25 October 2004
Supreme Court
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ESCORTS LTD. Vs COMMNR. OF CENTRAL EXCISE DELHI -II

Bench: ARIJIT PASAYAT,C.K. THAKKER
Case number: C.A. No.-007310-007312 / 2003
Diary number: 13775 / 2003
Advocates: RAJESH KUMAR Vs P. PARMESWARAN


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CASE NO.: Appeal (civil)  7310-7312 of 2003

PETITIONER: Escorts Ltd.                                                     

RESPONDENT: Commissioner of Central Excise,Delhi - II

DATE OF JUDGMENT: 25/10/2004

BENCH: ARIJIT PASAYAT & C.K. THAKKER

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

Appellant calls in question legality of the judgment rendered by  the Customs, Excise & Gold (Control) Appellate Tribunal (in short the  ’CEGAT’) in Appeal Nos. E/1574 & 3180/93\026A & E/1668/94-A.  The factual  background in a nutshell is as follows:

Show cause notice was issued on 29.04.1993 to the appellant in  respect of the period 1.10.1992 to 11.3.1993 alleging contravention of  the various provisions of Central Excise Rules, 1944 (in short the  ’Rules’) read with Section 4(1) of the Central Excise and Salt Act,  1944 (in short the ’Act’). A reference was made to Rule 6(b) of the  Central Excise Valuation Rules, 1975 (in short the ’Valuation Rules’)  and it was indicated that there was a short levy of duty amounting to  Rs.38,08,127.40/-. A reply to the said notice was furnished on  29.05.1993 by the noticee (hereinafter referred to as the ’Assessee’)  taking the stand that there was no contravention as alleged.    

On consideration of the materials on record and the show cause  noticee’s reply the Collector of Central Excise, New Delhi, confirmed  the demand of the aforesaid amount.  It was held that the stand taken  by the assessee in the reply was without substance.  

The assessee preferred appeals before CEGAT which by its order  dated 5.10.1998 dismissed the appeals. The matter was brought before  this Court taking the stand that the appeals were disposed of without  grant of an opportunity being heard to the assessee.  By order dated  24.8.2001 this Court set aside the order passed by the CEGAT and  remanded the matter for fresh consideration on merits without  expressing any view on the merits of the case.  Thus the matter was  heard afresh by CEGAT.   

According to the CEGAT the issue involved is one relating to  determination of the value of goods captively consumed by the assessee.  It took note of the fact that there was admittedly 2% direct sale in  the spare market though 98% of the production was being captively  consumed.  It was noted that how the value of goods captively consumed  is to be ascertained has been settled by this Court in Ashok Leyland  Ltd. v. Collector of Central Excise, Madras (2002 (10) SCC 344) it was  noted that as per the said decision, since price is ascertainable by  way of direct sale, the question of applying Section 4(1)(b) of the   Act would not arise. The valuation of the goods captively consumed is  to be based on the market price of the goods directly sold.  Therefore,

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the appeals filed by the assessee were dismissed, but that part of the  order passed by the Collector, which related to penalty, was set aside.

       Mr. V. Lakshmi Kumaran, learned counsel appearing for appellant  submitted that the Tribunal was wrong in applying the decision in the  Ashok Leyland’s case (supra) as the factual position was different.   Department based its case on Rule 6 of the Valuation Rules which has  application only when prices are unascertainable. As the judgment in  that case can be applicable only in a situation where the goods sold in  the spare parts market are identical and complete in all respects to  the goods captively consumed, admittedly, since in the present case,  the goods captively consumed are different and not identical to the  goods sold in the spare parts market, the principles laid down in Ashok  Leyland’s case (supra) will not apply.

       In response Mr. R. Mohan learned Additional Solicitor General,  appearing for the Revenue, submitted that the assessee did not bring  out any factual difference so far as the present case is concerned vis- a-vis what was decided in Ashok Leyland’s case (Supra). Therefore, the  CEGAT’s decision does not warrant any interference.

       In Ashok Leyland’s case (supra)it was, inter alia, held as  follows:

       "In our view, the provisions of the Act are  very clear. Excise duty is payable on removal of  goods.  As there may be no sale at the time of  removal, Section 4 of the Act lays down how the value  has to be determined for the purposes of charging of  excise duty. The main provision is Section 4(1)(a)  which provides that the value would be the normal  price thereof, that is, the price at which the goods  are ordinarily sold by the assessee to a buyer in the  course of a wholesale trade. Section 4(4)(e)  clarifies that a sale to a dealer would be deemed to  be wholesale trade.  Therefore, the normal price  would be the price at which the goods are sold in the  marked in the wholesale trade. Generally speaking,  the normal price is the one at which goods are sold  to the public.  Here the sale to the public is  through the dealers.  So the normal price is the sale  price to the dealer. The proviso, which has been  relied upon by learned counsel, does not make any  exception to this normal rule.  All that the proviso  provides is that if an assessee sells goods at  different prices to different classes of buyers, then  in respect of each such class of buyers, the normal  price would be the price at which the goods are sold  to that class.  The proviso does not mean or provide  that merely because the assessee sells at different  prices to different classes of buyers, the price of  that commodity becomes an unascertainable price.  The  price of that commodity will remain the normal price  at which those goods are ordinarily sold by the  assessee to the public, in other words, the price at  which they are sold in the market.  The mere fact  that sale is also made to the Defence or to the Civil  Department of the Government at different prices  would not mean that the price becomes an  unascertainable price.  In the case of the  appellants, a price is ascertainable. They admittedly  sell in the market at a particular price.  Section  4(1)(b) would not come into play and would not apply  at all.  Section 4(1)(b) of the Act would not apply  if the price cannot be ascertained.  In this case, as

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indicated above, the price is ascertainable and,  therefore, the question of application of Section  4(1)(b)does not arise.  If Section 4(1)(b) does not  apply, Rule 6 will also not apply."                

 Courts should not place reliance on decisions without discussing  as to how the factual situation fits in with the fact situation of the  decision on which reliance is placed. Observations of Courts are  neither to be read as Euclid’s theorems nor as provisions of the  statute and that too taken out of their context. These observations  must be read in the context in which they appear to have been stated.  Judgments of Courts are not to be construed as statutes. To interpret  words, phrases and provisions of a statute, it may become necessary  for judges to embark into lengthy discussions but the discussion is  meant to explain and not to define. Judges interpret statutes, they do  not interpret judgments. They interpret words of statutes; their words  are not to be interpreted as statutes. In London Graving Dock Co. Ltd.  V. Horton (1951 AC 737 at p.761), Lord Mac Dermot observed:

       "The matter cannot, of course, be settled  merely by treating the ipsissima vertra of  Willes, J as though they were part of an Act of  Parliament and applying the rules of  interpretation appropriate thereto. This is not  to detract from the great weight to be given to  the language actually used by that most  distinguished judge."

       In Home Office v. Dorset Yacht Co. (1970 (2) All ER 294) Lord  Reid said, "Lord Atkin’s speech.....is not to be treated as if it was a  statutory definition It will require qualification in new  circumstances." Megarry, J in (1971) 1 WLR 1062 observed: "One must  not, of course, construe even a reserved judgment of  Russell L.J. as  if it were an Act of Parliament." And, in Herrington v. British  Railways Board (1972 (2) WLR 537) Lord Morris said:

       "There is always peril in treating the  words of a speech or judgment as though they  are words in a legislative enactment, and it is  to be remembered that judicial utterances made  in the setting of the facts of a particular  case."

       Circumstantial flexibility, one additional or different fact may  make a world of difference between conclusions in two cases. Disposal  of cases by blindly placing reliance on a decision is not proper.  

       The following words of Lord Denning in the matter of applying  precedents have become locus classicus:

       "Each case depends on its own facts and a  close similarity between one case and another  is not enough because even a single  significant detail may alter the entire  aspect, in deciding such cases, one should  avoid the temptation to decide cases (as said  by Cordozo) by matching the colour of one case  against the colour of another. To decide  therefore, on which side of the line a case  falls, the broad resemblance to another case  is not at all decisive."

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       "Precedent should be followed only so far  as it marks the path of justice, but you must  cut the dead wood and trim off the side  branches else you will find yourself lost in  thickets and branches. My plea is to keep the  path to justice clear of obstructions which  could impede it."   

This aspect has been highlighted in Collector of Central Excise,  Calcutta         v. M/s Alnoori Tobacco Products and Anr.       (Civil  appeal nos. 4502-4503 of 1998 decided on 21.7.2004)

It is correct as contended by learned counsel for the assessee \026  appellant that the department’s case rested on Rule 6 of the Valuation  Rule.  CEGAT did not consider the applicability of Ashok Leyland’s case  (supra) in the background of Rule 6 of the Valuation Rules though it  has substantial bearing on the dispute. In the aforesaid circumstances  without expressing any view on the merits we remit the matter to the  CEGAT for considering the factual aspect and the applicability of Ashok  Leyland’s case (supra) to the facts of the present case.  The appeals  are allowed to the extent indicated above without any order as to  costs.