GOVERNMENT OF INDIAS vs MADRAS RUBBER FACTORY LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1995 Supreme(SC) 642

SUPREME COURT OF INDIA
BEFORE B.P. JEEVAN REDDY, SUHAS C. SEN AND G.T. NANAVATI, JJ.
GOVERNMENT OF INDIA AND OTHERS
Versus
MADRAS RUBBER FACTORY LTD. AND OTHERS
Civil Appeals No. 3195 of 1979{From the Judgment and Order dated 20-6-1979 of the Kerala High Court in W.A. No. 302 of 1978 : (1979) 4 ELT (J) 397} with Nos. 4731-32, 793 of 1984, 3020 of 1989, 165-67 of 1988, SLP(C) No. 14616 of 1990, R.P. (C) No. 532 of 1989 in C.As. Nos. 1914 of 1989, 2547-2550, 4046-62 of 1982, T.C. (C) Nos. 14-15 of 1989, C.As. Nos. 2458-61, 14777 of 1982, 6416 and 2901 of 1981, 50 of 1978, 1285 of 1976, 1307 of 1977, 2642-50 of 1979, 1097 of 1981, SLP(C) Nos. 6841 and 10794 of 1982, T.C. (C) Nos. 25-28, 79 of 1982, C.As. Nos. 3509 of 1982, 2269, 3119-20 of 1980, T.C. (C) Nos. 80-83 of 1982, C.As. Nos. 6811 of 1983, 2468 of 1991, 5373 and 5375 of 1995
Decided on 3-5-1995
Advocates appeared:
M. Chandersekharan, Additional Solicitor General, Harish N. Salve, A.B. Divan, Soli J. Sorabjee, F.S. Nariman and C.S. Vaidyanathan, Senior Advocates (A. Subba Rao, V.J. Francis, M. Gowri Sankaramurty, N.K. Bajpai, V.K. Verma, C.V. Subba Rao, P. Parameswaran, Vasudev, Ms A. Subhashini, Krishna Kumar, Darshan Singh, Ms Malini Sud, S.K. Gambhir, Vivek Gambhir, Ms M. Grover, P.H. Parekh, S. Fazl, Ms P.S. Shroff, Ms Monika Sharma, S.S. Shroff, S. Ganesh, Ravinder Narain, Rajan Narain, Ms Amrita Mitra, Ms S. Bhatnagar, Rajiv Dutta, M.K. Michael, Raju K. Lukose, K.R. Nambiar, S.C. Sharma, K.V. Mohan, T.V.S.N. Chari, Sri Narian, K.J. John, Mohan Lal Verma, H.K. Puri, K.C. Dua and N.K. Agarwal, Advocates, with them) for the appearing parties.

Headnote:
Central Excises and Salt Act, 1944 - Section 4 - Orders of assessment - Determination of value for purposes of duty - Interpretation of Section 4 of Act, 1944 - Main issue, referred to as "central issue", in that case was "whether the value of an article for the purposes of the excise levy must be determined by reference exclusively to manufacturing cost and the manufacturing profit of the manufacturer or should be represented by the entire wholesale price charged by the manufacturer - Appeals and petitions were allowed under what are called "format orders" and the matters remitted to assessing authorities with a direction to quantify and redetermine the permissible deductions in accordance with the law - Held, Even in the cum-duty sale price, the same principle must be followed to arrive at the assessable value. To compute an excise duty as a predetermined amount without making the permissible deductions for reducing the cum-duty selling price is a fallacy both legally and mathematically as demonstrated above. The ad valorem excise duty can only be computed after reducing the assessable value by permissible deductions and then applying the tariff rate to the assessable value. To reverse this sequence is to misinterpret the scheme and mode of levy of excise duty on the assessable value - Back to the Assistant Collector of Central Excise concerned who shall decide the said question in accordance with law and on the basis of the material that may be placed before him. Similar direction should follow in Synthetics & Polymer Industries v. Union of India{CA No. 1307 of 1977} where too the dispute is whether the packing is durable and returnable. The matter shall go back to the Assistant Collector of Central Excise concerned who shall decide the said question in accordance with law and on the basis of the material placed before him – Appeals allowed

JUDGMENT

B.P. JEEVAN REDDY, J.- Leave granted in SLPs (C) Nos. 10108 of 1980 and 4041 of 1981.

2. Having enunciated the principles governing the interpretation of Section 4 of the Central Excises and Salt Act, 1944 as it stood before and after the Amendment Act XXII of 1973 in Union of India v. Bombay Tyre International Ltd.{(1984) 1 SCC 467}, this Court (the Bench comprising P.N. Bhagwati, R. S. Pathak and A.N. Sen, JJ.) took up individual cases for disposal on 3-5-1984. The appeals and petitions were allowed under what are called "format orders" and the matters remitted to assessing authorities with a direction to quantify and redetermine the permissible deductions in accordance with the law enunciated by them in their opinion in Bombay Tyre International{(1984) 1 SCC} as clarified in Union of India v. Bombay Tyre International (P) Ltd.{(1984) 17 ELT 329 (SC)} Certain other directions were also given with respect to the manner in which the assessing authorities were to proceed in the matter of determining the value to which it is not necessary to refer at this stage. The Assistant Collectors (Central Excise) accordingly passed orders allowing certain claims for deductions and rejecting certain others. In terms of the format orders, the assessing authorities forwarded the orders of assessment made by them to this Court along with the objections filed by the assessees in each case. The Revenue too filed certain objections. The matters were posted before a Bench of this Court comprising P.N. Bhagwati, C.J. and V. Khalid, J. for finally determining and deciding several issues arising between the parties. By their judgment dated 20-12-1986, the Bench disposed of the appeals (Asstt. CCE v. Madras Rubber Factory Ltd.{1986 Supp SCC 751). Contending that the said judgment is not in accord with the judgment in Bombay Tyre International the Revenue filed review petitions, which came to be allowed by a Bench comprising R.S. Pathak, C.J. and L.M. Sharma, J. on 1-5-1989{Reported at (1989) 3 SCC 238}. By this order, the judgment and order dated 20-12-1986{1986 Supp SCC 751} was recalled and the appeals restored to their original number. It was directed that the appeals be listed again for fresh consideration. It is pursuant to the order dated 1-5-1989{Reported at (1989) 3 SCC} that these appeals have now come up before us for final disposal.

Section 4 as it stood before the Amendment Act XXII of 1973 and as it stands now

3. Prior to the Amendment Act XXII of 1973, which came into force with effect from 1-10-1975, Section 4 read thus:

"4. Determination of value for the purposes of duty.- Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value 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."

4. This section was practically a reproduction of Section 30 of the Sea Customs A

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