Bombay High Court
Dharamsi Morarji Chemical Co. Ltd. vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1980(6)ELT454(BOM), [1979]120ITR704(BOM)
ORDER
Chandurkar J.
1. The Petitioner which is a limited Company carries on business of the manufacturing sulphuric acid of various specifications in the factory at Ambernath in the District of Thana. One of their products is fuming sulphuric acid. which is also known as "Oleum". Oleum is of the different strengths, one of them being Oleum 20% out of the total quantities of Oleum 20% manufactured by the Petitioners Company during the period from August 1970 to May 1974, 62.25% of the total production was sold by them and the remaining 37.75% of the production was used by the Company for the manufacture of the Chemical Product known as Chlorosulphonic acid. In respect of the month of March and April 1971, a demand has been made from the Petitioner-Company for Rs. 3122.18 Ps. and Rs. 628.27 Ps. respectively on account of differential duties, because according to the department the Petitioner was not entitled to deduct the trade discount of 10% of which was declared by it is the case of sales to wholesale purchasers in case they purchase more than 515 tonnes of Oleum 20% in one quarter i. e. the period of three months. There is on record a price list which is effective from 1/1/1971 which states the price to the be charged by the manufacturer i. e. the Compannny from the dealers or consumers if there is a direct sale. The price of Oleum 20% per metric tonne is shown as Rs. 417.00 against item No. 6 which relates to the discount. The item No. 6 reads:
"6 Discount allowed if any and "Rs. 100/- per M. T. for condition. consumers purchasing more than 550 M. T. for period from 1/1/71 to 31/3/1971. 3 months."
This price list was submitted by the Petitioners to the Central Excise Authorities and according to the Petitioner the price list showed the quantity discount uniformly given by the Petitioner. The difference demanded from the petitioner was on the footing that for the purpose of computing the whole-sale cash price, the petitioner was not entitled to avail themselves of the said quantity discount in respect of Oleum 20% which was utilised by the petitioners-Company for the manufacture of another product. Both these demands were challenged by the petitioner by two separate appeals which were disposed of by the Deputy Collector, Central Excise, Pune, The Deputy Collector took the view that the assessable value should be ascertainable at the time of removal of the excisable article from the factory and the Trade discount which was allowed to be deducted, under explanation to section 4 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) should also be ascertainable at the time of removal of the excisable article from the factory. The condition of removal of the goods not having been satisfied in the case of Oleum 20% (hereinafter referred to as "Oleum" simpliciter) the discount could not be taken into account and the order of the Superintendent, approving the price list of the Petitioner and allowing the discountt was wrong in law. An identical order also came to be passed in respect of demands for the months of April 1971.
2. The petitioner company filed Revision Applications before the Union Government challenging this appellate order of the Deputy Collector. The Union Government, however dismissed both the Revision Applications by a common order. However, the order discloses that the ground on which the Revision Applications have been dismissed, with the observations reaching a fixed figure " and "further the quantities removed for consumptions even do not reach their fixed figure." The Joint Secretary of the Government of India who seem to have decided the appeal apparently has not applied his mind to the contention whether the Petitioner was not disentitled to claim a deduction of trade discount. merely because the Oleum was used by the Petitioner for its own purposes. This order of the Union Government is challenged in this petition.
3. In the meantime demands were also raised in respect of the period from May 1971 to September 1971 amounting to Rs. 23,714.50 (Exh. G) and for the period from August 1970 to February 1971 amount to Rs. 27,329/- For the later period from October 1971 to May 1974 according to the petitioner, provisional assessment is being made and the Petitioner are being given benefit of discount but in case the petitioner are not found entitled to these benefit additional duty payable would be Rs. 72,500.92, because the Oleum, consumed by the petitioner for the manufacture of Chlorosuphuric acid between October 1971 and May 1974 is 1765.20 Metric Tonnes. It is apparent that no useful purpose would have been served by the petitioner' challenging the demand made vide exhibits G and H. because it is clear not only from the Revisional order of teh Union Government but also from teh returned filed in this Petition that it is the firm view of the Department and the Union Government that the Petitioner are not entitled to deduct the trade discount for the purposes of the determining the value contemplated by section 4 of the Act.
4. Mr. Diwan, appearing on behalf of the petitioner, has contended that the concept of teh quantity discount is accepted by the Government of India as would be clear from a trade notice issued by the Poona Central Excise Collectoratee in which the quantity discount has been described as the discount granted in the ordinary course of business which is based on the quantity of the goods supplied. The learned counsel has also contended that the excise duty is to be levied on the value to be determined under section 4 of the Act and after to be levied on the value to be determined under section 4 of the Act an dafter the whole- sale cash price has been determined under section 4, a further deduction is to be made of the trade discount given by the trader. It is argued that so far us as indicated in the price list referred to above and it is contended that there is no valid justification for computing the value of Oleum used by the Petitioners on a different basis. On the other hand, it is contended by Mr. Govilkar, appearing on behalf of the Union of India that the provisions of permitting deduction of trade discount contained in the explanation to the section 4 of the Act must be read strictly in teh sense that a person who wants to take the benefit of that provision. It is further contended that the trade discount is a concept which can be relevant only when it has actually been given. In other words teh contention is that the Petitioners have not sold to outsiders the Oleum which was consumed by them for the purpose of manufacturer of another product and since in respect of this quantity of Oleum no trade, discount was given, The Petitioners would not be entitled to claim deduction of any trade discount for the purposes of teh determination of teh value for the levying the excise duty under teh Act.
5. Now, it is hardly possible to dispute the general proposition that a person who wants to take advantage of the provision relating to concession or advantages, must satisfactorily show that he falls within that provision. It is true that in that sense, it is for the Petitioners to satisfy the Court that the Petitioners fall within teh Explanation and that the value to be determined for the purpose of excise duty has to be determined after deducting the trade discount. In order to appreciate the arguments advanced it is necessary to refer to section 4 of the Act as it was in force at the material time. Present section section 4 was substituted for the section 4 as it stands to-day the provision with which we are concerned reads as follows :-
"sec 4 Valuation of excisable goods for purposes of charging of duty of excise : (1) where under this Act, the duty of excise is chargeable on any excisable goods with reference to value such value shall subject to the other provisions of this section be deemed to be (a) the normal price thereof that is to say the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyers is not a related person and the price is the sole consideration for the sale...."
6. The charging provision in the Art is contained in section 3 under which a duty on all excisable goods other than salt which are produced or manufactured in India. is to be levied and collected in such a manner as may be prescribed. Teh excise duty is to be charged on the value of the excisable goods. By clause (a) of section 4 , the value is deemed to be the normal price at which goods are ordinarily sold to the buyer in the course of wholesale trade for delivery at the time and place or removal. We are not concerned with the clause (b) of section 4, in this case, It is important to note that the words used are "Ordinarily sold" . there is also no dispute that teh wholesale cash price at which the value of Oleum was properly determined is so far as the Oleum sold by the Petitioner was concerned. Under section 4 of the Act. which the wholesale cash price is determined then certain deductions for the wholesale cash price are made permissible by the Explanation for the purpose of determining the value on which the excise duty is to be levied. One of teh items permitted to be deducted is a trade discount. Now, once the trade discount is deducted from the wholesale cash what one gets is the wholesale cash price at which the goods are sold to the buyer in teh course of wholesale trade. In other words, the scheme of section 4 read with teh Explanation appears to be determined that the value has to be determined on teh basis of teh price at teh which goods would be ordinarily sold and this would be the price which is the received by teh manufacturer after making allowance for the trade discount. It is true that the certain portion of the goods was used by the manufacturer for his own purposes of manufacturing some other goods and the goods are not actually sold to any outside and therefor, a question of giving any trade discount in respect of those goods does not arise But that in our view would be irrelevant because the sachem of section 4 is the to determine the value in. particular manner and the measure of that teh value is the wholesale cash price at which goods are ordinarily sold., Such wholesale cash price of the goods which are utilised by the manufacturer for himself. would therefore, be not different form the wholesale cash price of the goods which are sold by teh manufacturer. It is difficult for us to see how any distinction can be made in respect of the value of a small portion of the manufactured goods which are utilised by teh manufacturer himself . If the manufacturer had sold these goods by wholesale instead of suing them he would not had received anything more than teh wholesale cash price minus the trade discount. Therefore the wholesale cash price minus the trade discount would also represent the value of the gods used by him for the purpose of section 4 of the there is no warrant in teh provisions of section 4 read with the explanation to take in to account merely the whole-sale cash price while considering the value for teh purposes of leaving the excise duty.
7. As contended by Shri Govilkar it is no doubtt true that generally a trade discount offered by teh manufacturer does not strictly become discount unless there is actually a sale of the requisite equantity. We are, however, dealing with the method of determining a deemed to value prescribed by section 4 section 4 makes it clear that the wholesale cash price determined in teh manner prescribed in clauses (a) and (b) shall be deemed to the be value of the article As already pointed out section of the 4 refers to the normal, wholesale cash price at teh which gods are ordinarily sold and therefore, the fact that some part of teh goods have not been sold and no trade discount was given to anybody would not be relevant for the propose of production of the other goods.
8. As we have already pointed out the Revisional Authority viz. Union of India has not dealt with this question at all and all appeal and revision seem to have been decided on teh ground that quantitatively the quantify of the product prescribed in teh price list does not seem to have been utilised by teh petitioner. That teh statement appears to us to be factually incorrect as will be clear from teh extract which has been filed before the us at Exhibit a. This extract shows that considering the quarters from the September. 1970 onwards to May 1974, in none of these quarters the quantity of Oleum utilised internally by these quarters the quantity of Oleum utilised internally by teh Petitioners is less than 550 metric Tonnes In our Judgment the view which the Department and Union of India have taken that the Petitioner are not entitled to deduct the trade discount the respect of Oleum used internally is based on misconstruction of the provision in teh Explanation of section 4.
9. Consequently we must quash the Revisional order of the Union Government the two appellate orders of teh Deputy Collector of Central Excise dated 14th December 1971 and we must also quash the demand made in Exhibit G and Exhibit H. we thus a low the Petition with costs.