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PETITIONER: BATA SHOE CO. (P) LTD. & OTHERS

       Vs.

RESPONDENT: THE COLLECTOR OF CENTRAL EXCISE & ORS.

DATE OF JUDGMENT25/04/1985

BENCH: ERADI, V. BALAKRISHNA (J) BENCH: ERADI, V. BALAKRISHNA (J) DESAI, D.A. SEN, A.P. (J)

CITATION:  1985 AIR 1070            1985 SCR  (3) 960  1985 SCC  (3)  97        1985 SCALE  (1)923

ACT:      Central Excise  and Salt  Act 1944  Section 4 scope of- Determination of  value for  the  purpose  of  excise  duty- Exigibility to excise duty of footwear and accessories under Entry 36  of the  First Schedule  to the Act in terms of the Notification  No.   G.S.R.  171/67  dated  24th  July  1967- Interpretation of the Notification.

HEADNOTE:      By virtue  of Entry  36 of  the First  Schedule in  the Central Excises  and Salt  Act,  1944  "footwear  and  parts thereof" in  or on  relation to the manufacture of which any process is  ordinarily carried  on with the aid of power, is chargeable to  excise duty,  the rate  of duty  being 10% ad valorem in  respect of  "footwear" and  15%  ad  valorem  in respect of "parts of footwear". By a Notification dated July 24, 1967, issued In exercise of the powers conferred by sub- rule (1)  of rule  8 of  the Central Excise Rules, 1944, the Central Government  exempted, with effect from the 26th May, 1967, footwear  falling under  item  No.  36  of  the  First Schedule to the Central Excises and Salt Act, 1944, of which the value  did not  exceed Rs.  5 per pair from the whole of the duty of excise leviable thereon.      During the  year 1967  and 1968,  Bata Shoe Company was manufacturing  certain   items  of  footwear  of  which  the wholesale price was Rs. 6.25 per pair. The contention of the company that  since the  assessable value  of such  items of footwear calculated  in terms of section 4 of the Act, as it stood at  the relevant  time was only Rs. 4.94 and thus less than Rs.  5 per  pair were qualified for exemption under the Notification was  negatived by  the department on the ground that while  computing the  value of  the  articles  for  the purpose of  judging the  applicability of the exemption, the duty element  of the  cost structure  could not  be deducted from the  wholesale price  and on such calculation the value of such footwear would exceed Rs. 5 per pair.      Three Writ Petitions were, therefore, filed in the High Courts of  Patna, Calcutta  and the  Punjab & Haryana, since the   company   had   three   manufacturing   establishments attracting the jurisdictions of these Courts. The Patna High Court allowed  the writ petition accepting the contention of

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the  company  and  granted  certificate  of  appeal  to  the department. The High Court of Calcutta 961 dismissed  the  petition  and  accepted  the  stand  of  the Department that  the   expression "value"  occurring in  the Notification dated  July 24,1967  is not  the deemed "value" calculated according  to the  provisions of section 4 of the Act, but  is the  real and actual "value" of the goods after the payment  of the duty. The High Court of Punjab & Haryana dismissed the  petition in  limini on  the ground of laches. Both these  two High Courts, however, granted certificate of appeal  to   the  company.   Hence  the   three  appeals  by certificates.      Allowing the  appeals of the company and dismissing the State appeal, he Court, ^      HELD 1.1 While computing the "value" of the articles of footwear for the purposes of testing the availability of the exemption granted  under the Notification dated July 24,1967 section 4  of the  Central Excises  and Salt  Act, 1944 gets attracted. Section 4 is comprehensive in its coverage and it lays down  the procedure to be followed for determination of "value" of  any article  in every  case where the article is chargeable with duty at a rate dependent on the value of the article. [966H, 967A]      1.2 While  the notification  makes it  clear  that  the effect of the Notification is to render the changeability or otherwise to  duty of  excise of footwear falling under item 36 of  the First  Schedule is made wholly dependent upon the "value" of  the article  of footwear;  in case  such "value" exceeds Rs.  5 per pair, duty will be chargeable at the rate of 10%.  whereas if the value does not exceed Rs.5 per pair, no duty  will be  chargeable on such items of footwear, that is the  rate of  duty will  be nil. Thus entry 36 read along with the Notification dated July 24, 1967 clearly shows that the changeability  to duty  in respect  of  any  article  of footwear is  made dependent upon its value in tho sense that the chargeability  to duty  of excise will arise only if the "value" of  the article  does not  exceed Rs.  5  per  pair. [966D-E, 967A-B]      1.3 Before  determining the question of availability of the exemption  under the  Notification dated  July 24, 1967, the first  essential step,  therefore, is  to determine  the "value" of the article in the manner prescribed in section 4 of the  Act. The fact that on such a computation the article may ultimately be found to be exempted from excise duty does not have  any bearing  on the  question of  applicability of section 4  of the  Act  for  determining  the  ’’value"  for purpose of duty. [967B-D]      1.4 The expression ’I‘or the purpose of duty" occurring in section  4 has  a wide import. For all purposes connected with the determination of chargeability and levy of duty the provisions of  the section are to be applied for computation of the  "value" of  the article.  Under the  Explanation  to section 4,  it is mandatory that in determining the price of an article both trade discount as well as the amount of duty calculated as payable on the wholesale cash price payable at the time  of removal  of the  article based on the wholesale cash price referred to in clause (a) are to be deducted from such wholesale price. [967D-E]      In the  instant case,  in as  much as  the value of the articles of footwear in 962 question calculated  in accordance  with the  provisions  of section 4  of the  Act did  note exceed  Rs.5 per  pair, the

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articles in  question were  exempted from the charge to duty of excise under the Notification dated July 24, 1967 and the company is  entitled, forthwith,  to a refund of the amounts of duty illegally realised by the Department. [967G-H]      The Collector  of Central  Excise, Patna  & Ors. v. The Bata Shoe Company (P) Ltd. AIR Patna-approved.      The Bata  Shoe Company  (P) Ltd..  v. The  Collector of Central Excise  & Ors.,  Calcutta, AIR  Calcutta-: The  Bata Shoe Company  (P) Ltd.  v. The Collector of Central Excise & Ors., AIR Pun jab & Haryana-reversed.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 353 (N) of 1971.      From the  Judgment and  Order dated  29.7. 1970  of the Punjab and Haryana High Court in C.W. No. 2331/70.              Civil Appeal No. 1469 (N) of 1972.      From the  judgment and  order dated  28. 6. 1971 of the Patna High Court in C.W No. 1330/10).                             AND                Civil Appeal No. 1470 of 1972.      From the  judgment and  order dated 24. 12. 1971 of the Calcutta High Court in F.M.A. No. 201 of 1971)      Dr. Y.  S. Chitale,  Anil Sharma  and Praveen Kumar for the Appellants.      M. S.  Gujaral, V. K. Punjwani, C. V. Subba Rao and Ms. A. Subhashini for the Respondents.      The Judgment of the Court was delivered by      BALAKRISHNA  ERADI,  J.  In  these  three  appeals  the parties involved  are the  same and  the point  arising  for determination is  identical. Hence  they were heard together and are being disposed of by this judgment. 963      The Bata  Shoe Company  Ltd. (hereinafter  called  ’the company’) is  an existing  company within the meaning of The Companies Act,  1956;  with  its  head  office  at  No.  30, Shakespeare Sarani,  Calcutta-17. The  company is engaged in the business  of manufacturing  and dealing  in articles  of footwear and  accessories. For  the  purposes  of  the  said business, the company has three manufacturing establishments namely, a  factory  a  Batanagar  in  the  district  of  24- Parganas, West  Bengal, another  factory at  Batanagar  near Patna in  the State  of  Bihar  and  a  third  manufacturing establishment at  Faridabad in  the  State  of  Haryana.  By virtue of  Entry 36  of the  First Schedule  in the  Central Excises and  Salt Act, 1944 (hereinafter called the ’Act’ ), footwear  and  parts  thereof  in  or  in  relation  to  the manufacture of  which any  process is  ordinarily carried on with the  aid of  power, is  chargeable to  excise duty, the rate of  duty being  ten per  cent ad  valorem in respect of ’footwear and  fifteen per  cent ad  valorem in  respect  of ’parts of footwear’.      By a Notification G. S. R. 360, dated February 28, 1965 issued by  the Central  Government in exercise of the powers conferred by  Sub-rule (1)  of Rule  8 of the Central Excise Rules, 1944 for short "the Rules" footwear and parts thereof were completely  exempted from levy of excise duty. However, shortly thereafter,  by other  Notification  dated  May  26, 1967, the exemption from duty granted in respect of footwear and  parts  thereof  by  the  preceding  Notification  dated February 28,  1965 was  withdrawn. Thereafter  followed  yet another Notification  dated July  24, 1967  which was in the following terms:-

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         "NOTIFICATION           CENTRAL EXCISES           G. S.  R. In  exercises of the powers conferred by      Sub-rule (1) of rule g of the Central Excise Rule, 1944      the Central Government hereby exempts, with effect from      the 26th  may, 1967, footwear falling under Item No. 36      of the  First Schedule  to the Central Excises and Salt      Act, 1944  (I of  1944) of  which the  value  does  not      exceed Rs. 5.00 per pair, from the whole of the duty of      excise leviable thereon.           (No. 171/67)" 964      The sole  question raised in these appeals Concerns the interpretation of this Notification.      During  the   year  1967  and  1968,  the  company  was manufacturing  certain   items  of  footwear  of  which  the wholesale price was RS.. 6.25 per pair The company contended that since  the assess  able value of such items of footwear calculated in accordance with the provisions of Section 4 of the Act,  as they  stood at  the relevant time was only Rs.. 4.94 and  hence less  than  Rs..  5  per  pair,  such  items qualified for  exemption from  duty under  the  Notification dated July 26,1967. Though originally the Department appears to have been inclined to accept the correctness of the stand taken by  the company. Later on they changed their stand and informed  the   company  that   the  articles   of  footwear manufactured by  it, of  which the  wholesale price  was Rs. 6.25 per  pair were  chargeable to  excise duty  since while computing the  "value" of  the articles  for the  purpose of judging the applicability of the exemption, the duty element of the  cost structure  could not be deducted from the whole sale price  and  on  such  calculation  the  value  of  such footwear would exceed Rs.. 5 per pair.      The company  took up  the matter  with  the  respective Collectors of  Central Excise  in  West  Bengal,  Bihar  and Haryana but  without success- In the meantime the Department continued to levy and collected from the company substantial amounts by  way of  duty on  such articles  of footwear. The company, therefore, instituted separate Writ Petition in the High Courts  of Calcutta,  Patna and  Punjab and Haryana The Patna High  Court allowed  Writ Petition  of the company and upheld its  contention that  the  articles  of  footwear  in question were  not exigible  to duty  since they fell within the scope  of exemption granted the Notification of July 26, 1967. Accordingly  a mandamus  refund of  the duty illegally collected from  the Company  was issued  by the  Patna  High Court. The  High Court of Calcutta however, took a different view and  accepted the  stand of  the  Department  that  the expression "value"  occurring in the Notification dated July 26, 1967  is not  the deemed ’value’ calculated according to the provisions  of Section  4 of the Act but is the real and actual ’value’  of the goods after payment of duty. The High Court of  Punjab and  Haryana was  moved by the company only after short  interval of  time  during  which  it  had  been pursuing its  remedies before  the  highest  Departmental  a Authorities as well 965 as before  the Patna  and Calcutta  High  Courts.A  Division Bench consisting  of two  learned Judges  of the  Punjab and Haryana High  Court dismissed the company’s Writ Petition in limini on  the ground  that the  company had  approached the High Court  at a  very belated  stage.  The  Division  Bench however, certified the case to be St one to this Court under Article  133   of  the   Constitution  of   India.   Similar certificates were granted to the company and to the Union of

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India respectively by the High Courts of Calcutta and Patna. That is  how these  appeals have  come to  be filed  in this Court.      After hearing  Counsel  appearing  on  both  sides  and giving our  anxious consideration  to the  matter in all its aspects, we  are clearly  of the opinion that the view taken by the  High Court  of Patna  is the   correct  one and  the contrary view  taken by the High Court of Calcutta cannot be sustained- We  are also  of opinion  that on  the facts  and circumstances of  the High  Court of  Punjab and Haryana was not justified in dismissing the Writ Petition of the company in limini on the ground of delay especially having regard to the fact  that the  matter  was  throughout  being  actively pursued by  the company  before the Departmental Authorities as well as before the two other High Courts.      Section 3  of the  Act is the charging section and Sub- section (1) thereof lays down that there shall be levied and collected in  such manner  as may  be prescribed  duties  of excise on  all excisable  goods other  than salt  which  are produced or  manufactured  in  India  and  a  duty  on  salt manufactured in,  or imported by land into any part of India as, and  at the  rates, set  forth  in  the  First  Schedule Section 4  deals with  the subject of valuation of excisable goods for  purposes of  charging of duty of excise. We shall reproduce that  section as  it stood  at the  relevant time, omitting portions  thereof which  are  unnecessary  for  our present purpose:           "4. Determination  of value  for the  purposes  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 the removal of the articles      chargeable 966      with duty  from the  factory or  any other  premises of      manufacture or  production for delivery at the place of      manufacture of  production, or  if a  wholesale  market      does not  exist for  such article at such place, at the      nearest place where market exists.                      (b) (Not relevant)      Explanation-In determining  the price  of  any  article under this  section  no  abatement  or  deduction  shall  be allowed except  in respect  of trade  discount and amount of duty  payable   at  the  time  of  removal  of  the  article chargeable with  duty from  the factory  or  other  premises aforesaid."      Under this  Section, in  all cases where any article is charge able  with duty  at a rate ’dependent upon its value’ such ’value’  is  to  be  computed  by  deducting  from  the wholesale  cash   price  referred   to  in  clause  (a)  two components of  the price structure namely (1) trade discount and (2)  the amount  of duty  payable on  the article at the time of  its removal  from the  factory or other premises of manufacture or production.      The short  question for  consideration is  whether  the mode of  determination of "value" prescribed by Section 4 is not attracted while computing the "value’ of the articles of footwear for the purposes of testing the availability of the exemption granted  under the  Notification  dated  July  26, 1967. To  our mind  the answer  to the question is perfectly simple. Section  4 is  comprehensive in  its coverage and it lays down  the procedure to be followed for determination of "value" of  any article  in every  case where the article is

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chargeable with  duty at  rate dependent on the value of the article. On  a careful reading of the Notification dated Jul y 26,  1967, it  also become  clear that  the effect  of the Notification is  to render the chargeability or otherwise to duty of  excise of  footwear falling  under Item  36 of  the First Schedule  is made wholly dependent upon the ’value’ of the article  of footwear; in case such ’value’ exceeds Rs. 5 per pair, duty will be chargeable at the rate of 10% whereas if the value does not exceed Rs. 5 per pair, no duty will be chargeable on  such items  of footwear,  that is the rate of duty will be ’nil’. It is precisely to such a situation that the  provision  of  Section  4  gets  attracted  because  as expressly stated in the opening part 967 part of  the said  section  the  mode  of  determination  of ’value’ specified  in the section will be applicable to; all cases where  any article  is chargeable  with duty at a rate dependent upon  the value  of the  article. In the case of a total exemption,  the rate will be ’nil’. Thus Entry 36 read along with  the Notification  dated July  24,  1967  clearly shows that  the chargeability  to duty  in  respect  of  any article of  footwear is made dependent upon its value in the sense that  the chargeability  to duty  of excise  ill arise only if the ’value’ of the article does-not exceed RS. 5 per pair.; It  is therefore,  plain that  before determining the question  of   availability  of   the  exemption  under  the Notification dated  July 24,  1967, the first essential step is to  determine the  value of  the article  in  the  manner prescribed in  Section 4 of the Act. The fact that on such a computation the  article  may  ultimately  be  found  to  be exempted from  excise duty  does not have any bearing on the question of  applicability of  Section 4  of  the  Act  for. determining the  ’value, for purpose of duty. The expression ’for the purposes of duty’ occurring in Section 4 has a wide import. For all purposes connected with the determination of chargeability and levy of duty the provisions of the section are to  be applied  for comuptation  of the  value’  of  the article. Under the Explanation to Section 4, it is mandatory that in  determining the  price of  an  article  both  trade discount as well as the amount of duty calculated as payable on the  wholesale cash  price payable at the time of removal of the article based on the wholesale cash price referred to in clause  (a) are to be deducted from such wholesale price. This is  the view  taken by  the- High Court of Patna in the judgment appealed against C. A. No. 1469 of 1972 and we have no hesitation to agree with the said view. The High Court of Calcutta was  of opinion  that Section  4 only lays down the formula or the principle for determination of "value for the purpose of  duty" and  it has not laid down any principle or formula for  the determination  of value  for exemption from duty as  already indicated.  In our  opinion this  is not  a correct interpretation  of the  scope and ambit of Section 4 of the Act.      In the  result, we  hold that  inasmuch as the value of the  articles   of  footwear   in  question   calculated  in accordance with  the provisions  of Section 4 of the Act did not exceed  Rs. 5  per pair,  the articles  in question were exempt  from   the  charge  to  duty  of  excise  under  the Notification dated July 24, 1967. 968      In the result C. A. No. 1470 of 1972 arising out of the judgment of  the High  Court of  Calcutta, C.  A. No. 353 of 1971 filed against the order of the High Court of Punjab and Haryana and  the Writ  Petitions filed by the company in the High Courts  will stand  allowed with the direction that the

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amounts of  duty illegally  realised by  the Department from the company  should be  forthwith refunded  to it. C. A. No. 1469 of 1972 filed by the Collector of Central Excise, Patna against the  decision of  the Patna  High Court  will  stand dismissed In  C. A.  No. 1470  of 1972  and C, A. No. 353 of 1971  the   appellants  will   get  their   costs  from  the respondents. There will be no order as to costs in C. A. No. 1469 of 1972. S.R.          Civil Appeal Nos. 353/1971 and 1470/2 allowed.                          Civil Appeal No. 1469/72 dismissed. 969