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1978 Supreme(Mad) 175
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE MOHAN
Calcutta Chemical Company Limited - Appellant
Versus
Union of India and Others - Respondent
Case No : Writ Petition No. 237 of 1978
Decided On : 02 March 1978
Freight charges incurred after manufacturing should not be included as part of the cost price for levying excise duty.
Headnote:
Central Excise - Assessable Value - Freight Charges
Fact of the Case:
The Calcutta Chemicals Company Limited submitted a fresh price list based on the principles enunciated in a Supreme Court judgment. The company contended that the price list represented only the manufacturing cost and manufacturing profit, excluding equalized freight charges.
Finding of the Court:
The court found that the imposition of excise duty on the actual cost of manufacture plus the uniform freight charged was not valid. It held that freight should not be included as part of the cost price of the manufacturer, as it is a post-manufacturing operation.
Issues: The issue revolved around the inclusion of equalized freight charges in the assessable value for the purpose of levying excise duty.
Ratio Decidendi: The court's decision was influenced by the legal principle that excise duty is on the incidence of manufacture, and that freight charges incurred after manufacturing should not be considered as part of the cost price for levying excise duty.
Final Decision: The impugned order was set aside, and the writ petition was allowed with no order as to costs.
Mohan J.
This writ petition coming on for hearing on Tuesday the 28th day of February 1978 and on this day upon perusing the petition and the affidavit filed in support thereof, the order of the High Court, dated 27-1-1976 and made herein, and the counter affidavit filed herein and the records relating to the order in 642 of 1975 dated 24-9-1975 on the file of the First Respondent comprised in the return of the Respondents to the Writ made by the High Court, and upon hearing the arguments of Mr. S. Ramasubramaniam, for M/s. King and Partridge, Advocate for the petitioner and of Mr. T. Chengalvarayan, Senior Central Government Standing Counsel on behalf of the Respondents on both days, the Court made the following ORDER :
2.Messrs The Calcutta Chemicals Company Limited are manufacturers of cosmetics and toilet preparations on which a duty of Central Excise is leviable onad valorembasis under item 14 of the Ist Schedule to the Central Excises and Salt Act, 1944. For the purpose of determining the assessable value of the various products manufactured by them the company were furnishing to the Department from time to time price lists as required under Rule 173C of the Central Excise Rules and assessments were made on the basis of the prices so declared and approved by the proper officer. On 19-1-1974 the Company submitted a fresh price list in supersession of all their previous price lists contending that the same was based on the principles enunciated in Supreme Court's Judgment in the Case ofA. K. Royv.Voltas Ltd.1978E.L.T.(J 177) = (A.I.R, 1973 S.C. 225). The Revised price list furnished by the Company purported to represent only the manufacturing cost and manufacturing profit. In this connection, it may be stated that their factory is at Ambattur and according to their marketing pattern there are no sales at the factory gate and all their manufactured goods are removed from the factory and taken as "Stock Transfer" to their office at Broadway from where sales are effected through distributors, wholesalers and stockists. As the transportation charges were uniformly charged irrespective of the destination of the consignments these charges partake the nature of "equalised freight" and are to be considered as an integral part of the assessable value itself. In these circumstances the Assistant Collector of Central Excise, Madras Division required the company by his order C. No. V/14F/17/3/74 dated 2-2-1974 to furnish a revised price list including the equalised freight charges of determination of the assessable value. The Assistant Collector also demanded the duty short levied on clearances effected in the past by non-inclusion of "equalised freight" charge in the price list, in arriving at the assessable value. The Company preferred an appeal against the Assistant Collector's order to the Appellate Collector of Central Excise, Madras who by his order No. 14F/3/74/AU55/74 (M) rejected the same. The licensee thereafter filed a revision application before the Government of India which was also rejected by their order No. 642/75 dated 24-9-1975. The Company has filed the above writ petition praying for the issuance of a writ of certiorari seeking to quash the Government of India Order No. 642/75 dated 24-9-1975.
3.The learned counsel for the petitioner urges that merely because uniform freight is charged for the despatch of all the consignments, it cannot be held that the excise duty is liable to he paid on the actual cost of manufacture plus the uniform freight charged, because it is only for the purposes of ease though there is variation in price structure, this uniform rate of freight is charged. It is a matter purely between the petitioner and his customers and has nothing to do with the excise.
4.The learned counsel for the respondent would, however, try to meet this submission stating that freight means actual freight incurred. So long as this freight is included as part of the price structure at the factory gate which
