2004 Supreme(SC) 1278

2004(6) Supreme 564
Supreme Court of India
(From Central Excise Customs and Gold (Control) Appellate Tribunal, New Delhi)
Ruma Pal & P. Venkatarama Reddi, JJ.
M/s. I.T.C. Ltd. —Appellant
versus
Commissioner of Central Excise, New Delhi & Anr. —Respondents
Civil Appeal No. 70 of 1999
With
C.A. No. 6101 of 1998
Decided on 10-9-2004
Counsel for the Parties :
For the Appellant : S. Ganesh, Sr. Advocate, Ravinder Narain and Rajan Narain, Advocates.
For the Respondents : B.K. Prasad, Advocate.

Headnote:Central Excise and Salt Act, 1944 —Section 4—Central Excise Rules, 1944—Rule 8(1)—Additional Duties of Excise (Goods of Special Importance) Act, 1957—Section 3(3)—Standards of Weights and Measures Act, 1976—Standard Weights and Measures (Packaged Commodity) Rules, 1977—Excise duty payable on cigarettes—Interpretation of two exemption notifications of 1983 and 1985—Prior to 1983 excise duty was leviable on cigarettes at rates specified under Tariff Item 4 of First Schedule to the Act—Dispute relates to excise duty payable by appellant for the period 1983 to 1987 on cigarettes manufactured by it—Appellant cleared cigarettes manufactured by it during this period after paying excise duty on the basis of the Maximum Retail Price which was exclusive of local taxes printed by the appellant on each cigarette packet—Searches carried out by Central Excise Officers at various premises of appellant—Show cause notice alleging that concessional rates of duty under the notifications had been wrongly availed of by the appellant—Allegations that appellants had printed lower sales prices with the intention of evading payment of appropriate duty—Whether impugned demands raised are justified—(No).

       Held : Exemption was granted in respect of cigarettes which were (i) packed in packages for retail sale of 10, 20, 50 or any higher number (being a multiple of 50), (ii) bearing a declaration specifying the maximum sale price (exclusive of local taxes) at which such package may be sold. The rate of exemption from excise duty was to be calculated on the basis of the unit price of 1000 cigarettes, the unit or the adjusted sale price being arrived at by dividing the sale price of the package by the number of cigarettes in the package. The rate of exemption differed with the price of the cigarettes and was granted in three slabs depending on whether the sale price per thousand cigarettes was Rs. 50 and under, or was between Rs. 50 and Rs. 60 or was Rs. 60 and above. (Para 11)

       In the present case, the two notifications are statutory fiscal provisions. They require that excise duty on cigarettes must be levied on “adjusted sale price”. “Sale price” has in turn been defined in relation to a package of cigarettes as meaning the maximum price (exclusive of local taxes only) at which such package may be sold in accordance with the declaration made on such package. (Para 26)

       It would be doing violence to the language of the Notification if “In accordance with” is taken to mean “irrespective of”. The argument of the Revenue and the reasoning of the Division Bench also overlooks the phrase `made on the package’. According to the notification it is the declaration made, or the MRP as printed, on the package which alone is the sale price and which furnishes the foundation for the calculation of the adjusted sale price. There is no other basis provided. The construction put by the Tribunal is contrary to the words used, an exercise in interpretation which is clearly impermissible and against the well-established cannon of construction that in construing any statutory provision, words may not be added or amended but must, if reasonably possible, be construed as they stand. (Para 29)

       What the Revenue would have us do and what the Tribunal has fact done, is to shift the basis for levy of excise duty under exemption notification from the MRP actually printed on the package a price which is to be deemed to be the printed price. All this is done in order to avoid what the Tribunal considered could not have been object of the notification viz., “a situation where it would be open to manufacturer to deliberately and successfully “under declare” the price by declaring a price less than the price at which he knows the packages may be sold”. The object of the notification was to firmly fix the basis for levy we have expatiated later and the interpretation we have put on notification is in keeping with this object. Furthermore the reasoning the Tribunal, apart from being contrary to the principles enunciated in Innamuri Gopalan (supra), proceeds on the basis that ‘may’ means “likely”, an interpretation which cannot be correct for the reasons already stated. As against this if we were to construe the word ‘may’ as ‘permitted’, which is the plain meaning of the word given the context in which it appears, the consequences would not be absurd as apprehended by the Tribunal. According to the notification, the retailer is permitted to sell in accordance with the declaration made on the package. Permission could be contractual or statutory. If the permission were a contractual term, it would have to be established that there was privity between the manufacturer and each retailer. This is not the case of either party. The statute which forbids the sale of commodities including cigarettes, otherwise than, or permits such sale only, in accordance with the printed MRP is the Standards of Weights & Measures Act and the Packaged Commodity Rules. This was accepted by the Tribunal (Paras 31 and 32)

       The SWM Act as well as the Packaged Commodities Rules have been enacted to protect the consumers who are entitled to pay only such price as has been printed thereon. The purpose of printing the MRP on cigarette packages is to achieve a standardization of prices throughout the country and to inform consumers of the appropriate price of the product. There is no scope for “under declaration” because the consumer can insist on the retailer abiding by the printed MRP. Provisions for penalties under the Act on the retailer ensures this. It is not open to the retailer who may be proceeded against for selling above the printed MRP to contend that it was incorrect or false, nor can the retailer defend any violation of the printed MRP by asking for an enquiry into its reasonableness. If adhering to the MRP unreasonably narrows the retailer’s margins, the retailer can demand a reduction in the price from the wholesaler or desist from selling the product. This applies similarly to the wholesaler, whose feedback to the manufacturer will either force the manufacturer to raise the MRP or lose distributors. Given these serious economic consequences, the manufacturers cannot print a whimsical or fanciful figure as the MRP. The result is a system of incentives and enforcement that begins with the consumer. When this system is properly enforced, levying tax on MRP according to the notification clearly does not lead to absurd consequences. (Para 36)

       The Tribunal itself noted that the intention underlying the Notification was to get over “hassles arising on the question of determination of assessable value under Section 4(1)(a) of the Act and the admissible deductions”. But then it held that the switch over was made from “assessable value to `quasi-specific duty’. Duty is either specific or not. Since it is not specific according to the Tribunal, it would be open to the Department to go behind the printed prices and find out the “effective prices” at which the retailers may sell the packages to consumers and treat such prices as the printed prices for the purpose of determining the rate of duty applicable. The consequences of this interpretation by the Tribunal would be starting. There is no dispute that the Notification envisages a single retail price in respect of certain brands of cigarettes. It is this single retail price which has to be printed on the package. If one were to accept the High Court’s prima facie view, the printed MRP should reflect the actual price at which the particular kind of cigarette is sold throughout the country. The patent impossibility of this was acknowledged by the Tribunal which held that the actual price at which the cigarettes were sold could not “lawfully or logically” be the printed MRP because “the manufacturer has limited or little control over the actions of the retailers” who are, in the case of the appellant, “about a million in number”; that the appellant could not be held responsible for “the tendency of the retailers to charge higher than the printed price so as to secure larger margin” and that different prices may be actually charged for the same brand all over the country. Therefore, the Tribunal held that the printed MRP should have been the “reasonable price” at which the cigarettes could be sold. This led the Tribunal and the adjudicating authority to go into an elaborate exercise to determine what should be that single reasonable price for the entire country which should have been declared and printed by the appellant on the packages. In our opinion the outcome of this would be equally illogical. It envisages an excise officer in one part of the country determining what would be the reasonable market price through out the country for that particular brand, an exercise which the Tribunal itself concedes would require the examination of the cost data and market considerations and would be a “very complicated and time consuming impractical exercise which was rightly not provided for”. And yet according to the Tribunal’s and the Revenue’s interpretation of the notification, the Excise Officer would have had to do just that. Apart from the patent impracticability of the matter, the question whether the price so fixed by the Excise authority is `reasonable‘ or not would itself be justiciable with the consequent blockage of revenue in the quagmire of litigation. That is precisely what the Notification had sought to avoid. The certainty of specific rates which was sought to be achieved by the notification has been undone by the adjudicating authority and the Tribunal. The notification had introduced a system for levy of excise duty on an experimental basis. If the experiment was a failure for whatever reason, it was open to the respondents to do away with it and replace the system by some other as it did in 1987. But as long as the notification stood, it had to be given effect to. (Paras 50 to 52)