JUDGMENT

Sen, J.-This appeal raises the question as to the scope and effect of the Explanation to Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act ). The Explanation was added to clarify what would be the amount of duty which had to be deducted from the wholesale price for arriving at the assessable value of goods. The Delhi High Court in the case of I.T.C. Limited & Anr. v. Union of India1, took the view that by virtue of the Explanation only that amount of duty which was actually paid by the assessee after giving effect to various exemption notifications would qualify for deduction.

2. The contention of the appellant is that during the period in dispute, duty of excise was leviable under the Act at the rates specified in the First Schedule to the Act. Under Rule 8 of the Central Excise Rules, 1944 (hereinafter referred to as the Rules ) the Central Government had power to issue notifications for exempting the amount of duty of excise leviable on goods to the extent mentioned in such notifications. The Central Government had issued a series of notifications under which exemption was granted from levy of duty of excise. The language of the notifications provided that the goods specified in the notification shall be exempted from so much of duty of excise leviable thereon as is in excess of ... the specified amount. The contention of the assessees is that on a true interpretation of the notifications, the assessable value has to be determined first and the notification has to be applied thereafter.

2. This controversy has been dealt with in a large number of cases before the amendment of Seciton 4 of the Act. The Delhi High Court in the case of Modi Rubber Limited v. Central Board of Excise and Customs2, held that from the language of the notification it appeared that the duty of excise leviable and the assessable value of the goods had to be determined first, the relief under the notification had to be given thereafter. According to the appellant, the notifications exempted goods from so much of duty of excise leviable thereon as was specified. In order to determine the extent of the exemption, it was necessary to determine the excise duty leviable in the first instance. In a case where the price is inclusive of Excise Duty (cum-duty price) the amount of excise duty leviable under the Act has to be deducted from the cum-duty price in order to determine the assessable value. This is done without applying the notification. Therefore, before giving effect to the notification and before determining the extent of exemption available thereunder, it is necessary to finally determine the assessable value as well as excise duty leviable . This method of determining the assessable value has been accepted by this Court in the case of Bata (India) Limited v. Union of India3.

4. After these cases were decided, major changes have been brought about in the Central Excise Act. The controversy about the quantum of deduction of duty from wholesale price for the purpose of computation of value under Section 4 of the Act has been set at rest specifically by the Explanation added to Section 4(4)(d)(ii) by the Finance Act, 1982 with retrospective effect from 1.10.1975. Section 4(4)(d)(ii) with the added Explanation now stands as under:-

(d) "value in relation to any excisable goods,-

(i) x x x x

(ii) does not include the amount of the

2.

duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale ;

"Explanation : For the purpose of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be