Delhi Cloth & General Mills Co.
Ltd. Vs. Union of India & Ors [1986] INSC 25 (4 March 1986)
VENKATARAMIAH, E.S. (J) VENKATARAMIAH, E.S.
(J) THAKKAR, M.P. (J)
CITATION: 1986 AIR 856 1986 SCR (1) 440 1986
SCC (2) 288 1986 SCALE (1)293
ACT:
Central Excise & Salt Act, 1944, s.4 -
Excise Duty Wholesale Cost price forming basis of assessment - Determination of
- Maximum price of commodity fixed statutorily under Control Order - Whether
conclusive.
HEADNOTE:
During the period between May 4, 1971 ant
July 22, 1971 owing to the depression in the market, the appellant had to sell
on wholesale basis its vegetable products known as "Panghat" and
"Roshni" brands at Rs.78.66 and Rs.71.62 per tin in order to clear
the accumulated stock and to avoid huge loss. These prices were lower than the
maximum prices prescribed by the Notification issued under the Vegetable Oil
Products Central Order, 1947.
The appellant submitted a price list
containing the aforesaid wholesale cash price in respect of these two products
to the Superintendent, Central Excise, Delhi as required by rule 173-C of the
Central Excise Rules, 1974 and sought his approval there for. me
Superintendent, Central Excise rejected the prayer of the appellant and
directed that the central excise duty under 8.4 of the Central Excise
prices fixed under the above Notification. me
appellant's appeal before the deputy Collector (Technical), Central Excise also
failed.
Aggrieved by the decision of the Deputy
Collector (Technical), the appellant filed a writ petition before the High
Court on the ground that the maximum price fixed by the Government of India
should not be taken as the basis for levying excise duty under the Act when the
appellant had to sell the goods In question at a lower rate owing to bona fide
commercial reasons. The High Court dismissed the petition in limine.
441 Allowing the appeal, ^
HELD : 1. The Order of the High Court and the
orders passed by the Central Excise Authorities are set aside and the case is
remanded to the Superintendent of Central Excise to redetermine the wholesale
cash price in respect of the goods in question on the basis of the relevant
principles.
[447 A-B]
2.1 Section 4 of the Central Excise &
Salt Act 1944 toes not refer to any notification issued under the Essential
Commodities Act, 1955 fixing the maximum price of any essential commodity.
Hence the maximum price fixed there under cannot control the determination of
the value of the goods under 8.4 of the Act for the purpose of levy of excise
duty. In appropriate cases the assessing authorities may while determining the
wholesale cash price under section 4 of the Act take into consideration the
maximum price fixed under the Essential Commodities Act, 1955 to decide whether
the goods are sold by a dealer bona fide at the prices quoted by him. It
cannot. however, be conclusive. [446 B-D]
2.2 The provisions contained in 8.4 of the
Act are intended for the purpose of determining the excise duty payable by a
manufacturer. They are intended for ascertaining the wholesale cash price
realised or realisable by the manufacturer in respect of the goods in question.
Such price should ordinarily be fixed at arms
length and in the usual course of business. It should be fixed bonafide without
showing any kind of favour to the buyer. [445 F-G] In the instant case, the
excise authorities have not made any attempt to determine the whole-sale cash
price of the goods in question in accordance with law. It appears that both the
authorities felt that they were bound by the maximum prices notified by the
Government of India and the excise duty was payable on that basis of the
wholesale prices fetched by the goods even if they were lower than the
controlled prices. They have not given any valid reason for rejecting the price
list submitted by the appellant. [446 G- H]
3. The purpose of fixing the maximum price
beyond which essential commodities cannot be sold is different from the purpose
of the provisions contained in 8.4 of the Act. Under 442 the provisions of the Essential
Commodities Act 1955 and the various orders and notifications issued thereunder
when a maximum price of an essential commodity is fixed, a dealer is prohibited
from selling the commodity beyond that price.
The said restriction is imposed in the
interest of the consumers. The object of such notifications is to see that the
prices of essential commodities do not go beyond the maximum price fixed
thereunder. Those notifications do not prohibit a manufacturer or a dealer from
selling the essential commodities in question at rates lower than the maximum
rates fixed under the notifications and such sales would not be contrary to the
provisions of the Essential Commodities Act, 1955 or orders and notifications
issued thereunder. [445 D-F] & CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 626 of 1972.
From the Judgment and Order dated 4.11.1971
of the Delhi High Court in Civil Writ No. 1159 of 1971.
D.N. Mishra for the Appellant.
B. Datta, Additional Solicitor General,
T.V.S.N. Chari, R.D. Aggarwala and C.V. Subba Rao for the Respondents.
The Judgment of the Court was delivered by
VENKATARAMIAH, J. This is an appeal by special leave filed against the order
dated November 4, 1971 in Civil Writ No. 1159 of 1971 on the file of the High
Court of Delhi dismissing the said petition in limine. The appellant is a
manufacturer engaged in the business of manufacturing certain vegetable oil
products (hydrogenated oil) at its factory in Delhi. Vegetable oil product was
an essential commodity under section 2(ii) of the Essential Commodities Act,
1955. On February 22, 1971 the Director (Vanaspati), who had been authorised by
the Vegetable Oil Products Controller of India under sub-clause (a) of clause
(ii) of the Vegetable Oil Products Control Order, 1947 to exercise the powers
of the Controller under the said Order issued a notification in exercise of the
powers conferred by subclause (i) of clause 6 thereof read with the
notification of the Government of India 443 in the Ministry of Food and
Agriculture dated September 24, 1958 and in supersession of the notification of
the Government of India issued on the above subject earlier fixing maximum
prices at which the vegetable oil products might be sold in the various zones
specified therein with effect from February 23, 1971. Delhi cane within zone
'A'.
Under that notification the maximum price at
which the appellant might sell its vegetable product known as 'Panghat' in bulk
pack was Rs.81.04 per tin of 16.5 Kilograms and the maximum price at which it
could sell the vegetable product manufactured by it known as 'Roshni' in bulk
pack was Rs. 74.00 per tin of 15 Kilograms. The excise duty payable on the said
products under the provisions of Central Excise and Salt Act, 1944 (hereinafter
referred to as 'the Act') was 5 per cent ad valorem, but during the period
between May 4, 1971 and July 22, 1971 owing to the depression in the market the
appellant had to sell on wholesale basis 'Panghat' brand vegetable product at
Rs. 78.66 per tin and 'Roshni' brand vegetable product at Rs. 71.62 per tin in
order to clear the accumulated stock and to avoid huge loss These prices were
lower than the maximum prices prescribed by the notification, referred to
above. On May 4, 1971 the appellant submitted a price list in respect of
'Panghat' and 'Roshni' bulk packs showing the wholesale cash price of these
products at Rs.78.66 and Rs. 71.62 per tin respectively as stated above to the
Superintendent, Central Excise, Sabzi Mandi, Delhi as required by rule 173-C of
the Central Excise Rules, 1944 and sought his approval therefor. The
Superintendent, Central Excise rejected the prayer of the appellant and
directed that the Central Excise duty was payable on the basis of the maximum
prices fixed by the Ministry of Food and Agriculture under the notification
referred to above. Aggrieved by the said order, the appellant filed an appeal
under section 35 of the Act before the Deputy Collector (Technical) of Central
Excise, Bahadurshah Zafar Marg, New Delhi which was rejected by him.
The short order dated August 28, 1971 passed
by the Deputy Collector (Technical) on that appeal read as follows:
"I have carefully considered all the
points raised by the appellants in their appeal and those made by them at the
time of personal hearing.
2. The appellant's main contention is that
the price of the vegetable product fixed by the 444 Government in the Ministry
of Food and Agriculture would form the basis of assessment of Central Excise
duty only if the statutory price and their wholesale price at which the goods
are sold are the same, but if their wholesale price is less than the
statutorily fixed price, it was not justifiable to assess Central Excise duty
on the Government fixed price.
3. I do not accept the above contention of
the appellants. Since in the case of Vegetable Product, the wholesale price is
controlled under Vegetable Oil Control Order by the Govt. in the Ministry of
Food and Agriculture, only such controlled price should be made the basis of
assessment of duty for the purpose of section 4 of the Central Excise and Salt
Act, 1944. I, therefore, do not see any reason to interfere with the price
approved by the Superintendent of Central Excise." Aggrieved by the
decision of the Deputy Collector (Technical) the appellant filed the writ
petition before the High Court out of which this appeal arises contending that
the maximum price fixed by the Government of India above which the goods in
question could not be sold should not be taken as the basis for levying excise
duty under the Act when the appellant had to sell the goods in question at a
lower rate owing to bona fide commercial reasons. That petition was rejected in
limine by the High Court and this appeal is filed against the order of the High
Court.
The material part of section 4 of the Act, as
it stood at the relevant time, read as follows:
"Determination of value for the purpose
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
removal of the article chargeable with duty from the factory or any other 445
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............... "
Neither the Superintendent of the Central Excise nor the Deputy Collector
(Technical) has recorded a finding in this case that the appellant had sold the
goods in question during the relevant period at a price higher than the prices
mentioned by the appellant in the price list. The Excise authorities were
guided mainly by the maximum price fixed by the Government of India by its
notification in arriving at the 'wholesale cash price' which formed the basis
of assessment of excise duty in respect of the two types of vegetable oil
products with which we are concerned in this case. me purpose of fixing the
maximum price beyond which essential commodities cannot be sold is different
from the purpose of the provisions contained in section 4 of the Act.
Under the provisions of the Essential
Commodities Act, 1955 and the various Orders and Notifications issued
thereunder when a maximum price of an essential commodity is fixed a dealer is
prohibited from selling the commodity beyond that price. The said restriction
is imposed in the interests of the consumers. me object of such notifications
is to see that the prices of essential commodities do not go beyond the maximum
price fixed thereunder. A contravention of that rule would expose a dealer to
penal consequences. Those notifications do not prohibit a manufacturer or a
dealer from selling the essential commodities in question at rates lower than
the maximum rates fixed under the notifications and such sales would not be
contrary to the provisions of the Essential Commodities Act, 1955 or Orders and
Notifications issued thereunder. me provisions contained in section 4 of the
Act are intended for the purpose of determining the excise duty payable by a
manufacturer. They are intended for ascertaining the wholesale cash price
realised or realisable by the manufacturer in respect of the goods in question.
Such price should ordinarily be fixed at arms length and in the usual course of
business. It should be fixed bona fide without showing any kind of favour to
the buyer. me wholesale cash prices of goods are bound to vary depending upon
various economic factors such as supply, demand etc. etc. m ere is no guarantee
that the goods 446 in respect of which the maximum price is fixed under a
notification issued under the Essential Commodities Act, 1955 and Orders made
thereunder would actually be sold at the maximum price mentioned in the
notification. The wholesale cash price realised by the manufacturers may fall
below such maximum price on many occasions as it has happened in the instant
case. Section 4 of the Act does not refer to any notification issued under the Essential
Commodities Act, 1955 fixing the maximum price of any essential commodity.
Hence the maximum price fixed thereunder cannot control the determination of
the value of the goods under section 4 of the Act for the purpose of levy of
excise duty. In appropriate cases the assessing authority may while determining
the wholesale cash price under section 4 of the Act take into consideration the
maximum price fixed under the Essential Commodities Act, 1955 to decide whether
the goods are sold by a dealer bona fide at the prices quoted by him. It
cannot, however, be conclusive. The proposition becomes clear if a converse
case is taken. Let us assume that the manufacturer taking advantage of
conditions of scarcity of certain goods sells the goods for which maximum price
is fixed at wholesale cash prices which are higher than the maximum price. In
that event he would suffer the penal consequences under the Essential Commodities
Act, 1955 and also would be liable to pay excise duty on the basis of the
higher wholesale cash price realised by him. He would not be taxed under the
Act on the basis of the maximum price which is lower but on the actual price at
which the goods were sold. Hence it is the duty of the authorities under the
Act to determine the wholesale cash price in accordance with the well-settled
principles, of course, keeping also in view the maximum price fixed by the
Government of India under the Essential Commodities Act, 1955. But in the
orders of the excise authorities which are impugned in this appeal we find that
they have not made any attempt to determine the wholesale cash price of the
goods in question in accordance with law. It appears that both the authorities
felt that they were bound by the maximum prices notified by the Government of
India and the excise duty was payable on that basis and not on the basis of the
wholesale prices fetched by the goods even if they were lower than the
controlled prices. They have not given any valid reason for rejecting the price
list submitted by the appellant. The decisions of the Superintendent of Central
Excise and the Deputy Collector (Technical) which are impugned 447 in these
proceedings are, therefore, liable to be set aside.
We accordingly set aside the order of the
High Court and the orders passed by the Central Excise authorities and remand
the case to the Superintendent of Central Excise (Respondent No.2 herein) to
re-determine the wholesale cash price in respect of the goods in question on
the basis of the relevant principles and in the light of the above decision
again and to pass a fresh order of assessment for the period in question. We
direct that the fresh assessment proceedings shall be concluded by the
assessing authorities within three months from today. We are informed that the
appellant has paid excise duty on the basis of the orders of the Central Excise
authorities which are set aside by this judgment. If on reassessment it is
found that the appellant is entitled to the refund of any excess amount paid by
it the Central Excise authorities shall refund such excess amount within two
months from the date of reassessment. This appeal is accordingly allowed. No
costs.
M.L.A. Appeal allowed.
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