Bombay High Court
Poona Beverages Pvt. Ltd. vs A.K. Bandopadhyay And Others on 1 January, 1800
Equivalent citations: 1980(6)ELT193(BOM)
JUDGMENT Chandurkar, J.
1. The Petitioners are manufacturers of aerated waters. excise duty was for the first time subject to duty at 10% ad valorem with effect from 1st of March, 1970. the selling price of Coca cola and Patna orange, according to the Petitioners, was Rs. 9.50 per crate of 24 bottles and Rs. 4.80 per crate of 24 bottles for Patna soda. For the purposes of determination of assessable value, apart from other deductions claimed from the amount of Rs. 9.50 and 4.80, the Petitioners claimed a deduction of Rs. 1.50 per crate of 24 bottles on account of distribution which according to the Petitioners, could not be taken into account for assessing the value of the aerated waters for the purpose of excise duty. The Superintendent of Central Excise, Assessment Group "B" Pune II Division, allowed exclusion of octroi, sales tax and central excise from the price of Rs. 9.50 and Rs. 4.80 and for the purpose of excise duty, the value of Coca cola and Fanta soda. The Superintendent sees to have taken views that under section 4 of the Central Excises and Salt Act, 1944 (hereinafter referred to as "the Act " ) deduction only on account of trade discount and the amount of duty payable if they are included in the price could be allowed.
2. The Petitioners appealed against this assessment to the Appellate Collector of Central Excise. The Appellate Collector took the view that under the Explanation to section 4, no deduction except the traded discount and the amount of excise duty payable on the goods from the price determined either under section 4(a) or 4(b) was permissible. The Appellate Collector also took the view that the sum of Rs. 1.50 uniformly charged cannot be held ass a freight charged for the transport facilities provided at the request of or on behalf of the buyers at the latter's place as a part of its business due to the peculiar nature of the goods. The Petitioners' appeal therefore came to be rejected.
3. The Petitioners then filed a revision application to the Government of India. The Government of India while disposing of the revision application seems to have taken the view that the freight charges were not shown separately in any invoice and reference was made to Invoice No. 473 dated 16-4-1973k which indicated the price to be Rs. 9.50 per case. Thus the Government of India took the view that it was not possible to violate freight and other charged from the sale price. It was further observed in the revisional order that on account of this fact, no rebate for freight charges was admissible. The order then further reads.
"The Government of India also observes that when the cost attributable on the core is not determinable and is not indicated in the Petitioners' documents the case laws quoted by them in the argument are not relevant".
The revision application thus came to be dismissed. The Petitioners have now challenged the orders of the Central Excise authorities in this petition.
4. Shri Taraporewalla has argued that the matter is now expressly covered by a decision of this Court In India Tobacco Company Ltd. v. The Union of India. Misc. Petition No. 203 of 1974 decided on 15th December 1975 from the judgment of which decision some para are reproduced in September, 1979 issue of Excise Law Time, p. J 476. In the India Tobacco Company Limited cases, the Division Bench are concerned with the question as to whether the while determining the assessable value of a manufactured product for the purpose of determining the excise duty payable upon it marketing and distribution expenses, advertising expenses, freight on cigarette and smoking mixture (the articles manufactured in that case were cigarette and smoking mixture (the articles manufactured in that the case were cigarettes smoking mixtures and other tobacco product) and interest could be deducted from the wholesale price charged by the company to its wholesale dealers for the purpose of determining the assessable value under section 4(a) of the Act. the contention of behalf of the assessee in that case was the excise was a tax on the production and manufacture of goods in India and therefore while arriving at the assessable value of the goods also produced or manufactured fro the purpose of leaving duty under section 4(a) of the Act. the post- manufacturing expenses which are referable to post-manufacturing activity were require to be excluded. the contention was that for arriving at the wholesale cash price of excisable commodity under section 4(a) of the Act any loading of the price with the items of expenses which are referable to post-manufacturing activity was not permissible. It was pointed out by the Division Bench that while section 3(1) of the Act was a charging section, which created a liability to pay the excise duty on the goods produced or manufactured in India and the to pay the excise duty on the goods section 4 of the Act was in the nature of machinery provision and therefore the anything said in 4 must be so read as to carry out the basic concept of the excise duty and not so as to militate against that concept.
5. Referring to the provision of section 4 and to the deeming provision contained in section 4(1)(a), the Division Bench observed as follows:
"In our view, therefore, there is nothing either the in deeming provisions nor in the language of the section which suggests that while arriving at the assessable value of manufactured article the expenses or the profits attributable to post-manufacturing activity or non-manufacturing activity should not be excluded for the purpose of calculating the excise duty payable on such article."
Reading section 3(1) and section 4 together, the Division Bench took the view that the post-manufacturing cost or post- manufacturing profit will have to be excluded from the wholesale price charged by the Company to its wholesalers for the purpose of arriving at the assessable value of the goods manufactured by the company. The Divisional Bench referred to the contention of the counsel for the department that the expenses incurred by the company under any of the four heads viz. (a) Marketing and Distribution expenses,(b) Advertising expenses, (c) Freight and (d) Interest could not be allowed to be deducted from the wholesale price for calculating the excise duty under section 4(a) of the Act because these expenses incurred under the aforesaid heads were not all referable to post- manufacturing activity. The Division Bench further noticed the Departments' contention that so for as freight was concerned the case of the Company was that it is usually entered into agreements with its wholesalers under which one or the other type of delivery was effected, namely (a) delivery at the factory gate where the wholesalers by their carriers in which case there was no question of any freight would enter into the price charged a uniform price to its wholesalers there was no question of such wholesale price including any element of freight and therefore no deduction of freight could be claimed by the company from the wholesale price charged by it to its wholesalers. Rejecting the contention of the Counsel for the Department that the no part of the advertising expenses incurred by the Company could be deducted with reference to the freight, the Division Bench observed as follows:
"Similarly as regards freight thought it is true that in both types of the delivery generally effected by the petitioner- company to its wholesalers a uniform price is being charged, that by itself would not be a valid ground to refused the relief of deduction. The mere fact that the same price is the charge both at factory. gate and also at the godowns of the wholesalers would not mean that the price charged at the factory gate would always to be exclusive of non-manufacturing elements of freight. It is quite possible that the petitioner-company may have for the purpose of maintaining goods relations with its wholesalers fixed a uniform price in both types of delivery, but at the same time in fixing the uniform price may have struck an average in regard to freight. It would, therefore, be a matter of investigation and ascertainment weather the wholesale price charged by the petitioner-company at its factory gate includes non-manufacturing elements of freight."
6. Shree Taraporewalla seems to be right when the contends that where goods are delivered to wholesalers at a fixed price which according to the manufacturer includes an elements of freight to be charged to the wholesaler as the part of the price then such charges on account of freight were liable to be deducted for the purpose of determining the assessable value fro the purpose of the charging excise duty. The question does not seem now to be open to debate on view of the decision of the The Divisional Bench which is binding on us. We may also observe that shri Sethna appearing on behalf of the Respondents has fairly conceded that the question weather freight should be deducted from the price charged to the wholesalers for the purpose of determining the assessable value of the manufactured product stand now concluded by the decision of the The Divisional Bench in the India Tobacco Company's case.
7. Now, so far as the facts of the present case are concerned, the claim of the Petitioner was that the sale to the wholesalers and the retailers were made at the same price of Rs. 9.50 for two kinds of drink and at the Rs. 4.80 for the third kind of drink and the price charged to the wholesaler and the inclusive of the freight which was uniformly spread over at the 50 per crate of 24 bottles. This freight would clearly be in the of post- manufacturing expenses and the mere fact that the it has not been separately shown either in the Invoice or in the bills will not make any difference to the legal position that any amount expended or charged to the customers, whether a wholesaler or a retailer on account, of freight, could not validly and legally be included so far as the wholesaler or a retailer on account of freight could not validly and legally be included so far as the wholesale cash price is concerned for the purpose of determining excise duty payable by the Petitioner.
8.Shri Taraporewalla then contended that at no earlier stage of the proceedings has any authority which has dealt with the matter denied the correctness of the statement of the Petitioner that Rs. 1.50 was the amount charged by the Petitioners to the wholesaler and the retailer on account of the transport charges. According to the learned Counsel, it must therefore be the assumed that the correctness of this figure was admitted the by the authorities. The order of all the three authorities as however, do not show that any attempts was made to ascertain the exact amount which was charged on account of the freight a a part of post-manufacturing expenses. Indeed, that occasion does not seem to have arisen at any stage, at all. because all the authorities have proceeded on the legal position that the expenses incurred on account of freight could not be deducted from the wholesale price for determining the assessable value. The proper order in this case would therefore, be to set aside the order of the three authorities which held that the Petitioners were not entitled to a deduction of the amount spent or charged to the wholesalers or retailers how much amount was charged, through it is not doubt true, according to the Petitioner that the amount charged was Rs. 1.50. This will have to be sustained by the Petitioners before the appropriate authorities, if necessary, by producing the account books or such other evidence that the Petitioner may desire to produce in support of their contention that Rs. 1.50 was the freight uniformly charged to the wholesaler and the retailers.
9. Both the parties agree that the matter may be remanded to the Assistant Collector Excise, who will now go into the quantum of the freight which, according to the Petitioners was charged to the wholesalers and retailers, the Petitioners will them be entitled to a deduction of the amount so determined. subject of course to their right of appeal if any, for the purpose of determining the assessable value on which the Petitioners will be liable to pay excise duty.
10. Rule absolute in terms of prayer (a) of the petition except that no order for refund of the amount is possible in the view we have taken. The Petitioners would be entitled to the cost of the petition.