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PETITIONER: DELHI CLOTH & GENERAL MILLS CO. LTD.

       Vs.

RESPONDENT: UNION Of INDIA & ORS.

DATE OF JUDGMENT04/03/1986

BENCH: VENKATARAMIAH, E.S. (J) BENCH: 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 therefor.  me  Superintendent,  Central Excise rejected  the prayer  of the  appellant and  directed that the central excise duty under 8.4 of the Central Excise JUDGMENT: 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.

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[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 thereunder 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

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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.

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         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

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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

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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. 448