee to pay differential excise duty. We accordingly confirm the demand. 15. Before concluding, we may add that every efficient manufacturer has to plan his operations sufficiently carefully to know what raw materials he will use and in what proportion he will use the raw materials in the manufacture of his final product. Generally, such manufacturers maintain what is called as Order Book. A manufacturer who is prudent would ordinarily worked out on estimation, the extent of exemption which he is likely to get, in which event, the uncertainty to which the learned counsel has made reference would in fact hardly arise. In the present case, we are concerned with the amount of deduction. That deduction has been claimed by the assessee-manufacturer (appellant). The burden is on such manufacturer to maintain proper records, as the burden is on it to file a proper price declaration under Rule 173-C. The burden to claim deduction is on the manufacturer. In the present case, the assessee has filed a declaration under the said Rule 173-C without disclosing to the Department any of the aforestated details. We are, therefore, of the view that the Department was right not only in raising the demand for differential duty but also for invoking the extended period of limitation. 16. For the aforestated reasons, we find no merit in these civil appeals and the same are accordingly dismissed with no order as to costs. Civil Appeal Nos.2008-2010 of 2002 17. This batch of civil appeals have been filed by the Department against order dated 3.7.2001 passed by the CEGAT ("the Tribunal") which order stands confirmed by our above judgment in civil appeal Nos. 8529-8531 of 2001 in favour of the Department. 18. By the impugned order, the Tribunal has confirmed the demand made on the assessee vide show cause notice dated 19.3.1999 for the period March, 1994 to March, 1997. However, the Tribunal found that the demand made by the Department was beyond limitation after the assessee had categorically informed the Department vide letter dated 14.1.1997 that there were two types of sales, namely, backward area sales and normal area sales. According to the Tribunal, therefore, there was no suppression after the Department had acquired the knowledge for the first time vide the assessees letter dated 14.1.1997 and, therefore, it was not open to the Department to claim suppression after 14.1.1997. 19. We see no reason to interfere with the findings recorded by the Tribunal on the question of suppression. 20. Accordingly, civil

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

Explanation:
0[ds]In our view, the above two judgments of the Bombay High Court lay down the correct principle underlying the Explanation to section 4(4)(d)(ii). As held in TOMCOs case (supra), the exemption was not by way of a windfall for the manufacturer-assessee but on account of cotton seed oil used by TOMCO in the manufacture of Pakav. Similarly, in the case of B. K. Paper Mills (supra), the Bombay High Court has correctly analysed section 4(4)(d)(ii) with the Explanation to say that only the reduced rate of duty can be excluded from the value of the goods and that Explanation explains what was implicit in that Section. That, the said section 4(4)(d)(ii) did not refer to duty leviable under the relevant tariff entry without reference to exemption Notification that may be in existence at the time of clearance/removal. That, section 47 of the Finance Act, 1982 which inserted the Explanation expressly sets out what is meant by the expression "the amount of duty of excise payable on any excisable goods." By the amount of duty of excise what is meant is the effective duty of excise payable on such goods under the Act and, therefore, effective duty of excise is the duty calculated on the basis of the prescribed rate as reduced by the exemption notification. This alone is excluded from the normal price under section 4(4)(d)(ii).