TMI Blog1974 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts only to a limited number of customers such as Philips India Limited , Central Electric Company (India) Ltd. and Crompton Greaves Limited etc. The products are sold to these companies in accordance with their orders and specification in their respective brand names, Philips , Osram , Mazda and Crompton etc. The price at which ELMI sells its goods to these customers includes the actual manufacturing cost and manufacturing profits. These customer-companies sell the products of ELMI in their respective brand names through their own sales organisations. Each of these customer-companies has got its own separate dealer or distribution arrangements. In or about 1955 excise duty was first levied on the products of the petitioner on specific basis, that is to say, fixed sum of money for a fixed number of say 100 lamps. Since 1961 the excise duties were being collected by the respondents on ad valorem basis excepting miniature pre-focus lamp which was continued to be assessed on specific basis till March 16, 1972. The excise duty was being levied under Section 3 of the said Act on ad valorem basis. The petitioner s definite case is that the levy of excise duty on their product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and manufacturing profits only. It is his definite case that the excise duties being a tax on manufactured goods, only, any levy on costs other than manufacturing costs and manufacturing profits is illegal. To illustrate the respondents are realising duty at a price of ₹ 148.55 per 100 bulbs which is the selling price of Philips India Ltd., less excise duty and discount to their consumers. The latter not being manufacturers does not pay excise duty. Excise duty is to be collected from the manufacturers on the basis of his manufacturing cost and profits and not on the sale price of the customer-companies. 5. Further Mr. Roy Chowdhury has argued that the Union Government cannot levy tax on sales excepting inter-state sales and the Central Government cannot include the sale price of its customer-companies under the guise of excise duty. His contention therefore, is that levy of excise duty on the basis of any post-manufacturing costs such as, sale price other than the manufacturing cost and manufacturing profits is ultra vires the Constitution inasmuch as excise duty cannot be levied by adding the sales price of its customer for which sales tax has been separately paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he duty payable by the latter. Thus in accordance with this procedure the assessee is to furnish all the information as required by the department. Under Rule 173C(1), assessee is to file price list for approval of the Excise Officer. Under Rule 173C(2) it is the mandatory duty of the excise authorities to approve the price list after making modification as they may consider necessary for the purpose of Section 4 of the Central Excises and Salt Act, 1944, which provides that the excise duty is leviable only on ex-factory wholesale cash price at the time of the removal of the excisable goods from the factory. If there is a dispute as to the rate of duty as provided under Rule 173C(2) the excise officer under Rules 173C(2B) might allow the assessee to clear its goods upon furnishing a bond under Rule 9B in Chapter III of the Central Excise Rule, 1944. It is the petitioner s case that the price list they submitted in March, 1973 has not yet been approved nor has it been modified or rejected. If the assessee has complied with the provisions of Rule 173B, 173C or 173D, the assessee itself under Rule 173F shall determine its liability for the duty on the excisable goods intended to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said Affidavit no particulars are given as to the break up of the price on the basis of which the department is levying duty. In fact, according to the department the manufacturing cost and manufacturing profits are not determinable in the present case. The department overlooked the fact that it was their mandatory duty to determine the ex-factory wholesale price on the basis of manufacturing cost and manufacturing profits. Mr. Roy Chowdhury has referred me to the said decision of the Judicial Committee and also the Supreme Court and submitted that post-manufacturing expenses or post-manufacturing profits are not assessable under Section 4 of the said Excise Act. The respondent s contention that the ex-factory wholesale cash price is not ascertainable in as much as the internal arrangement or secret agreement between the petitioner-company and its favoured costomer are not known, cannot be accepted nor could the department be allowed to overside the provisions of Section 4 (a) of the Excise Act by raising the plea that the petitioner-company is only a subsidiary of four foreign companies, which are really, according to them holding companies. The petitioner categorically deni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of assessment is severable, order can be passed for refund of the amount which is legally recoverable. If, however, such refund is not severable the court should quash all the previous orders of assessment in entirely and should remand the matter to the excise authorities for reassessment. In this connection he has referred to the State of Kerala v. Aluminium Industries Ltd. - 16 Sales Tax Cases, 689, Hindustan Construction Company Ltd. v. State of West Bengal .Ors. - 78 C.W.N. 168 Paras 7 8 in support of his contention that refund of illegal payments can be directed under article 113 of the Indian Limitation Act, 1963, that is, within three years from the date of the mistake discovered by the party. References has also been made by him to Himmatal v. State of Madhya Pradesh - AIR 1954 SC 403 paragraph 9, in support of his prayer of injunction as set out in prayer F as there is threat on the part of the respondents to levy excise duties on the sale price list of the petitioner-companies purchasers. Relying upon K.K Kochunni v. State of Madras A. 1959 S.C. 725,733, it is also contented that a declaratory order for not levying duty except on manufaturing costs and profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured goods were sold in the market in the name of Philips or Mazda or Crompton or General Electric Lamps. Thus the trade name of the manufactured goods of the petitioner company is in fact the trade names of the goods of the customer companies. On the basis of these facts he has urged that the petitioner-company is really a joint venture of the four subsidiary companies which, according to the petitioner, are their customers and these customer-companies are the only buyers of the goods manufactured in the petitioner-company and the wholesale price of the petitioner-company is calculated and fixed by the Board of Directors of the petitioner-company. As stated earlier, this Board of Directors is the Managing Director or the Chief Executive Officer of the said alleged four customer-companies. The petitioner s definite case is that all the goods manufactured by the petitioner-company are sold to the members of the public through the said four cutomers companies and no other agency or purchaser or distributor. According to the petitioner s own case these four customer-companies have a vast sales organisation which have their own system of distribution through which the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rules prescribed under the said Excises Act. It appears from the price list submitted by the petitioner-company for the period from 17-3-1969 to 31-3-1969 (Annexure to supplementary affidavit of Narayana Swami affirmed on April 3, 1973) that the petitioner s manufactured products such as electric lamps have been valued in accordance with the prescribed forms. To illustrate, one specific category of manufactured goods is being shown as follows :- * * * * 18. Different amounts have been mentioned in respect of different goods under those columns in the statutory return filed by the petitioner-company from 1968-69 to till 1972-73 in accordance with the statutory form prevalent during the period. The Excise authorises on the basis of the said statutory form submitted by the petitioner-company were all along levying duty on the basis of the amount mentioned under column 11, that is, price less assessable excise duty. According to the counsel for the petitioner the price of the goods shown against column 11, that is to say, ₹ 167.71 as set out against Item 22 above, include the selling costs of the petitioner-company to one or the other of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our wholesale purchasers who purchases the petitioner-company s electrical goods and fix their own price for sale to the members of the public through the said purchaser customers or otherwise. It is well settled that the Excise duty can only be levied from the manufacturer in respect of the goods manufactured by them. The value of such goods under Section 4 is the wholesale cash price which includes only manufacturing costs and manufacturing profits. The additional costs or charges which a purchaser should ordinarily bear cannot be included in the determination of the wholesale cash price. The octroi duty or sales tax are statutory liabilities under the State legislations which are passed in accordance with the legislative list of the State in Schedule to the Constitution of India. The purchaser companies have vast sales organisations and naturally after payment of octroi duty sales tax the price of the purchasers would be very much higher than the ex-factory whole sale cash price of the manufacturer. Thus the substance of Mr. Roy Chowdhury s arguments is that the respondents levied and are threatening to levy excise duty on the price determined by the petitioner-company s custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the manufacturer but the liability of pay Excise duty rests only on the manufacturer or the producer of those goods and not other purchasers. Thus Mr. Roy Chowdhury s contention must be accepted in so far as his submission is that the Excise duty is leviable only on the wholesale cash price of the manufacturer but according to him the wholesale cash price must constitute manufacturing costs and manufacturing profits. Relying upon the Voltas case he has strenuously argued the price list of the petitioner-company s customer purchaser cannot be taken into consideration in levying the Excise duty on the manufacturing goods. The wholesale `dealer who purchases the manufactured goods must have to charge much higher price from their customers to cover their own profits, transport cost, octroi duties, sales tax and other incidental charges. The respondents have been levying duty on the wholesale cash price of the petitioner-company s customer purchasers. It is alleged that both the petitioner and the respondents under a mistake of law proceeded on the said basis since 1961 and the petitioner had to pay heavier duty than the amount which should have been paid on the basis of the wholes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions between a manufacturer seller and independent wholesale customer purchasers. It may be added here that the annexure to the petition and the various other documents filed on behalf of the petitioner-company show that the price list of the customer purchaser are often more than 100% of the alleged ex-factory wholesale price of the manufacturer. Further for all these past years there is not the slightest indication of the petitioner s manufacturing costs and manufacturing profits which might pursuade the Excise Officers to examine the alleged ex-factory whole cash price under Section 4. On the contrary, the petitioner- company induced the department to accept for the price of duty under Section 4, the price list of the petitioner company s customer purchasers in as much as such price list was fixed and agreed upon among themselves after taking into consideration their mutual profits. Thus, the principles laid down in Voltas case do not have any applications to the facts of the present case. 28. The next difficulty in accepting Mr. Roy Chowdhury s contention is that the orders of assessment under Section 4(a) are not ex facie illegal. It cannot be said that the excise officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Voltas case, it is obvious that in ascertaining the wholesale cash price for the purpose of levying excise duty under Section 4(a) the real value of the assessable goods should consist of manufacturing costs and manufacturing profits only. The excise officers who levy the duty under Section 4(a) will have to make proper enquiry and must approve the price list in accordance with the statutory rules under Chapter VIIA and in particular Rule 173C(2) and 173-I. The Manufacturer will be entitled to file a revised or amended price list in which case the manufacturer should make the application for provisional assessment under Rule 173C(2A) (2B) read with Rule 9B of Central Excise Rules. Clearance of the manufactured goods out of the factory or place of manufacture or production should not be stopped if the necessary conditions in Chapter VIIA are complied with. To this extent, the contention of Mr. Roy Chowdhury should be accepted. But as discussed earlier the facts in the instant case are clearly distinguishable from the facts of the Voltas case. The petitioner s main claim is for quashing the orders of assessment passed in connection with the excise duty from the year 1961 till t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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