MAIN POINT
The measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy.
There is no discernible difference in the statutory concept of ‘transaction value’ and the judicially evolved meaning of ‘normal price’.

Headnote:(a) Central Excise Act, 1944 – Sections 3 and 4 – Excise duty – A levy on manufacture and upon the manufacturer who in turn is entitled to pass on the burden to first purchaser of the manufactured goods – Entry 84, List I, Seventh Schedule, Constitution of India – Collection of the levy and the measure thereof – A statutory function – Measure and nature of levy – Distinction and nexus between the two – Measure cannot be controlled by rigors of the nature. (Para 6, 14, 23)
       (1984) 1 SCC 467; AIR 1962 SC 1281; (1975) 1 SCC 499 – Relied upon
       (2004) 8 SCC 173; (2009) 14 SCC 596; (2016) 6 SCC 391 – Referred
       (b) Central Excise Act, 1944 – Sections 3 and 4 – Stage of collection of excise duty – Clearing of product for entering the market for the first time. (Para 11)
       A.I.R. (29) 1942 FC 33; AIR 1945 PC 98 – Relied upon
       © Central Excise Act, 1944 – Section 4 – Measure for levy of excise duty is the price with value additions before clearance. (Para 16)
       (d) Central Excise Act, 1944 – Section 3 – No discernible difference in the statutory concept of ‘transaction value’ and the judicially evolved meaning of ‘normal price’. (Para 23)
       Facts of the case:
       The assesses, for supply of their product provide containers to consumers on rent whereas in others the customers bring their own containers. For making available or for filling up the containers provided by the customers the Assessees charge the customers certain amounts under different heads viz. packing charges, wear and tear charges, facility charges, service charges, delivery and collection charges, rental charges, repair and testing charges. The Assessees treat the said amounts as their income from ancillary or allied ventures.
       The issue arising is whether the aforesaid charges realised by the Assessees are liable to be taken into account for determination of value for the purpose of levy of duty in terms of Section 4 of the Central Excise Act, 1944 as amended with effect from 1st July, 2000.
       Perceiving a conflict between the two decisions of this court in Union of India and Ors. V. Bombay Tyre International Ltd. and Ors., (1984) 1 SCC 467 and Commissioner of Central Excise, Pondicherry v. Acer India Ltd., (2004) 8 SCC 173 rendered by three judge Benches a two judge Bench of this Court by order Commissioner of Central Excise, Indore VS Grasim Industries Ltd., , (2009) 14 SCC 596 dated 30th July, 2009 referred the matter to larger Bench. Thus the matter has come before this Bench.
       Finding of the Court:
       The measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy.
       Result: Reference answered.

JUDGMENT

RANJAN GOGOI, J.

1. First, the facts:

The respondent – Assessees are manufacturers of dissolved and compressed industrial gases, liquid chlorine and other allied products. Cotton yarn and Post Mix Concentrate manufactured by two other individual assessees are also in issue. These articles are supplied to the customers in tonners, cylinders, carboys, paper cones and HDPE bags, BIBs, pipeline and canisters, which may be more conveniently referred to as “containers”. In some cases the containers are provided by the Assessees to the customers on rent whereas in others the customers bring their own containers. For making available or for filling up the containers provided by the customers the Assessees charge the customers certain amounts under different heads viz. packing charges, wear and tear charges, facility charges, service charges, delivery and collection charges, rental charges, repair and testing charges. The Assessees treat the said amounts as their income from ancillary or allied ventures.

2. The issue arising is whether the aforesaid charges realised by the Assessees are liable to be taken into account for determination of value for the purpose of levy of duty in terms of Section 4 of the Central Excise Act, 1944 (hereinafter referred to as “the Act”) as amended with effect from 1st July, 2000.

3. Perceiving a conflict between the two decisions of this court in Union of India and Ors. v. Bombay Tyre International Ltd. and Ors., (1984) 1 SCC 467 and Commissioner of Central Excise, Pondicherry v. Acer India Ltd., (2004) 8 SCC 173 a two judge Bench of this Court by order Commissioner of Central Excise, Indore VS Grasim Industries Ltd., , (2009) 14 SCC 596 dated 30th July, 2009 referred the following questions for an answer by a larger bench:

“1. Whether Section 4 of the Central Excise Act, 1944 (as substituted with effect from 1-7-2000) and the definition of “transaction value” in clause (d) of subsection (3) of Section 4 are subject to Section 3 of the Act?
2. Whether Sections 3 and 4 of the Central Excise Act, despite being interlinked, operate in different fields and what is their real scope and ambit?
3. Whether the concept of “transaction value” makes any material departure from the deemed normal price concept of the erstwhile Section 4(1)(a) of the Act?”

4. As the decisions in Bombay Tyre International Ltd. (supra) and Acer India Ltd. (supra) were rendered by Benches of Three Hon’ble Judges of this Court, the above questions were referred by order Commissioner of Central Excise, Indore VS Grasim Industries Ltd., (2016) 6 SCC 391 dated 30th March, 20164 to an even larger Bench. This is how we are in seisin of the matter.

5. What is excise duty and what is the relationship between the nature of the duty and the measure of the levy are the two precise questions that would arise for determination in the present reference.

6. On first principles, there can be no dispute. Excise is a levy on manufacture and upon the manufacturer who is entitled under law to pass on the burden to the first purchaser of the manufactured goods. The levy of excise flows from a constitutional authorisation under Entry 84 of List I of the Seventh Schedule to the Constitution of India. The stage of collection of the levy and the measure thereof is, however, a statutory function. So long the statutory exercise in this regard is a competent exercise of legislative power, the legislative wisdom both with regard to the stage of collection and the measure of the levy must be allowed to prevail. The measure of the levy must not be confused with the nature thereof though there must be some nexus between the two. But the measure cannot be controlled by the rigors of the nature. These are some of the settled principles of laws emanating from a long line of decisions of this Court which we will take note of shortly. Do these principles that ha

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2018 Supreme(SC) 474

MAIN POINTThe measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy.There is no discernible difference in the statutory concept of ‘transaction value’ and the judicially evolved meaning of ‘normal price’.

Cases Referred (7)

MAIN POINT
The measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy.
There is no discernible difference in the statutory concept of ‘transaction value’ and the judicially evolved meaning of ‘normal price’.