TMI Blog1984 (9) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ter under Notification No. 128 of 1977 dated 18th June, 1977 the earlier Notification of 1973 was superseded. Under the Notification No. 128 of 1977 certain types of papers was exempted from so much of the duty of excise leviable thereon as specified in the table set out in the notification on condition that the paper mill did not have a plant attached to it for making bamboo wood pulp and the paper mill manufactured paper out of pulp. The material part of the notification is as follows : In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944............... the Central Government hereby exempts paper other than..................manufactured and cleared from a paper mill of the type described in the table below, from so much of the duty of excise leviable thereon as is specified in the corresponding entry in column (3) of the said Table. TABLE Sr. No. Description of paper mill Extent of Exemption 1. Paper Mill whose annual installed capacity in respect of all varieties of paper and paper boards does not exceed 2,000 tonnes. Seventy- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 31-7-1979. 6. In or about November 1976 the Excise authorities orally intimated to the petitioners that under the first notification of 1973 the petitioners were required to pass on the benefit of exemption from excise duty to their customers. If the said benefit was not passed on to the customers, the assessable value of paper as declared by the company in its price list would have to be revised by including the quantum of benefit retained by the company (under the first notification of 1973) in the value of the goods for calculation of excise duty. Accordingly a show cause notice dated 9/15 March 1977 was issued by the Superintendent of Central Excise calling upon the petitioners to show cause why an amount of ₹ 26,968.77 alleged to be short levied should not be recovered from the company under Rule 10 of the Central Excise Rules in respect of its clearance of paper from 16th March 1976 to 30th June 1976. The petitioners replied to the show cause notice. Ultimately an order was passed against the petitioners by the Assistant Collector on 8th October 1977. 7. Being aggrieved by the order of 8th October 1977 the petitioners preferred an appeal to the Appellate Collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows :- Similary price (cum duty) X reduced rate of duty (100 plus reduced rate of duty) In other words the assessable value of goods under Section 4 was proportionately increased and the duty collected proportionately reduced to reflect the correct reduced percentage of duty. The total price, of course, remained the same. 9. The petitioners have challenged the orders of 21st June 1979 and 6th November 1979 as well as the revision of assessable value of the goods as per these orders. In order to adjudge upon the contentions raised by the petitioners it is necessary to examine the scheme of the Central Excises and Salt Act, 1944. 10. Under entry 84 of list 1 of the 7th Schedule to the Constitution, Union Government has the power to levy duties of excise on goods manufactured or produced in India. Entry 45 in list 1 of the 7th Schedule to the Government of India Act, 1935, under which the Central Excises and Salt Act, 1944 was originally enacted is also in similar terms. The duty of excise is therefore levied on goods which are manufactured or produced in India. It is levied on goods and is collected from the manufacturer. Excise being an indirect tax, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise- (1) Whereunder this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be- (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sols consideration for the sale; Provided that- (i) where ... .... ...... .. .... ...... such goods are sold by the assessee at different prices to different buyers etc. ... .... (ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; (iii) where the assessee so arranges that the goods ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at the point of the first sale effected by the manufacturer. Under the present Section 4(1)(a), the value of excisable goods is deemed to be the normal price thereof i.e., the price at which such goods are ordinarily sold by the asseessee to a buyer in the course of wholesale trade, for delivery at the time and place of removal. [I am not here concerned with the other provisions of Section 4(1) ]. Normal price, therefore, in the present case is required to be determined with reference to such a sale. Under Section 4(4)(d), in the value so arrived at, the amount of excise payable on such goods as well as the normal trade discount is not to be included. Hence the value for the purpose of levy of excise is the normal price but not including the duty of excise payable. 13. What is normal price ? Under Section 2 (10) of the Sale of Goods Act, price means money consideration for the sale of goods. Normal price therefore is the amount paid by the buyer for the purchase of goods. It is the sum total of amounts at the foot of the invoice which constitutes price. Price may contain several ingredients all of which may or may not be shown on the face of the invoice, e.g., the price may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty payable on the goods in question by the assessee. In my view Section 4(4)(d)(ii) does not refer to the duty leviable under the relevant tariff entry without a reference to any exemption notification that may be in existence in connection with that entry as contended by the petitioners. 16. This position is now made clear by virtue of an explanation which has been added to Section 4(4)(d)(ii) with retrospective effect from 1st October 1975 under Section 47 of the Finance Act of 1982. The explanation sets out what is meant by the amount of duty of excise payable on any excisable goods. By the amount of the duty of excise is meant the effective duty of excise payable on such goods under the Act. The effective duty of excise is explained as follows : In a case where there is an exemption notification, the duty of excise computed with reference to the rate specified in the Act in respect of such goods as reduced so as to give a complete effect to such exemption. The effective duty of excise therefore is the duty of excise which is calculated on the basis of the prescribed rate as reduced by virtue of an exemption notification. This alone is excluded from normal price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idea. A change in wording denotes a change in meaning. (See Maxwell on The Interpretation of Statutes, 12th Edition, page 282). But when the words used in the notification expressly provide for an exemption from the payment of excise duty, there can be no question of any different interpretation being put on these words based on a difference in language. As a result of the notification, the paper mills of the description set out in the notification and in the table forming part of it, are exempted from paying a percentage of the duty leviable. The explanation to Section 4 (4)(d)(ii) provides that when the effect of an exemption notification is a reduction in the rate prescribed in the Act, it is the reduced rate of excise duty which is to be excluded under Section 4(4)(d)(ii). 19. It is true that in the present case the notification does not, in terms, reduce the rate of duty. It grants an exemption from payment of a certain percentage of duty leviable. But the effect of such an exemption is that the petitioner is required to pay a reduced rate of duty. If this is the effect of the exemption notification, then the explanation in terms applies to such a notification. The petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, if the duty is then to be calculated it would not be the same as before and in this manner the calculation would keep on changing. Such a procedure would lead to an absurd situation. 21. With due respect to the Delhi High Court, this part of its reasoning is a result of a mistake in the method of calculation. The reduced rate of duty is not required to be calculated on the selling price inclusive of the duty of excise leviable as per the original tariff entry. To calculate duty in this manner would be to calculate duty on a portion of the duty. Hence the impossibility of calculating the value of goods as pointed out by the Delhi High Court. The assessable value cannot be arrived at by deducting from the selling price cum leviable duty (under the tariff entry without reduction) an amount of duty calculated on it at a reduced rate. The correct method of calculating the assessable value in such cases is by dividing the total price charged into price and duty calculated on it at the applicable percentage. In order to determine which portion of the selling price inclusive of duty which is charged to the wholesale buyer, consists of wholesale value and which portion consists of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urer can retain the benefit of exemption. In the course of its judgment the court considered the scope of Section 4(4)(d)(ii). It said that this clause merely reiterates the principle that excise duty is leviable on manufacturing cost and manufacturing profit. Hence Section 4(4)(d)(ii) excludes the amount of excise duties, sales tax and other charges as also the trade discount while arriving at the excisable value of goods under Section 4. The learned Judge went on to observe that the words amount of the duty of excise occurring in clause (ii) referred to the duty leviable under the tariff entry and not duty actually paid. Since an exemption notification did not take away the duty leviable under the relevant tariff entry, the duty of excise in clause (ii) referred to the duty leviable under the tariff entry without any reference to an exemption notification. With respect to the learned Judge he has not taken into account the words the amount of the duty of excise payable on such goods . These words, looking to the entire scheme of the section, can only refer to the amount of duty of excise payable on such goods by the assessee. In my view they do not refer to the amount of dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, however, the Excise Department is merely seeking to compute the value of assessable goods on the basis of Section 4 read with Section 4(4)(d)(ii) and the explanation. There is therefore no question of their not being entitled to so compute the value of the assessable goods. 25. In the present case the petitioners have also challenged the retrospective amendment to Section 4 which has been made by the Finance Act of 1982. As a result of such retrospective amendment the explanation to Section 4(4)(d)(ii) has been added with retrospective effect from 1-10-1975. In view of a decision of the Division Bench of this Court in the case of New Shakti Dye Works Pvt. Ltd. and others v. Union of India and another reported in 1983 E.L.T. 1736 (Bom.) where the Court has held that a retrospective amendment of a taxing statute cannot be considered as an unreasonable restriction on the petitioner s fundamental right to carry on business under Article 19(1 )(g) of the Constitution of India, the petitioner have not made any submissions on this aspect of the case before me. The judgment in New Shakti Dye Works Pvt. Limited and others v. Union of India is binding on me. In any case, lookin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and Salt Act, 1944 by the same Act, namely, the Finance Act of 1982. The amendment which was required to be considered by the Delhi High Court also contained in the Amendment Act a saving clause with a sub-section identical with sub-section 2(d) in the saving clause to Section 47 of the Finance Act, 1982. The Delhi High Court has held that this provision means that levy, collection, assessment of penalties etc. would all have to be done in accordance with the provisions of the Act and the rules as in force from time to time. The period prescribed for such collection, either in the Act or in the rules, continues to operate and the provisions of Sections 11A and 11B continue to apply to such recoveries and levies also. I am in respectful agreement with the view taken by the Delhi High Court. To hold otherwise would also invite a challenge to the retrospective amendment itself. It would amount to saying that as a result of the retrospective amendment, the assessees can be called upon to pay taxes retrospectively as from 1975. It would make the provision open to challenge on the ground of arbitrariness and unreasonableness. Such an interpretation is not warranted. The amendment do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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