Case Note & Summary
The dispute arose under the Central Excise and Salt Act, 1944, concerning the levy of excise duty on footwear and the applicability of an exemption notification. The Assistant Collector of Central Excise, as appellant, challenged the respondent manufacturer's claim that footwear with a wholesale price above the exemption limit of Rs.60 per pair could still be exempt if notional excise duty was deducted from that price to arrive at an assessable value of Rs.60 or less. The respondent manufacturer argued that under Section 4, excise duty should be excluded from the wholesale price to determine assessable value, and if after such deduction the value fell to Rs.60 or less, no duty was payable. A chart illustrated wholesale prices of Rs.62, Rs.64, and Rs.66, which after deducting 10% duty resulted in values of Rs.56.36, Rs.58.18, and Rs.60.00. The revenue contended that the normal wholesale price itself was the value and that no deduction was permissible when no excise duty was actually included in that price. The Supreme Court rejected the manufacturer's contention. It held that Section 4(1)(a) deems the normal wholesale price to be the value of excisable goods. The normal wholesale price is a cum-duty price only when duty is actually payable and included by the manufacturer. Section 4(4)(d)(ii) allows exclusion of the amount of excise duty 'if any' payable on such goods, meaning only actual duty payable can be deducted. If the manufacturer fixed a wholesale price above Rs.60 knowing that footwear valued up to Rs.60 was exempt, no excise duty could have been included in that price; the excess was extra profit in another guise. Allowing the deduction would defeat the exemption's purpose of providing relief to consumers of lower-priced footwear and would enable manufacturers to profit while depriving the revenue. The court followed Hindustan Polymers v. Collector of Central Excise, (1989) 4 SCC 323, which held that deductions are for actual burdens borne by the assessee. Accordingly, the court ruled in favor of the revenue, holding that no deduction of notional excise duty was permissible and the manufacturer could not claim exemption for footwear whose wholesale price exceeded Rs.60 without including duty.
Headnote
A) Central Excise - Valuation - Normal Wholesale Price as Assessable Value - Central Excise and Salt Act, 1944, Section 4(1)(a) - The court considered whether the manufacturer of footwear could deduct notional excise duty from the wholesale price to reduce assessable value below the exemption limit. It held that the normal wholesale price at the time and place of removal is deemed to be the value, and that excise duty is leviable on the value of excisable goods, not on a cum-duty price. The manufacturer's attempt to deduct duty not actually payable was rejected. B) Central Excise - Exemption Notification - Footwear Value Limit and Object - Central Excise Rules, 1944, Rule 8(1) and exemption notification - The exemption for footwear valued up to Rs.60 per pair cannot be claimed by a manufacturer whose wholesale price exceeds Rs.60, when no excise duty was actually included in that price. Allowing such deduction would defeat the purpose of the notification, which was to give relief to consumers of lower-priced footwear, and would enable manufacturers to profit under the guise of tax. C) Central Excise - Deductions/Abatements - Meaning of 'if any' in Section 4(4)(d)(ii) - Central Excise and Salt Act, 1944, Section 4(4)(d)(ii) - The phrase 'if any' signifies that only the amount of duty actually payable on goods is excludible from value. If no duty is payable, nothing is deducted from the wholesale price. The decision in Hindustan Polymers v. Collector of Central Excise, (1989) 4 SCC 323, was followed to hold that deductions are for actual burdens only. Held that no deduction of non-payable excise duty is permissible.
Issue of Consideration
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, particularly by deducting notional excise duty from the wholesale price to determine assessable value under Section 4.
Final Decision
The Supreme Court rejected the respondent manufacturer's contention and held that where the wholesale price of footwear exceeds Rs.60 per pair and no excise duty was actually included in that price, the manufacturer cannot claim exemption by deducting notional excise duty from the wholesale price. The normal wholesale price is the assessable value under Section 4, and deduction under Section 4(4)(d)(ii) applies only to duty actually payable. The court upheld the revenue's position.
Law Points
- Normal wholesale price is deemed value under Section 4(1)(a)
- Excise duty leviable on value
- not cum-duty price
- Deduction under Section 4(4)(d)(ii) only for duty actually payable
- No deduction if no duty payable
- Exemption notification cannot be availed by artificial reduction of value
- Manufacturer cannot profit by including non-payable tax
- 'if any' means actual duty only
