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SUPREME COURT OF INDIA
S. RANGANATHAN, V. RAMASWAMI AND YOGESHWAR DAYAL, J.
Union of India and another, Appellants
Versus
The Century Manufacturing Company Ltd., Respondent
Civil Appeal Nos. 1432-33 of 1984, D/- 14-5-1992.
Advocates appeared :
Mr. A.K. Ganguli, Sr. Advocate, Mr. P. Parmeshwaran, Mr. Dilip Tandon and Ms. A. Subhashini, Advocates with him, for Appellants; Mr. C.M. Lodha, Sr. Advocate, Mr. S.S. Shroff, Mr. Rajiv Shakdhar and Mr. S.A. Shroff, Advocates with him, for Respondent.
Central Excises & Salt Act, 1944 - Section 3(2) - Except in respect of trade - In determining price of any article under this section no abatement or deduction shall be allowed except in respect of trade discount and amount of duty payable at time of removal of the article chargeable with duty from factory or other premises aforesaid - Century Spinning and Manufacturing Co. Ltd - Respondent hereinafter referred to as assesses challenged fixation of tariff values of sulphuric acid and liquid chlorine at amounts referred to earlier - Its contention developed in three steps was this (a) that an excise duty being a duty on manufacture or production its levy can be based on cost of production or manufacture together with any margin of profit manufacturer may be able to make when he sells goods in a wholesale market at or near factory gate (b) tariff value fixed under Section 3(2) can also be only on this basis and cannot be based on sale price of the goods, much less on a weighted average sale price as in the present case (c) if S. 3(2) were to be interpreted differently in a wide manner as empowering the Central Government to fix tariff values wholly at its discretion - unfettered by formula indicated in (a) above at any figure it chooses sub-section should be struck down as violative of article 14 as there are no guidelines indicated in the statute for fixation of such tariff value - Held, That weighted average so fixed exceeds manufacturing cost and profit of a particular manufacturer can be no reason for doubting its validity - Equally there is no acceptable logic in High Courts suggestion that it should be fixed at lowest of prices at which manufacturer is able to sell his goods in wholesale market - To apply such a measure will restrict the fixation of value at figures even less than those that can be arrived at under S. 4. whole purpose of S. 3(2) is to enable the revenue to free itself from shackles of S. 4 in cases where as here Government feels that application of that section would lead to difficulties and harassments - Criticism that tariff value has been manipulated to enhance rate of duty has also no force - Central Government has undoubted power to enhance the rates and validity of notification having such an effect is not open to challenge even if it is done under guise of fixing a tariff value - But as already pointed out by us there is no such guise or facade in this case and tariff value has been fixed on basis of relevant criteria having a nexus to the value of goods - Appeals allowed.
Judgment
S. RANGANATHAN, J.:- These two appeals under the Central Excises & Salt Act, 1944 (hereinafter referred to as the Act’) raise an interesting question as to the vires and interpretation of S. 3(2) of the Act. Under that provision, the Central Government issued notifications dated 28-11-1970 and 26-7-1971 fixed the tariff value on the basis of which excise duty was to be levied on sulphuric acid and liquid chlorine respectively. In respect of the former, the tariff value fixed was Rs. 260 per metric tonne where the strength of the acid was 93 to 99 and a proportionately lower figure where the strength of the acid was less. The tariff value for chlorine was fixed at Rs. 500 per metric tonne.
2. It is necessary to set out the provisions of Ss. 3 and 4 of the Act, as they stood at the relevant time, to enable a proper understanding of the issue raised. They read thus:
3. Duties specified in the First Schedule to be levied.
(i) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and. a duty on salt manufacturer , or imported by land into, any part of in(iia as, and at the rates, set forth in the First Schedule.
(IA) xx xx xx xx xx xx xx
(2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles enumerated, either specifically or under general headings in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force.
4. Determination of value for the purpose of duty:
Where, under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be -
(a) the wholesale cash price, for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory, or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or
(b) where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at such place, at any other place nearest thereto.
Explanation - In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid."
3. The effect of these two sections read with the definition in S. 2(d) of, and the First Schedule to, the Act may be summarised ;ins: Excise duty is charged on all goods specified in the First Schedule to the Act. It is a duty on such goods produced or manufactured in India. It is levied at the rates specified in the First Schedule. These rates are charged in some cases on the basis of length, area, volume and weight but, in most cases, the rate is ad valorem i.e. dependent on the value of the goods. We are concerned here with the last of these modes of rate fixation where the rate is applied to the value. Naturally, in such cases, the crucial question is: What is the value of the goods to which the rate is to be applied? This question is answered in two ways. S. 3(2) empowers the Central Government, in such cases, to fix the tariff value by Gazette notifications issued from time to time. S. 4 empowers the assessing authority to determine the value of the excisable goods in individual cases on the basis of the wholesale
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