Customs, Excise and Gold Tribunal - Delhi
Cyanamid India Ltd. vs Collector Of Central Excise on 7 November, 1996
ORDER
U.L. Bhat, J. (President)
1. Appellant is engaged in the manufacture of Patent or Proprietary Medicines falling under erstwhile T.I. 14E. The dispute in the appeal relates to the period from 16-12-1983 to 16-2-1984. Appellant had filed two prices lists, one under part II in regard to drugs supplied to Government as per DGS&D rate contract and the other under part III for sale through normal channels at the prices fixed in the price list referred to in paragraph 19 of the Drugs (Prices Control) Order, 1979 (for short, the 1979 Order) issued under Section 3 of the Essential Commodities Act, 1955. Notification No. 245/83 dated 13-9-1983 granted exemption to manufacturers of Patent or Proprietary Medicines of so much of duty leviable on the medicines as is in excess of the duty calculated on the basis of value of medicines arrived at after allowing a discount of 15% on the retail price of the medicine specified in paragraph 19 of the 1979 Order. The condition in proviso (iii) of the notification is that the manufacturer should claim exemption under the notification in respect of all the medicines cleared by him, the retail price of which is specified in the said price list. In the part III price list appellant had made a note that 15% discount shall be deducted from retail price as per the notification. No such remark was made in the part II price list. It appears the price lists were duly approved without any modification. In other words, regarding medicines supplied to Government, appellant was paying duty on the contract prices which were evidently lower than the retail prices minus 15% and in respect of medicines supplied to other parties appellant was paying reduced duty under the notification. The audit brought out that there was violation of proviso 3 of the notification, inasmuch as appellant did not claim exemption in respect of all medicines cleared included in the price list. There is no dispute that the medicines sold to the Government and other customers by the appellant were all included in the price list in paragraph 19 of the 1979 Order. Notice was issued to the appellant to show cause why appellant should not be held liable to pay duty on the assessable value determined on the basis of the retail price under the 1979 Order price list less 15%. Appellant resisted the notice contending that there was no violation of proviso 3 of the notification as the Government was a class of buyer distinct from the other buyers and proviso (i) to Section 4(1)(a) of the Central Excises Act, 1944 (for short, the Act) recognised different prices for different class of buyers. Assistant Collector overruled these contentions and confirmed the demand and his order was confirmed by the Collector (Appeals). Hence, the present appeal.
2. The main contention of the learned counsel of the appellant is that proviso (3) of the notification as interpreted by the lower authorities would be in conflict with proviso (i) of Section 4(1)(a) of the Act and that on a harmonious reading of the provisions of the statute and the notification, proviso 3 must be understood as permitting exemption to be claimed in respect of particular class of buyers. On this basis, it is contended that the appellant's buyers fell into two classes, namely the Government on the one hand and others on the other and the benefit of the notification could be claimed in respect of the non-governmental buyers who form one class without applying the clause, to another class, namely, Government. Learned counsel also sought to place reliance on the decision in Raj Krushna Bose v. Binod Kanungo and Ors., AIR 1954 S.C. 202. In that decision apparent conflict was seen between Section 33(2) and Section 16 of the Representation of Peoples Act, 1951 and it was held that in the absence of a non obstente clause, it is the duty of the courts to avoid head on clash between the two provisions and whenever it is possible to do so, to construe provisions which appear to be in conflict so that they may harmonise.
3. Section 4(1)(a) of the Act lays down the basis of valuation for the purpose of reckoning duty. Proviso (i) reads thus :-
"(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers."
It is apparent that where as per trade practice in relation to particular type of goods, the goods are sold at different prices to different classes of buyers other than related persons, each such price shall be deemed to be normal price in relation to such class of buyers. Proviso (iii) to the notification reads thus :-
"(iii) the manufacturer claims exemption under this notification in respect of all the medicines cleared by him, the retail price of which is specified in the said price list."
The proviso makes it clear if the manufacturer desires to claim the benefit of the exemption notification, he must claim exemption in respect of all medicines cleared by him, the retail price of which was specified in paragraph 19 of the 1979 Order. The notification is an exemption notification issued under Rule 8(1) of the Central Excise Rules, 1944, exempting Patent or Proprietary Medicines falling under Item 14E from so much of the duty of excise as is in excess of the amount of duty calculated on the basis of the value of such medicines arrived at after allowing a discount of 15% on the retail price of the said medicines specified in the price list referred to in paragraph 19 of the 1979 Order.
4. We are unable to see any conflict between proviso (iii) to the notification and the first proviso to Section 4(1)(a) of the Act. The argument proceeds on the basis that the notification prescribes an alternate mode of determining assessable value. Learned counsel for the appellant in this connection placed reliance on the decision of the High Court of Calcutta in East Anglia Plastics (India) Ltd. v. Collector of Central Excise, Calcutta-Orissa, 1983 (12) E.L.T. 126 where it was held that notification under Rule 8(1) of the Rules cannot prescribe a mode of valuation different from that contemplated by Section 4 of the Act. We do not think this decision can apply to the facts of the case. Notification No. 245/83 does not prescribe any alternative mode of valuation. The purpose of the notification was to grant duty relief to manufacturers of patent or proprietary medicines. Duty in excess of the amount stipulated in the notification was exempt. The amount stipulated was the amount of duty calculated on the basis of value of medicines shown in the official retail price list less 15% discount. Duty must be calculated on this amount and the difference between the duty calculated at the tariff rate and this amount of duty would be the extent of relief. The method given in the notification is only to quantify the extent of reduced duty payable and the extent of duty relief. It does not prescribe method of valuation alternative to Section 4 of the Act. Therefore, the question of conflict being resolved by reading the two provisions harmoniously would not arise.
5. Once it is seen that the scope of the notification was only to grant limited exemption from payment of duty, it would follow that exemption cannot be forced on an unwilling manufacturer. The manufacturer is told that the Government would grant exemption to a particular extent provided he claims the exemption in respect of all medicines the retail price of which is specified in the said price list. Admittedly, the retail prices of all the medicines sold by the appellant to Government and other customers are shown in the statutory price list. The purpose of proviso (iii) of the notification is not interfere with the method of valuation prescribed by Section 4 of the Act but to insist that the manufacturer cannot claim exemption under the notification only in respect of part of the medicines cleared by him. Either he avails the benefit of exemption in respect of all medicines cleared by him (that is those which find place in the statutory price list) or he has to pay duty at the tariff rate on all medicines cleared by him. This choice is available to every manufacturer. It is for him to exercise the choice, after working out the pros and cons of the exemption and the restrictions. The effect of proviso (iii) is not to interfere with the method of valuation stipulated in Section 4 of the Act. Proviso (iii) of the notification does not mean that the appellant in respect of drugs included in part II price list for supply to Government should pay duty at assessable value different from that prescribed in Section 4 of the Act. It only means that even in respect of such goods appellant must claim exemption. It is contended on behalf of the appellant that manufacturers are constrained to reduce the prices drastically for supply to Government and, therefore, the net duty payable under the notification in respect of all goods supplied to Government may be higher than the duty payable otherwise on such medicines. It is clear that the Government was fully aware of this position. It was evidently the intention of the Government that the manufacturers of medicines who desire the benefit of exemption should forego benefits they may otherwise have and accept the standard pattern of duty povided in the notification. We would like to emphasise again that no manufacturer is compelled to avail the benefit of the exemption notification. It is a matter of choice and it is for him to exercise the choice on the basis of his own calculations. We, therefore, find no conflict as suggested by the appellant.
6. We are also not able to agree that proviso (iii) must be understood in such a manner as to permit a manufacturer not to claim exemption in respect of medicines which are included in part II price list. The language of proviso (iii) is clear and unambiguous. It says "in respect of all the medicines cleared by him" provided their price is stipulated in the statutory price list. The words "all the medicines cleared" are comprehensive enough to include all medicines cleared, irrespective of the class of buyers.
7. The next contention is that if it is found that appellant was in error in availing benefit of the notification in regard to clearances made to nongovernmental buyers and the Department was in error in approving the price lists, action should have been taken to withdraw the benefit and claim differential duty and action cannot be taken to compel the appellant to pay higher duty on the goods cleared by way of sale to Government. The position, as we have already indicated, is that any manufacturer who desires exemption under the notification must claim the benefit of the exemption notification in respect of all medicines cleared by him, the retail prices of which are specified in the statutory price list. The appellant did not claim exemption in respect all such medicines. Therefore, the approval of the price lists was not in order. This would mean that appellant would be entitled to pay duty on the supplies made to Government on the basis of appropriate assessable value, namely, based on contract prices and would not be entitled to the benefit of the notification in regard to supplies made to non-governmental buyers. In other words, instead of requiring the appellant to pay differential duty on supplies made to Government, the Department should have required the appellant to pay differential duty on supplies made to non-governmental buyers. But it is also to be seen that the basis of show cause notice was that the appellant was bound to claim the benefit of the notification in respect of all medicines cleared by him and not merely in respect of part of the medicines cleared. The manufacturer was all along aware of the stand taken by the Department. We, therefore, feel that in order to do justice between the parties, we should give proper direction which will relieve the appellant of the liability to pay differential duty on the supplies made to Government, but would make the appellant liable to pay differential duty, if any, on the supplies made during the period to non-governmental buyers. The peculiar facts and circumstances compel us to hold that this is implicit in the show cause notice and the appellant will not be in any way prejudiced by this direction, since the appellant was all along aware that if the interpretation of proviso (iii) of the notification canvassed was not accepted, the benefit of the notification will be lost.
8. In the result, we set aside the impugned orders and remit the case to the jurisdictional Assistant Commissioner who shall proceed to determine the differential duty payable by the appellant in regard to medicines supplied to non-governmental buyers during the relevant period on the basis that appellant would not be entitled to the benefit of the exemption notification. Before doing so, he shall give particulars of the demand to the appellant and allow personal hearing to the appellant. Appeal is allowed as indicated.