TMI Blog1982 (10) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumed in the factory itself without being sold to outsiders. 3. Under Section 3 of the Central Excises and Salt Act, 1944 (hereinafter called "THE: ACT") excise duty shall be levied and collected in such a manner as may be prescribed on all excisable goods at the rates set forth in First Schedule to the Act. Under sub-section (2) thereof, Central Excise may by notification in the Official Gazette fix for the purpose of levying the said duties, tariff values on the articles mentioned in the First Schedule as chargeable with ad valorem duty. Different tariff values may be fixed for different classes or descriptions of the same article as provided by sub-section (3). Section (4) of the Act provides for the valuation of the excisable goods for the purpose of charging of duties of excise on the excisable goods. Sub-section (4) (d) of Section 4 lays down the method of valuation in relation to excisable goods and it reads as follows: 4 (4) (d). 'Value' in relation to any excisable goods.- (i) Where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee to periodically make credit in such account current by cash payment into the treasury sufficient to cover the duty due on the goods intended to be removed at any time. Proviso (I) to Rule 173G provides that the duty due on the goods consumed within the factory in a continuous process may be so paid at the end of the factory day. An exception is made in the case of cotton yarn, but that is not relevant for the present case. 7. The practice which the Mills was adopting with regard to payment of duty on the wrapping paper and the other varieties of paper manufactured by them as stated in the counter affidavit is as follows :- On each packet of paper sold in the market, there will be a label which describes the grammage of the paper, size of the paper, the gross weight of the packet and the number of sheets contained in the packet. For the purpose of payment of duty, the net weight of inner contents will be calculated by the Mills by deducting the weight of the wrapper paper from the gross weight shown on the label and the Central Excise Duty will be paid on the value of such net weight, at the rates and value applicable to such paper. So far as the wrapper paper is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... content paper, and that the demand for payment of duty on the wrapper paper used for packing other kinds of paper and also for payment of duty on the value of the wrapping paper as forming part of the reams or reels of other paper with which the wrapping paper has been wrapped amounts to levy of duty twice over on the same excisable goods, and that it is illegal and without jurisdiction. 10. On the other hand, it is contended for the respondents that the Wrapper Paper is not sold to outsiders but it is consumed within the factory and, therefore, it attracts excise duty before it is taken away for use in the factory as packing material for other varieties of paper, and that subsequently when the wrapper paper is cut into small pieces and used for packing operations of other varieties of paper, the wrapper paper thereby loses its entity as well as identity and, therefore, the cost of the wrapper paper forms part of the value of the wrapper paper and is liable to excise duty as per the provisions of Section 4 (4) (d) of the Act. 11. There is no dispute that wrapping paper manufactured by the Mills is liable for duty at the Tariff rate mentioned in Item 17 (2) of the First Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are unrelated to the manufacture or production, the price must be relieved of such loading arising out of the inclusion of post-manufacturing expenses and costs for the purpose of determining the assessable value. For the purpose of determining the assessable value under Section 4 of the Act, as it stood prior to 1-10-1975, the 'wholesale cash price' was to be ascertained. After the amendment from 1-10-1975, the 'normal price' is to be ascertained. Section 3 of the Act authorising the levy of excise duty on the manufacture and production of goods, it may be noted, is left intact and has not been amended by the Amending Act of 1973. What is more, the concept of 'Factory Gate sale' which was the basis for determination of the assessable value under Section 4 of the Act, as it stood prior to the amendment, is re-affirmed in the amended section and in the notification of 'normal price' contained to the amended Section 4, the element of sale of goods for delivery at the time and place of the removal has been preserved. The basis of excise duty, therefore, continues to be the manufacturing cost and manufacturing profit and the amendment of Section 4 does not and cannot, in any way, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of excise duty on excisable goods produced or manufactured in India. lt is clear, when one bears these constitutional entries in mind, that the taxable event in the case of excise duty is the production or manufacture of excisable goods and nothing else." 15. It is therefore, clear that when considering Section 4, one has to bear in mind that that section provides for machinery of collection of excise duty for administrative convenience. If, in enacting Section 4 and Explanation thereto, any words are used which are capable of being construed as enabling the excise authorities to calculate the excise duty on anything other than manufacture or production of goods by the well known doctrine of 'Reading Down', which has been evolved by Courts of Law, First in Australia and then followed in India, the language of Section 4 must be confined to the power of the Legislature referable to Item 84 in the Union List in the Seventh Schedule to the Constitution, viz., that only the manufacture or production should be taken into consideration by the excise authorities while fixing the value of the goods for the purpose of excise duty when excise duty is leviable on an ad valorem basis. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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