TMI Blog1966 (4) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 9 (II) (viii) of Schedule I to Central Excises and Salt Act. 1944 (hereinafter called the Act). The other three brands of cheroots were being sold by the plaintiff at a whole-sale cash price of ₹ 0-14-0 per hundred to M/s Maganti Veeriah and Company (hereafter referred to for convenience as the Company) which was the sole selling agent of the plaintiffs firm (hereafter referred to for convenience as the firm). There was a trade agreement between that company and the firm. Under Item NO. 9(II) (ix) of Schedule I, no duty was leviable if the price per hundred did not exceed ₹ 0-14-0. The Deputy Superintendent of Central Excise conducted experiment on 5-2-1956 and other dates to ascertain the cost structure of the brands of Chinna Langar, Key (Talam) and Special Langar. He decided that all the three varieties fell under taxable categories. On 29-5-1956 the Superintendent of Central Excise went to the firms factory and seized the stock these three brands of cheroots totalling in all 2,83,084 declaring that they were excisable goods. ( 3. ) He released the goods only on payment under protest, of an amount of ₹ 700.00 as advance penalty and directed them to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dred and the cost of manufacture of Talam Brand as ₹ 0-14-8 to ₹ 1-3-0 per hundred. Regarding special Langar brand, no experiment was conducted but the price structure as given by the Deputy Superintendent and the latter fixed the cost of manufacture of that brand at ₹ 1-0-4 per hundred as against ₹ 0-12-8 as shown by the firm. While the ex-factory price arrived at by working out the cost of manufacture may be a rough indication of the value, where the value as defined in Section 4 of the Act is not ascertainable, it is not and it cannot be the basis for determining the taxable nature or otherwise of the cheroots. Hence the value of the tobacco adopted by the Deputy Superintendent do not affect the conclusion drawn on the basis of the wholesale cash price at which the plaintiffs sole selling agent company was actually selling the cheroots. The experiment conducted by the Deputy Superintendent, Central Excise, Ananthapur on 18-2-1956 no doubt disclose, that the cost of manufacture as calculated by him is less than that worked out by the Deputy Superintendent of Central Excise, Nellore. But, the latter cannot be accepted as a sound basis for determining the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the negative. He held on Issue No. 2 that the determination of the wholesale cash price for the purpose of S. 4 of the Act was the rate at which the article was sold by the manufacturer unless the evidence pointed to the conclusion that the price indicated is designedly low to avoid levy of duty. He found on Issue No. 3 that no collusion had been proved and that the brands were not chargeable with duty. ( 8. ) The learned Counsel for the appellant has contended before us that the findings of the lower Court on all the issues are wrong. Issue No. 4:- As regards this issue, the learned Additional Judge has mentioned all the relevant dates in para 6 of his judgment and shown that the suit was in time. It has not been shown to us that his finding on Issue No. 4 is wrong. Issue No. 5:- S. 40 of the Act limitation of suits and other legal proceedings-(1) No suit shall lie against the Central Government or against any Officer of the Government in respect of any order passed in good faith or any act in good faith done or ordered to be done under this Act. (2) No suit, prosecution or other legal proceeding shall be instituted for anything done or ordered to be done under this Act aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such manner as may be prescribed duties of excise on all excisable goods..........at the rates, set forth in the First Schedule. In Schedule I to the Act, item 9 deals with Tobacco. The material provision reads thus:- II Manufactured tobacco- (1) Cigars and cheroots of which the value (ix) exceeds 14 annas a hundred but does not Four annas exceed ₹ 1-4-0 a hundred. There is no duty on cheroots of which the value does not exceed Re. 0-14-0 a hundred. Section 4 of the Act runs thus:- Section 4. Determination of value for the purposes of duty:- 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- (a) the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or. (B) where such price is not ascertainable the price at which an article o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than the maximum limit of the slab the rate of duty becomes calculable at the higher rate. It is, therefore, to the interest of the manufacturer to keep the value within the lower slab, and it is always the headache of the Excise Authorities to ensure that this is properly calculated, so that the higher duty is not deliberately avoided. The learned Judges held as follows: - (at p. 480) The determination of excise duty in terms of section 4 of the Act, depends on the determination of the value for the purpose of duty, for the calculation of which there are three factors, which are as follows:- (1) The location where the calculation is in be made. (2) The time at which the calculation is to be made. (3) The methods of calculation. Regarding the third factor, the learned Judges further observed thus:- (at p. 481) ..........It is easy to see that the stand taken by the petitioner company, namely that the value to be considered is the wholesale price at which it sells to its stockiest at Calcutta, cannot be accepted......The essence of the determination of the wholesale cash price for a wholesale market is that it must be an open market or a market overt, where any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouncil in Ford Motor Co. of India Ltd. v. Secy. of State, AIR 1938 PC 15 and decided that, for determining the wholesale cash price, the authorities could have, if other conditions mentioned in Section 4(a) were fulfilled, levied duty on the basis of the wholesale cash price fetched at the Bangalore market. After considering the facts of that case, they referred to the decision in AIR 1961 Cal 477 with approval and proceeded to apply the principles of that decision to the facts of the case before them. They held as follows:- (at p. 218) ........The petitioner was not free to sell the articles to others and in fact no sales are proved to have been made to any one other than the authorised distributors. The distributors were free to sell to the customers at whatever price they pleased. In determining the price to be paid by the distributors, wholesale cash prices ruling in the nearest market (Bangalore), do not appear to have been taken into consideration. Hence the distributors cannot be considered as independent buyers. They are clearly favoured buyers. Therefore, it cannot be said that there was a wholesale cash market at the factory site nor can the price charged to the distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was being charged for these in the wholesale market.....by the manufacturers sole selling agent viz., M/s. Maganti Veeraiah and Co., in the wholesale market. There is no dispute about the prices actually charged by the sole selling agents....... ( 19. ) Thus , he did not make any deductions for discount and incidental expenses as had been indicated in the decisions of the Calcutta and Mysore High Courts referred to earlier. In the written statement also, there was no allowance conceded or made for such deductions in fixing the value (price) under Section 4 of the Act. ( 20. ) The learned Additional Judge observed in para 14 of his judgment as follows:- If there is evidence that the manufacturer has sold the finished product to a wholesale dealer at the place of manufacture, if evidence is further forthcoming that the price is low and the price shown is but a device to evade duty, enquiry can be made to see if the price is the real value of the goods. If, for example, it is borne out by evidence that the cost of manufacture is lower than the price at which the produce has been sold, then, obviously, the price quoted cannot represent the real value of the goods. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the agreement in this case, the selling firm, has to foot all the expenses of advertisement, transport and sale. If it had no margin of profit how did it make up the outlay on these efforts and yet made it worthwhile to trade? . ( 27. ) In effect, the learned Additional Judge held that the difference between the price at which the company purchased from the plaintiff and the price at which the company sold to its vendees could be fully accounted for by the cost incurred by the company for advertising and other expenses and the margin of profit which the company had to get. This finding is not based on any data in evidence. It is a mere general assumption which is not justified by facts and figures. It lacks precision. The learned Additional Judge did not justified by facts and figures. It lacks precision. The learned Additional Judge did not specifically consider the factors mentioned in AIR 1961 Cal 477 Supra and AIR 1963 Mys 216 Supra which we follow respectfully, band find out what the wholesale cash price for purposes of Section 4(a) of the Act as arrived at by deducting from the prices charged by the company the discount and incidental expenses act. Apparently, neither of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me under the first part of Sec. 4(A). The cheroots so seized and sold in open market to one and all are shown in Column 2 below. The total number of cheroots which were manufactured are given in Column 3 below. The figures shown in Column 4 give the number of cheroots of each variety disposed of to the company by the plaintiff during the period between 5-2-56 to 29-5-1956. It is the difference between figures in Column 2 and Column 3. ------------------------------------------------------------------------- Column. 1Column. 2Column 3Column. 4 Brand.No Of cheroot seized No. Of cheroots manu- No. Of cheroots sold by the Deputy factured between to the Company by 29-5-1956 5-2-56 and 29-5-1956. firm of the plaintiff. (1) Chinna Langar 1,62,313 67,04,300 64,84,987 (2) Thalam 35,648 11,67,000 11,31,352 (3) Special Langar 28,123 1,67,100 1,38,977 ---------------------- --------- 2,26,084 80,38,400 77,55,316 --------------------- --------- (4) Chinna Langar issued to out- workers for wrapping 57,000 ------------ 2,83,084 ----------- ( 31. ) In his order dated 8-11-1957 (Ex. A-6), the Collector has charged duty and penalty on the cheroots shown in Column 4. This is the amount concerned i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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