Patna High Court
Seraikela Glass Works Private Ltd. vs Union Of India (Uoi) And Ors. on 15 September, 1982
Equivalent citations: 1982(30)BLJR487, 1982(10)ELT870(PAT)
JUDGMENT S. Shamul Hasan, J.
1. In this application, the petitioner wants quashing of Annexures 1, 8 and 10 to the writ application. Annexure 2 is the adjudication order passed by the Assistant Collector, Central Excise (respondent No. 2) by which he has laid down the method of calculating the net price on which excise will be levied under Section 4 of the Central Excise Act, 1944. Annexure 8 is the notice issued by the Superintendent, Central Excise, Jamshedpur (respondent No. 3) to show cause why a penalty should not be imposed on them under Rule 173-Q(1) of the Central Excise Rules, 1944 and why the demand should not be raised for differential duty on the goods already claimed after 20-6-1979 in respect of which the offence appears to have been committed under Rule 10 of the Central Excise Rules. By Annexure 10 certain information has been sought in connection with Annexure 1. The controversy, therefore, in this application is what really amounts to wholesale price as envisaged in Section 4 of the Act aforesaid. In other words, whether post-manufacturing cost could also be treated as a part of the wholesale price of a commodity. It may be stated that Section 4 of the Act was slightly amended but such amendment does not vitally affect the question in issue in this application.
2. The petitioner is a private limited company having its registered office at Kandra in the district of Singhbhum in Bihar manufacturing sheet glass. Undoubtedly the sheet glass is an excisable commodity mentioned in Item No. 23A of the First Schedule of the Act. The constitutional validity of such a levy is not in controversy. Section 3 of the Act empowers the Government to levy excise duty on articles mentioned in the First Schedule and Section 4 lays down the method of computing the value of the articles for the purposes of charging excise duty. While interpreting the scope of Section 4 of the Act, the department by Annexure 1 has refused to allow packing charges, such as, paper bundles, wooden frames and boxes as well as service and assurance charges collected at the time of delivery of the goods from the factory. Only thing allowed was trade discount. The claim of the petitioner was that excise duty can only be charged on manufacturing expenses and manufacturing profit and service charges and assurance charges cannot be added to the price of the articles. The contention of the petitioner is that the price list is certified by Chartered Accountant and the price certified by the Chartered Accountant should really be valued for the purpose of levy of excise duty. Annexure 2 was the price list submitted by the petitioner duly certified by the Chartered Accountant in which post-manufacturing cost was deductive from the price in column No. 3 which was disallowed by Annexure 1.
3. In view of the two decisions of the Supreme Court followed by a decision of this court there is no doubt left that the post-manufacturing cost must be deducted from the price for the purpose of levying excise duty. It is surprising that the Patna decision has not been noticed by the authority in Annexure 2 although it was referred to in the petition showing cause by the petitioner. Even the Supreme Court decisions have not been correctly interpreted arid' the authority goes on to include such items which may be described as post-manufacturing cost. In view of what has been decided in the case of A.K. Roy v. Voltas Ltd. (A.I.R. 1973 S.C. 225) there is no doubt that the post-manufacturing cost and profit cannot be included in the price and they have to be excluded. Paragraph 21 of the judgment may be usefully example. Similar is the decision in the case of Atic Industries Ltd. S.H.H.Deve (A.I.R. 1975 S.C. 960). In this decision even though the purchaser from the manufacturer was also a whole-seller yet the price charged by the second whole-seller was not added to the leviable amount. The Patna decision in the case of The Tata Engineering and Locomotive Company Limited v. S.N. Guha Thakurta (1977 P.L.J.R. 469) has relied on the two Supreme Court decisions and has considered the effect of these decisions on the amended Section 4 of the Act. Summing up therefore, there is no doubt that post-manufacturing cost cannot be added while computing the value for the purpose of levying excise duty and in assessing post-manufacturing cost, post-manufacturing expenses and profit has to be treated as post-manufacturing cost. After laying down the above principle which should provide the guideline to the authority in this regard, I do not propose at this stage to embark upon any enquiry as to what items specifically constitutes post-manufacturing cost and profit. In this application learned counsel for the petitioner has submitted that service charges and insurance charges should be treated as post-manufacturing cost which submission has been disputed by learned counsel appearing on behalf of the Government. As I have said, I do not propose to decide specifically what item constitutes post-manufacturing cost. It will be open to the petitioner to show to the authority in the light of the above decision what constitutes post-manufacturing cost and it will be open to the authority to examine this aspect of the matter in the light what has been stated above.
4. I have, therefore, no hesitation in quashing Annexure 1 and consequently Annexures 8 and 10 to the writ application with the aforesaid direction. The application is accordingly allowed and Annexures 1, 8 and 10 to the writ application are quashed. There will be no order as to costs.
Hari Lal Agarwal, J.
1. While I agree with all that has been stated by my learned brother, I would like to add a few words of my own.
2. The main controversy raised by the petitioner is as to., what should be the assessable value on the petitioner's product, namely, sheet glass for the purpose of computing excise duty under Section 4 of the Act. Whereas the contention of the petitioner was that in computing the said value the post-manufacturing expenses and profit cannot be included the department on the other hand, by the impugned Annexure 1, while determining the price list under the rules, has included various items which were objected to by the petitioner.
3. In view of a large number of decisions of this court as well as of other High Courts and the Supreme Court, learned counsel for the respondents, as a matter of proposition, does not dispute that post-manufacturing expenses cannot be added to the assessable value. But as, to what would be those items of expenses is a question which has not been examined by the revenue authorities.
In some of the reported decisions, some of the items have been examined but the authorities have not given their attention to any item themselves. I would refrain to discuss the details of those items although Mr. Chatterji has made some endeavour to give some observations in this regard. Therefore, when the mattergoes back, it would be open to the petitioner to convince the authorities in this regard and if any dispute would arise thereafter, it would be open to the petitioner to come to this Court after exhausting the appellate remedy provided under the statute.