TMI Blog1996 (5) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.00 per pair because of inclusion of excise duty. If that cannot be done, there is no question of deducting any duty payable on the goods manufactured by the assessee. The conundrum spoken of by Mr. Shanti Bhushan does not exist. Once the principle underlying the mechanism of valuation of excisable goods is borne in mind, this becomes a straightforward case. No intriguing conundrum perplexes our mind. We can easily behold what lies behind the assessee's scheme. Appeal allowed. - 8762 of 1994 - - - Dated:- 7-5-1996 - A.M. Ahmadi, CJI and B.L. Hansaria, Suhas C. Sen, JJ. [Judgement per : Suhas C. Sen. J]. - The only point that falls for determination in this appeal is whether the benefit of exemption given to footwear can be claimed by the manufacturer even where the wholesale price of the footwear exceeds the limit of the exemption specified in the notification. There can be no dispute that if the assessable value calculated according to Section 4 of the Central Excises and Salt Act, comes upto or below the limit set by the notification, the assessee will be entitled to the benefit of the notification. 2.The notification which was originally issued under sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.It was argued that in respect of the first three items of which wholesale price (after trade discount etc.) was Rs. 56.00; Rs. 58.00 or Rs. 60.00, there was no controversy that these were exempted. There was also no controversy in respect of the last three items of which the wholesale price (after trade discount etc.) was Rs. 68.00, Rs. 70.00 or Rs. 72.00. The controversy is restricted to the items in the second category, where the wholesale price after trade discount etc. was in the range of Rs. 62.00, Rs. 64.00 or Rs. 66.00. In these cases, if the excise duty element was taken away, the value will become Rs. 60.00 or less. Applying rules of valuation laid down in Section 4 of the Act, no duty was payable even on shoes under this category. 5.Mr. Shanti Bhushan has contended that if excise duty is payable on these shoes, then the duty element has to be deducted from the wholesale price in order to ascertain the assessable value under Section 4. Once excise duty at the rate of 10% is taken out from the wholesale price of the shoes falling under the disputed category, the assessable value would come to less than Rs. 60.00 and the benefit of exemption notification canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sub-clause (ii) of clause (d) provides that the value will not include "the amount of duty of excise......, if any, payable on such goods." Otherwise, there will be tax upon the amount of tax which forms part of the price of the goods. But in a case where the wholesale price is not inclusive of any duty payable on the goods, then no question of deduction of any duty for determination of value will arise. Sub-clause (ii) of clause (d) specifically states that what will not be included in the value "is the amount of duty of excise,...... if any, payable on such goods". The phrase "if any" signifies that if no duty is payable, nothing will be deducted from the wholesale price. It is only when excise duty is actually payable that the duty element can be excluded from the wholesale price. Sabyasachi Mukharjee, J. (as his Lordship then was) pointed out in the case of Hindustan Polymers v. Collector of Central Excise - 1989 (43) E.L.T. 165 (SC) = (1989) 4 SCC 323 that the two sub-clauses of Section 4(4)(d) dealt with abatements or deductions in respect of actual burdens, either by way of an expenditure of discount, borne by the assessee. If the assessee has not allowed any trade discoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f excise duty because footwear valued upto Rs. 60.00 per pair was exempt from duty. 11.It has not been explained in the chart how the wholesale price has been fixed at Rs. 62.00 or Rs. 64.00 or Rs. 66.00 as inclusive of duty. Did these prices contain any amount on account of estimated excise duty payable? If so, what were the values on which the manufacturer estimated the amounts at the duties payable? For example, if Rs. 62.00 is the price, the manufacturer will have to explain by giving the breakup, how was this price fixed. If 10% was the rate of duty and footwear valued upto Rs. 60.00 per pair was exempt from duty, Rs. 6 could not be added to the value for fixation of the price. If Rs. 66.00 is an ex-duty price, then duty has not been included in the price. In such a situation, no question of any deduction of duty from the wholesale price under Section 4(4)(d)(ii) could arise. 12.The construction suggested by Mr. Shanti Bhushan will also defeat the purpose of the exemption notification. Exemption from duty has been given to footwear valued at Rs. 60.00 or less per pair. Excise duty is usually passed on to the consumer by including the duty in the price of the goods. The obv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given in the chart were Rs. 60.00 or less, then these values should have been the normal prices of the goods, that is to say, the prices at which such goods were sold to the wholesale market. But, if even in such cases, the wholesale prices were fixed at Rs. 62.00, Rs. 64.00 or Rs. 66.00, per pair, then these prices were not inclusive of any tax. In such a situation, provisions of Section 4(4)(d)(ii) are not attracted at all. The value of the goods shall be deemed to be the normal price of the goods under Section 4(1) of the Act (Rs. 62.00 or Rs. 64.00 or Rs. 66.00 as the case may be). 14.Unless it is shown by the manufacturer that the price of the goods, includes an amount of excise duty payable by him, no question of exclusion of the duty element from the price for determination of value under Section 4(4)(d)(ii) will arise. What the manufacturer has really done in the instant case is to increase the profit element in the wholesale price. In the chart given by Mr. Shanti Bhushan, in the second category the wholesale price of goods after discounts etc. has been shown to be Rs. 62.00, Rs. 64.00 and Rs. 66.00 inclusive of duty at 10%. These are self-contradictory figures. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification granting exemption from duty to a pair of footwear upto the value of Rs. 60.00. This means that if the value of a pair of shoes came to Rs. 60.00 or less no excise duty was leviable; it was not open to the manufacturer to claim any deduction on account of any duty which was not payable. 17.We are unable to uphold the contention of Mr. Shanti Bhushan that the Explanation to Section 4 (4) (d) (ii) comes into operation only when there is a variation in the rate of duty and not otherwise. The duty of excise under Schedule (I) of the Act was imposable on various bases. It could be imposed unitwise as in T.I. 33AA (Parts of Wireless Receiving Sets) or lengthwise as in T.I. 37 (Cinematograph Films) or on the basis of weight as in the case of T.I. 25 (Iron in any Crude Form). The duty has to be calculated at the rates prescribed in the Schedule on the basis of number of units, length or weight or some other basis, as laid down in the Schedule. When the duty is imposed ad valorem, calculation of duty at the prescribed rate will have to be made on the basis of the value of the goods. Section 4 deals with value of excisable goods where the duty of excise is chargeable with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise computed with reference to the specified rate in the First Schedule "as reduced" so as to give full and complete effect to such exemption. "As reduced" in this context means the duty of excise as reduced by a notification granting exemption. 18.There is yet another way of looking at the problem. The notification by exempting footwear upto the value of Rs. 60 from duty of excise has not removed "footwear" from the list of excisable goods in the first Schedule. It has in effect reduced the ad valorem duty of 10 per cent payable on such footwear upto the value of Rs. 60 to nil. 19.The construction suggested by Mr. Shanti Bhushan will lead to anomaly and should be avoided. It will have to be held that "the amount of duty payable, if any" in sub-clause (ii) of clause (d) will mean the amount of duty payable as computed in accordance with the provisions of the First Schedule which will stand reduced only when relief is granted by reduction in the rate of duty and not otherwise. "A notification or order providing for exemption" in the Explanation will have to be read as a notification or order granting exemption by reduction in the rate of ad valorem duty only. The object of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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