1. Manufacture of industrial gases and allied products — charges for containers and ancillary services — determination of assessable value for excise duty under Section 4, Central Excise Act, 1944. (Para 1 , 2 )
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2018 Supreme(SC) 474
SUPREME COURT OF INDIA
RANJAN GOGOI, N.V. RAMANA, R. BANUMATHI, MOHAN M. SHANTANAGOUDAR, S. ABDUL NAZEER, JJ.
COMMISSIONER OF CENTRAL EXCISE, INDORE – APPELLANT(S)
VERSUS
M/S GRASIM INDUSTRIES LTD. THROUGH ITS SECRETARY – RESPONDENT(S)
CIVIL APPEAL No.3159 OF 2004 WITH C.A. Nos. 3455 of 2004, 2982-2985, 2986, 7143, 7272 of 2005 and 2261 of 2006 & 2246-2247, 2934-2935, 3528, 4820, 6695 of 2008 & 2534, 8541 of 2009 & 253, 445, 1382, 2003-2004, 2430, 2363, 7174-7175 of 2010 & 4696, 6984 of 2011 & 2705 of 2012
Decided On : 11-05-2018
Important Points
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’.
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’.
Subject
EXCISE DUTY - NATURE AND MEASURE OF LEVY
Act Referred
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.
Legal Category Hierarchy
Table of Contents
2. Whether ancillary charges are includible in transaction value for excise duty and whether Section 4 is subject to the charging provisions of Section 3 of the Act. (Para 2 , 3 )
3. Excise is a levy on manufacture, but the measure of levy is distinct from its nature; value additions enhancing marketability prior to clearance are includible in transaction value. (Para 6 , 14 , 17 , 19 , 21 )
4. The measure of levy under Section 4 is not controlled by the nature of levy under Section 3, provided a reasonable nexus exists between the two. (Para 23 )
5. Reference answered holding that transaction value under the 2000 amendment statutorily incorporates permissible additions to normal price as established in Bombay Tyre International Ltd. (Para 23 , 24 )
6. Is the measure of excise duty controlled by the nature of the levy?
No. While excise is a levy on manufacture, the measure of the levy is a statutory function. As long as a reasonable nexus exists between the measure and the nature of the levy, the measure is not controlled by the rigors of the nature. (Para 6 , 23 )
7. Are post-manufacturing expenses includible in the assessable value for excise duty?
Yes. Expenses incurred up to the date of delivery that enrich the value of the article or promote its marketability in trade, such as storage, outward handling, and marketing expenses, are includible in the value or transaction value. (Para 17 , 19 )
8. What is the relationship between transaction value under the 2000 amendment and the earlier concept of normal price?
There is no discernible difference between the two. Transaction value statutorily engrafts the additions to normal price that were judicially held permissible, reflecting the changed description of the levy as a value-added tax. (Para 21 , 23 )
9. Must excise duty be collected at the exact time of manufacture?
No. The stage of collection is a matter of administrative convenience and legislative wisdom. The fact that it is often collected when goods leave the factory does not change its essential nature as a duty on manufacture. (Para 6 , 9 , 11 , 12 )
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 have withstood the test of time require a rethink is the question that poses for an answer in the pr
