TMI Blog1975 (12) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ufactured by it and praying for issuance of the writ of mandamus directing the three respondents (The Union of India, Assistant Collector of Central Excise, Bombay and Collector of Central Excise, Bombay) not to collect or recover any excise duty from it by including in the wholesale price of its products the post-manufacturing costs and expenses and to allow the petitioner-Company to clear its products on the basis of the price list showing the wholesale cash price after excluding the post-manufacturing costs and expenses from the price recovered by it from its wholesale dealers. The petitioner-Company is also seeking to claim a refund of the sum of Rs. 5,213,743.19 P. being the excess collected up to 22nd March, 1974 and any further amount that may be collected by the respondents after that date by failing to exclude from the wholesale cash price of its products the post-manufacturing costs and expenses. **** 7. Mr. Sorabjee for the petitioner-Company has contended that reading Sections 3 and 4 of the Act together it becomes clear that the excise is a tax on the production and manufacture of goods in India and therefore while arriving at the assessable value of the goods so p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to post-manufacturing activities or rather which are referable to non-manufacturing activities will have to be excluded from the wholesale price which is charged by the manufacturer to his wholesale dealer and if because of the very nature or character of the duty or impost such items of expenses are required to be excluded from such wholesale price, the same will have to be done and the exclusion will not depend upon whether the same could be done under the Explanation. He, therefore, contended that the decision of the 2nd respondent dated 14-1-1974 is liable to be quashed or set aside. In support of his aforesaid contentions strong reliance was placed by Mr Sorabjee on the observations of the Supreme Court in the case of A K. Roy and Another v. Voltas Ltd. reported in A.l.R. 1973 S.C. 225 = 1977 E L.T. (J 177) which have been reiterated and approved by that very court in its subsequent decision in the case of Atic Industries Ltd. v. H.N. Dave, Assistant Collector of Central Excise and Customs reported in A.l.R. 1975 S.C. 960 = 1978 E L.T. (J 444). He also pointed out that following the decision of the Supreme Court in Voltas case, in the case of this very petitioner company t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find a sale of goods at a wholesale cash price, and it is not legitimate to dissect the actual price paid, deduct from it such portions as may be ascertained to represent something other than the price of goods, e.g. the cost of service, and then say that the residue left is the wholesale cash price of the goods". Mr. Joshi submitted that the general observations made by the Supreme Court in Voltas' case, on which Mr. Sorabjee has relied, will have to read in the context of facts of that case and the Court has properly explained those observations in its subsequent decision in Atic Industries case and as such the said observations cannot avail the petitioner -Company in support of its case claiming the relief of the type sought in the petition. Thirdly he contended that all the expenses incurred by the petitioner -Company under four heads viz. (a) Marketing and Distribution Expenses, (b) Advertisement Expenses, (c) Freight, and (d) Interest, were not and could not be referred to post-manufacturing activity, as, for instance, the advertising expenses must have been incurred by them both before as well as after manufacturing was complete. An advertisement inserted for securing the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance of such manufactured article from his or its factory shall be taken to be the assessable value for the purpose of calculating the excise duty payable thereon. In the instant case admittedly the petitioner-Company was and has been charging to its wholesalers for its products the wholesale price indicated by it in the price list submitted by it and approved by the Excise Authorities and as such that wholesale cash price as indicated in the price list must be taken to be the assessable value of the products for the purpose of calculating the excise duty payable thereon. The section, according to Mr. Joshi, nowhere mentions that such wholesale price is to be arrived at by deducting the so-called post-manufacturing expenses or manufacturing profits. He pointed out that having regard to the fact that the section contained a deeming provision it was never contemplated that the Excise Officer should undertake any investigation for ascertaining whether such wholesale cash price is charged by the manufacturer, etc. Its wholesales at its factory gate included portions representing expense or profits attributable to post-manufacturing activity and it was with a view to avoid such inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t while arriving at the assessable value of manufactured article the expenses of profits attributable to post-manufacturing activity or non-manufacturing activity should not be excluded for the purpose of calculating the excise duty payable on such article. 15. As regards the Explanation to Section 4, on which reliance was placed by Mr. Joshi, it seems to us clear that the question of considering the Explanation or applying the same to the claim put forward by the petitioner-Company cannot arise. It is true that the said Explanation lays down that in determining the price of any article under Section 4 no abatement or deduction shall be allowed except in respect of two items specified therein, but the question here is not one of allowing any deduction as such from the price determinable under Section 4 but the question relates to exclusion of post-manufacturing expense and post-manufacturing profit while arriving at the assessable value of manufactured article for the purpose of calculating the excise duty payable on such article and the contention is that having regard to the nature or character of excise duty which is a tax only on the production or manufacture of goods the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been incurred by the petitioner-Company for securing the services of personnel or employees for the purpose of manufacturing its products and such expenditure which would be referable to manufacturing activity could not be allowed. As regards freight he pointed out that the petitioner-Company usually entered into agreements with its wholesalers under which one or the other type of delivery was effected, namely (a) delivery at the factory gate where the wholesalers brought their carrier, in which case there was no question of any freight entering into the price charged, and (b) delivery at the godowns of the wholesalers by the petitioner-Company by its lorries, in which case the element of freight would enter into the price charged. but he urged that since in both the types of delivery the petitioner-Company admittedly charged a uniform price to its wholesalers there was no question of such wholesale price including any element of freight and as such no deduction on account of freight could be claimed by the petitioner-Company from the wholesale price charged by it to its wholesalers. lt is not possible to accept these submissions of Mr. Joshi. As regards advertising expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent to which such expenses are attributable to its post-manufacturing activity or non-manufacturing activity will have to be deducted from the wholesale cash prices indicated in its approved price lists and charged by it to its wholesalers while arriving at the assessable value of its products for the purpose of levying the excise duty thereon and the refusal of relief in that behalf of the petitioner-company by the 2nd respondent under his order or decision dated 14-1-1974 is clearly wrong. 18. Having regard to the above discussion, the impugned decision/order of the 2nd respondent is quashed or set aside and it is declared that the petitioner-Company is entitled to the relief or deduction sought by it and is further entitled to clear its products on the basis of the price-list showing the wholesale cash price after excluding the post-manufacturing cost and expenses under the aforesaid four heads from the price recovered by its wholesale dealers. However, it will not be possible for us to straightway grant the relief of refund of Rs. 52,13,743.19 P. as claimed by the petitioner-Company, inasmuch as, the matter will have to go back to the Excise authorities for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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