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SUPREME COURT OF INDIA
P.N. Bhagwati, CJI., V. KHALID, J.
Civil Appeals Nos. 3195 of 1979, 4731-4732 of 1984 (SLP No. 1409-1410 of 1977), Spl. Leave Petn. (Civil) No. 10108 of 1980, Civil Appeal No. 793 of 1984, D/- 20-12-1986.
Assistant Collector of Central Excise, others, Appellants
Versus
Madras Rubber Factory Ltd., Respondent.
AND
Superintendent of Central Excise, Kottayam, others, Appellants
Versus
Madras Rubber Factory Ltd., Respondent.
AND
Union of India, others, Petitioners
versus
Madras Rubber Factory Ltd., Respondent.
AND
Madras Rubber Factory Ltd., Appellant
Versus
Collector of Central Excise, Madras, Respondent.
Excise Act, 1958 - Section 4, 4(a), 4(1)(a), 4(b), 4(1)(b), 4(4)(d)(ii), 4(4)(d) - Central Excises and Salt Act, 1944 - Section 35L - Rubber Factory Products - Excise Duty - Selling Price - Sales Tax - MRF has four factories Kottayam (Kerala) Madras (Tamil Nadu) Arkonam (Tamil Nadu) and Goa (Union Territory) engaged in manufacture of automotive tyres, tubes and other rubber factory products - Each of these factories are under jurisdiction of different Assistant Collectors - Whether price to Defence Department ex-factory gate is to be considered as wholesale cash price under old Section 4 - Whether Excise duty should be first deducted or permissible deduction should be first deducted from selling price for re-assessments - Whether on account of trade discount or on account of cost of secondary packaging or sales tax or other taxes - How excise duty has to be deducted, whether after deducting permissible deductions – Held, Petitioners basis that assessable value is to be arrived at by taking into consideration same amount of excise duty which was hypothetically pre-determined and added to factory price and that this element in an attempt to compute assessable value should naturally be deducted first is putting cart before horse - Excise duty is only known as a ratio of assessable value when an ad valorem duty is included in cum duty paid selling price - Cum-duty paid sale price being available for computation and a known value of deductions permitted being also known, assessable value and excise duty as a ratio of assessable value can be only decided by first deducting permissible deductions, from cum-duty paid selling price and thereafter computing value in accordance with equation - This has both a legal and a mathematical basis - If pre-determined amount of excise duty as per illustration given by MRF Ltd. is first deducted, equation will not tally - Excise duty cannot be computed unless permissible deductions are first made - Assessable value is arrived at only after permissible deductions are made - Excise duty is a ratio of assessable value - Ad valorem excise duty is computed only on assessable value after arriving at such assessable value by making proper permissible deductions - Excise duty cannot be computed without proper determination of assessable value, namely assessable value exclusive of permissible deductions - Even in cum-duty sale price, same principle must be followed to arrive at assessable value - To compute an excise duty as a pre-determined amount without making permissible deductions for reducing cum-duty selling price is a fallacy both legally and mathematically - Ad valorem excise duty can only be computed after reducing assessable value by permissible deductions and then applying tariff rate to assessable value - Court direct assessing authorities to quantify and re-determine permissible deductions in accordance with our present Judgment - Assessment, MRF Ltd. already having been required to file permissible deductions/amendments to price lists within a period of one month in last instance is once again required by us to file fresh price lists in light of our present Judgment, within one month for all the periods under consideration - Assessing authorities after hearing assessee would quantify correct assessable value in light of our Judgment - In making assessments for each of periods, authorities would include set off in respect of further refunds, if any, allowable on account of fresh deductions permitted and/or already allowed to the assessee - Order accordingly.
Judgment
BHAGWATI, C.J.I. :- The above cases are involving a Company known as Madras Rubber Factory Ltd. (popularly known as MRF Ltd.). MRF has four factories Kottayam (Kerala) Madras (Tamil Nadu) Arkonam (Tamil Nadu) and Goa (Union Territory) engaged in the manufacture of automotive tyres, tubes and other rubber factory products. Each of these factories are under jurisdiction of different Assistant Collectors. The 4 proceedings arising for our consideration are as under :
(i) Civil Appeal No. 3195/79 is an appeal by certificate filed by the Union of India through the Assistant Collector of Central Excise, Kottayam against the Judgment dated 20th June 1979 of the Division Bench of the High Court of Kerala from Writ Appeal No. 302 of 1978 : (reported in 1979 E.L.T. (J) 397) allowing post manufacturing expenses under the new Section 4 of the Excise Act. This relates to the Kottayam factory.
(ii) Civil Appeals No. 4731-32 of 1984 are appeals filed by Union of India through the Superintendent of Central Excise, Kottayam against the Judgment dated I st April, 1976 of the Division Bench of the High Court of Kerala (reported in 1979 E.L.T. (J) 89) allowing post manufacturing expenses under the old Section 4 of the Excise Act.
(iii) SLP (Civil) No. 10108 of 1980 is another appeal of the Union of India against the Judgment of the Additional Judicial Commissioner, Goa, Daman and Diu allowing post manufacturing expenses under the old is Section 4 of the Excise Act in respect of the factory at Goa. In respect of new Section 4, the Union of India and MRG were agreed that the decision in Writ Appeal No. 302 of 1978 being the subject matter of Civil Appeal 3195 of 1979 would be applicable to the factory at Goa.
(iv) Civil Appeal No. 793 of 1984 is MRFs Appeal under Section 35L of the Central Excises and Salt Act (as amended) against the order and decision dated 1st February, 1984 of the Tribunal (CEGAT) deciding that the sale of tyres and other rubber products through their 42 Depots throughout India were not retail sales but were in the nature of wholesale sales and MRF was not entitled to deductions under Rule 6A of the Central Excise (Valuation) Rules, 1975 (hereinafter referred to as the "Valuation Rules").
2. These proceedings are now arising for our consideration after the pronouncement of the Judgment by this Court in the case of Union of India v. Bombay Tyres International Ltd. (1983) 14 ELT 1896: (AIR 1984 SC 420) decided on the 7th October 1983 and the clarificatory order passed by this Court in the game case of Union of India v. Bombay Tyres International Ltd. reported in (1984) 17 ELT 329. This clarification was given by the Supreme Court on 14th and 15th November 1983. Pursuant to hearings held in this Court in several cases relating to post manufacturing expenses and after the latter clarificatory order in the case of Union of India v. Bombay Tyres International Ltd. (supra), the Tribunal (CEGAT) decided the Review Notice and set aside the order of the Appellate Collector on I st February, 1984 and on 9th February, 1984 the Civil Appeal No. 793 of 1984 was admitted. Format orders were passed by this Court in the pending appeals relating to post manufacturing expenses. Even in the present matters format orders were passed on or around 3rd May, 1984. Format orders were also passed in the pending Writ Appeal No. 590 of 1979 pending before the High Court at Madras. In accordance with the format orders and within the time-frame stipulated, amendments to price lists were to be filed by MRF Ltd. The present appeals are now to consider the various deductions claimed by MRF Ltd. and/or disallowed and/or not allowed by the Assistant Collector, or allowed by the Assistant Collector, in the various jurisdictions qua the factories of MRF Ltd. in the cross appeals of the Union of India and the MRF Ltd.
3. For the sake of convenience, the deductions arising for consideration of this Court can be summarised as under :-
i) TAC/Warranty discount
ii) Prod
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