TMI Blog1974 (9) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on the amount of trade discount allowed by the plaintiff to its dealers and distributors. Plaintiff also prayed for the recovery of a sum of ₹ 89,246.70 paise, wrongly collected from the plaintiff along with interest at 9 per cent. per annum and the costs of the suit. * * * * The learned trial Judge has passed the following decree : The plaintiff do recover from the defendant ₹ 82,571.10 paise with the full costs of the suit and running interest at 6 per cent. on the principal amount of ₹ 75,742/- from the date of suit till realisation. Further, it is hereby declared that action of the Excise authorities and officers of the Union of lndia in refusing to allow the plaintiff to clear the electric motors without payment of duty on the amount of trade discount is illegal, ultra vires, male fide and outside their powers and jurisdiction. It is further declared that the action of the Excise authorities and officers of the Union of India in levying and charging Excise duty on the amount of trade discount is illegal, unauthorised and in contravention of the provisions of the Central Excise and Salt Act, 1944. The defendant, its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 per cent. is invariably given to its appointed dealers and distributors. In case of electric motors sold through the plaintiff s sole selling agents, referred to above, the trade discount at uniform rate of 181/2 per cent. is allowed to them, i.e. M/s. Jyoti Calor Engg. Ltd. with condition that out of the said 181 per cent. they have to pass on 15 per cent. discount to the dealers and distributors, and that is invariably done. 8. According to the plaintiff company, in view of the clear provisions of Section 4 of the Act, the prices at which electric motors are sold by it to M/s. Jyoti Calor-Engg. Ltd. less 181/2 per cent, should be taken as the value for the purpose of computing the excise duty payable. Alternatively, in any case, all the standard electric motors, whether sold by M/s. Jyoti Calor-Engg. or by the plaintiff itself to their dealers and distributors, are sold at fixed price determined by the plaintiff company from time to time less 15 per cent trade discount uniformly. Therefore, assuming without admitting that rebate of 181/2 per cent, allowed as trade discount to their sole selling agents, is not deducted of at least 15 per cent which is the uniform trade disco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise duty does accept those special prices which are always higher than the prices of the standard motors. But at the same time, they do not allow deduction of the trade discount for the purposes of duty. Not only that, but utilising it as a lever, the Central Exeise Department goes to the length of disallowing deduction of 15 per cent. trade discount, which is invariably given to all the dealers and distributors. 12. The plaintiff company had represented the matter to the Collector of Central Excise, Baroda and also to the Central Board of Revenue, New Delhi. The Central Government has accepted in principle that IS per cent. trade discount should be deducted for the purpose of duty vice their letter dated 24th March 1965, Ex. 28. However, as the Central Excise authorities at Baroda insisted on not allowing deduction on trade discount, the matter was again represented by plaintiff to the Collector of Central Excise, Baroda, by its letter, dated 27th August, 1966. It having been rejected on 14-10-1966, the plaintiff company has been obliged to file the present suit for the aforesaid relief, after giving a statutory notice, as required under Section 18 of the Act. 13. The defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference at an appropriate stage the learned trial Judge has observed : ......lt is clear from both these statements at Ex. 24, and 41, that the plaintiff company gives the trade discount uniformly to all its dealers at the rate of 15 per cent in case of standard motors. It is also clear that in case of special motors, the plaintiff company gives discount to its dealers, as mutually agreed upon. Thus, it can safely be stated that the plaintiff company gives trade discount uniformly to all its dealers at the rate of 15 per cent, in case of standard electric motors and thus even if we accept the interpretation put up by the defendant, the action of the Central Excise Officers in not allowing deduction of trade discount at 15 per cent is illegal. The learned trial Judge has further observed that there was nothing in Section 4 of the Act to indicate that the excise is not to be charged on trade discount only if it is uniformly given. According to the learned trial Judge, reading of such a condition in Section 4 of the Act which is not there, is clearly indicative of the position that the act of Excise authorities is in contravention of the provisions of the Act and, therefore, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Duty . The relevant part of Section 3 of the Act reads : (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and duty on salt manufactured it or imported by land into any part of India as and at the rates set forth in the First Schedule. The relevant item in the First Schedule with which we are concerned is Item No. 30, and the description of goods, referred to therein, is electric motors, all sort and parts thereof and the duty is to be levied at 15 per cent ad valorem. 17. Section 4 of the Act, which was substituted by Act No. 15 of 1955, and which is material for our purposes, reads : * * * * 18. The Explanation to this Section 4 of the Act, which is most material for the purpose of this appeal, reads : In determining the price of any article under this section, no abatement or deduction slall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid. The marginal note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment and nothing higher than it. It may be erroneous, submitted Mr, Desai, because the excise duty is a duty on the value of the manufactured goods, that is, cost of manufactured goods inclusive of manufacturing profit. Mr. Desai has submitted that if any deduction other than the aforesaid deduction is given, it will be non-compliance with the provisions of the Act, but if any of those two deductions is not given, it will not be a case of non-compliance with the provisions of the Act. 19. The second limb of Mr. Desai s submission was that the expression trade discount will indicate that it is a discount given in trade or business. If such a discount is given in the trade, it will not be manufacturer s profit. lt is a discount given in trade or business, indicating the pattern. For the purpose of trade, it becomes necessary to pay such amounts in cases of bulk purchase. Mr. Desai has submitted that it is what A or B pays is material, but it is the amount which is usually paid in such trade, that is material. It is not the nomenclature that the trader or manufacturer concerned gives to it, is material. It should be construed or it is capable of construction that the discou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, in some of which 15 per cent, discount was not given. There are only 65 such cases. Plaintiff company replied by Ex. 24 explaining each and every of those cases referred to. The analysis of it shows that there are six categories of cases. The first category of cases is consumers. The second category of cases is of dealers and distributors where some discount is given to the consumers and the balance to the distributors (at the request of the distributors in cases were the goods are sold to the consumers through the distributors. The third category of cases is of contracts with the Government local bodies and public authorities, where special deduction to the price is given by 10 per cent, and discount of 10 per cent is given to the dealers in those cases. The fourth category of cases is in respect of orders received through the branches of the plaintiff-company. They are cases of retail sales and in those cases nominal discount is given to the consumers. The fifty category of cases is in respect of some Government contract without reduction in price or giving of discount. They are in the category of the consumers. In the sixth category of cases, there are two instances in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has stated : .....It is true that in respect of item at Serial No. 62, we have given the same dealer 15 + 21/2 per cent. For items at Serial Nos. 14, 30, 37, 38,45, 51 and 62 Explanations have been given in the Remarks column for giving those rates to the dealers, and those remarks are correct. These remarks indicate that actual discount passed by the plaintiff company is more than 5 per cent. It is true that the particulars mentioned in Serial Nos. 37 to 41 are all our dealers. It is true that uniform rates of discount are not given to them for the reasons stated in the Remarks column which work out discount more than 15 per cent. The word agreement used in Ex. 24 means written agreement. It has been also made clear in this para 9 of his deposition that in item No. 54, the order is by Government directly and hence no discount has been given. In para 10, it is made clear that it was true that 4,000 to 5,000 invoices mentioned by him include the invoices of motors for which the Government has fixed tariff value and for which they are not fixed. Not a single motor sold by the tariff value is included in the suit claim. This evidence of the plaintiff s witness and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for such trade discount as well as the amount of excise duty payable. No other deduction is to be given, which clearly and by necessary implication indicates that deductions have to be given in respect of two items referred to in that Explanation. 29. Interpretation put by Mr. Desai that it is only within the discretion of the excise authorities to give such deduction is not a correct interpretation. It is not at all warranted by the language of the Explanation. It is clearly against the provisions of the Act. It is significant to note in this context that prior to the substitution of this Section 4, as it stood in the Central Excises and Salt Act, 1944, was :- Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable to being sold for delivery at the place of manufacture and at the time of its removal therefore without any abatement of deduction whatever except trade discount and the amount of duty then payable. 30. It is thus evident that even in Section 4 as it stood earlier also, such deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. Before we consider the submission made at the Bar in regard to the jurisdiction and consider the authorities cited at the Bar, it is significant to note that in the Act with which we are concerned, there is no ouster or exclusion section ousting the jurisdiction of the Civil Court. It is, therefore, evident that the question of jurisdiction is not to be determined on the basis of interpretation of that exclusion section. It is equally true that the liability to pay Excise duty is created under this special Act. 34. It is also true that remedies have been provided in that Act. Relevant sections for that purpose are Sections 35 and 36 of the Act. Section 35 reads : * * * * It is on account of that finality given the order passed in appeal which is only subject to the power of revision conferred by Section 36 of the Act, an argument is advanced that by necessary implication the Civil Court will have no jurisdiction to hear such a suit, the submission being that it is authority referred to, in this section which has been given power to assess or to determine the real value and to levy the excise duty. If anybody has grievance against it, he has to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted Mr. Desai would fall within the purview of those observations. 39. Mr. Desai has submitted that the question that arises for decision is, whether the act complained of, in the instant case, is an act of assessing and collecting excise duty on the amount of the alleged trade discount or is an act which is in non-compliance with the provisions of the Act. The latter expression is explained by the Supreme Court in Firm of Illuri Subayya Chetty and Sons v. State of Andhra Pradesh (which will be hereinafter referred to as `Illuri s case ), AIR 1964 Supreme Court 322 and again affirmed in Dhulabhai v. State of Madhya Pradesh (which will be hereinafter referred to as Dhulabhai s case) AIR 1969 Supreme Court 78 (at p. 86, para 24). According to his submission the non-compliance with the provisions of the Act. We agree with the submission that non-compliance with the provisions of the Act can be said to be synonymous with the violation of the provisions of the Act. 49. In Dhulabhai s case, AIR 1969 Supreme Court 78, most of these decisions have been specifically referred to, and the ratio laid down in each of these cases has been referred to by the Supreme Court. Basappa s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies. (6) Question of correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply. It is thus evident that the scrutiny of this decision of the Supreme Court also indicates that the submissions made by Mr. Desai, relying upon the observations made in Illuri s case and Kamla Mill s case that the observations made by the Privy Council is Mask s case in any manner have been watered down, are not well founded. It is true that in this particular case, the Supreme Court had to deal with a case where there was breach of the constitutional provisions contained in article 301. But this decision in terms lays down the categories of cases, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not acted in conformity with the fundamental principles of judicial procedure or the authority has acted in violation of the fundamental principles of judicial case. * * * * 59. Keeping in mind the ratio of the Supreme Court in Tarachand s case (AIR 1971 SC 1558) the present case will undoubtedly fall in the first part of the first category of cases referred to in Dhulabhai s case in pare 32, at page 89. It is significant to note that the present case is not a case where it is sought to be urged that were erroneous order passed by the Taxing Authority attracts the jurisdiction of the Civil Court. But what is contended, is that the order is a nullity, is invalid and inoperative and that is why it attracts the jurisdiction of the Civil Court. It is also admitted by Mr Kaji that if two views are possible, it cannot be agitated even in a writ jurisdiction much less in a suit. But in the instant case, it is the mandatory provision of the Act that is not being complied with and the qualification is sought to be imposed where the Act contemplates none. 60. It is significant to note that the provisions of Section 4 of the Act clearly indicates that time an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. It was nowhere challenged that it was not a trade discount. Exhibit 25 is a letter written by the plaintiff company, dated 2-4-1962, to Central Excise Collector, Baroda, after the Assistant Collector decided against it. Exhibit 26 is the order of Central Excise Collector, Baroda. Exhibit 27 is a revision memo and Exhibit 28 is an order of the revisional authority. We will only, in brief, note the order of their revisional authority, which is final. It is stated therein : ......Considering the fact that the price at which the goods are being sold by the petitioners to their sole selling agents, M/s. Jyoti Calor Engg. Ltd., Baroda, are not the price at which they are sold to an independent buyer under fully open market conditions, these prices cannot be accepted as the assessable value as defined in section 4 of the Central Excises and Salt Act, 1944. The basis of the assessment should, therefore, be the sale price of the sold selling agents to the distributors, sub-dealers, etc. and on these, a 15 per cent reduction on account of trade discount shall be allowed, so long as such or higher discount is actually being granted uniformly, on all .the sales in wholesale lots to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the relevant provisions of Indian Railways Act, 1890. Section 41 of the Indian Railways Act, 1890 lays down that any complaint that a railway administration is contravening the provisions of Section 28, or is charging for the carriage of any commodity between two stations a rate which is unreasonable, or is levying any other charge which is unreasonable may be made to the Tribunal, and the Tribunal shall hear and decide any such complaint in accordance with the provisions of that Chapter. But the Tribunals have not been given any power to refund. The Supreme Court has, in some cases, held that for refund of such money, civil suit is maintainable in any Civil Court. In our opinion, it would be probably such cases that would fall within that category No. 5. * * * * 69. We, therefore, hold that learned trial Judge had rightly reached the conclusion that the Civil Court had jurisdiction to entertain such a suit and give the appropriate relief, submission No. 1 made by Mr. Desai, therefore, fails submission No. 4 also, we have dealt with, and we hold that the submission made by Mr. Desai on that behalf is also not well-founded, and the learned trial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribes period of three years for recovery of suit for money payable by the defendant to the plaintiff for money recovered by the defendant, for the plaintiff s use. Time commences to run from the date the money is received. As found by us, the amount was recovered by the revenue authority in excess of its powers. It is, therefore, evident that from the date of the receipt of that amount by it, the amount was payable by the authority to the plaintiff which was received and retained for its use. 72. In Venkata Subbara v. State of Andhra Pradesh, AIR 1965 Supreme Court 1973, the controversy in this behalf has been settled by the Supreme Court. It is observed : In order to attract Article 62 of the Limitation Act, 1908 it is not necessary that at the moment of the receipt of money the defendant should have actually intended to receive it for the use of the plaintiff and that it is sufficient if the receipt is in such circumstances that the law would impute to him an obligation to retail it for the use of the plaintiff and refund to him when demanded. Article 62 most nearly approaches the formula of money had and received by the defendant for the plaintiff s use, if read as a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmittedly collected from the dealers and distributors or consumers, as the case may be, there is no occasion for the plaintiff company to suffer any loss by way of damages. That being the position, the plaintiff company is not entitled to interest amount claimed by way of damages. There was no contract to pay interest. Interest Act does not apply. It is only on this count that the learned trial Judge has allowed interest. He has, in our opinion, commented on error in allowing the interest claimed. 74. The net result of our finding is that the plaintiff-respondent has been wrongly allowed the two claims, viz. (1) ₹ 12,989.50 paise, and (2) ₹ 8,616.28 paise, ₹ 21,604.78 paise, which are barred by limitation. Similarly, the claim of interest in respect of two items, viz. ₹ 779.34 paise, and ₹ 1,262.24 paise, ₹ 2,075.78 paise is also time-barred. The only claim that is within limitation and is allowable comes to ₹ 75,742 minus ₹ 21,604.78 paise ₹ 54,138.22 paise. The relief granted in respect of declaration and injunction has been properly granted. The result is that the appeal partly succeeds. 75. First Appeal No. 713 of 1968 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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