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PETITIONER: TEXMACO LTD.

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, CALCUTTA

DATE OF JUDGMENT31/07/1991

BENCH: VENKATACHALLIAH, M.N. (J) BENCH: VENKATACHALLIAH, M.N. (J) AGRAWAL, S.C. (J)

CITATION:  1992 AIR 1801            1991 SCR  (3) 323  1991 SCC  Supl.  (2) 305 JT 1991 (6)   180  1991 SCALE  (2)755

ACT:     Central  Excise Rules, 1944  Rule  8---Notification  No. 120/75  CE- D/--30.4.1975--Clause (iv)--Exemption from  levy of  duty--Value of wheel sets supplied by  Railways--Whether exempted.

HEADNOTE:     The  appellant pursuant to contracts entered  into  with the  Railway Administration fabricated and delivered to  the Railways  wagon-bodies mounted on "wheel sets"  supplied  by the Railways.     The  appellant’s invoices, reflected only the  price  of the  wagonbodies without including the value of the  "wheel- sets" on which the wagon-bodies were mounted. The goods were cleared for purposes of Excise duties on such invoice-value.     The Revenue raised demand for recovery of short-levy and sought  to  recover  the unpaid duty on  the  value  of  the "wheel-sets" also.     The  claim  for recovery of the short-levy  having  been adjudicated against the appellant, appeals were filed before the  Tribunal,  by the appellant contending that  the  goods manufactured  by  the appellant were only  the  wagon-bodies mounted on the "wheel-sets" supplied by the Railway Adminis- tration;  and therefore, the assessable value could only  be the  value  of the wagon-bodies excluding  the  "wheel-sets" supplied  by the Railways; and that at all events the  value in excess of the ’invoice value’ which represented the price of  the wagon-bodies was exempt from levy of duty under  the Exemption  Notification No. 120/75CE dated 30th April,  1975 issued under Rule 8 of the Central Excise Rules, 1944.     The  Tribunal dismissed the appeals, against which,  the present appeals were filed before this Court.     The  appellant contended that the  Tribunal  misdirected itself in law in its construction of the exemption Notifica- tion and in its reasoning that there was something in Clause (iv) of the Notification which detracted from the  permissi- bility of its benefit in the present case; that 324 it  was  erroneous to read the condition  as  requiring  the ’invoice value’ to be the full commercial price of the goods including  therein the value of the "wheel-sets";  that  the

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very purpose of the exemption was to relieve the manufactur- er  from bearing the burden of the duty on such part of  the assessable-value as did not reflect the value of his  supply and  services but represented the value of the  "wheel-sets" supplied  by  the  Railway  Administration  itself  free  of charge.     The Revenue-Respondent contended that Clause (iv) of the Notification  signified and imported the idea of  full-value of the manufactured goods being required to be reflected  in the  invoice and that the reasoning of, and  the  conclusion reached by, the Tribunal was correct.    This Court allowing the appeals,     HELD.  1.  The Notification posits  and  predicates  the possibility that the invoice-value’ could be lesser than the "assessable-value"  and,  taking into account  the  need  to mitigate  the hardship on the manufacturer of  being  called upon  to  pay  duty on the value in excess  of  the  invoice value, seeks to exempt the manufacturer from payment of duty "inexcess  of the duty" calculated on the basis of  the  ’i- nvoiceprice’. [328G-H]     2. The way in which the Tribunal looked at the Notifica- tion  is neither good sense nor good law. Such  construction would  make the Notification and the exemption  contemplated thereunder meaningless. The need for the exemption arose  in view of the fact that "assessablevalue" was higher than  the ’invoice-value’.  Requiring the former and the latter to  be the same as something compelled by Clause (iv) is really  to construe the Notification against itself. [329B-C]     3.  In this case, there is no dispute that  the  invoice price represented the value of the wagons, less the value of the "wheel-sets" supplied by the Railways. The invoice-price could  not be required to include the value of  the  "wheel- sets".  But the "assessable-value" would take  into  account the  full  commercial value including that  of  the  "wheel- sets".  1t  is in order to mitigate the  hardship  that  may arise  by  requiring the manufacturer to pay  duty  on  this difference  in such cases that the Notification  No.  120/75 came to be promulgated. [328H-329B]     4.  There is nothing in Clause (iv) which  enjoins  upon the appellant to include the value of the "wheel-sets".  The contract  between  the parties does not also  require  this. [329B]   325     M/s. Burn Standard Company Ltd. & Anr. v. Union of India JUDGMENT:

&     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.  5969-70 (NM) of 1990.     From  the Order dated 21.8.1990 of the  Customs,  Excise and Gold (Control), Appellate Tribunal, New Delhi in  Appeal Nos. ED/SB/T/945/80-A and ED/SB/T/A. No. 586/81-A (Order No. 1284 to 1286/90-A.).     Dr. Debi Paul, Harish Salve, Darshan Singh, Ms. Suman J. Khaitan and Ms. Priya Hingorani for the appellant.     A. Subba Rao for the Respondent.    The following Order of the Court was delivered:     These  appeals  arise out of and  directed  against  the common  appellate  order  dated 21.8.1990  of  the  Customs, Excise  and  Gold (Control) Appellate  Tribunal,  New  Delhi (’Tribunal’  for short) m’ Appeals Nos. ED/SB/T 945/80A  and ED/SB/T/586/8  1A. By the same order another appeal  of  the appellant  was also disposed of but that matter is not  car-

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ried up in appeal here.     2.  The appellant, M/s. Texmaco Ltd., pursuant  to  con- tracts entered into in this behalf with the Railway Adminis- tration  fabricated  and delivered to  the  Railways  wagon- bodies mounted on "wheel sets" supplied by the Railways. The invoices  raised  by the appellant respecting  these  wagons reflected only the price of the wagon-bodies without includ- ing the value of the "wheel-sets" on which the  wagon-bodies were mounted. The goods were cleared for purposes of  Excise duties on such invoice-value. The Revenue raised demand  for recovery of short-levy and sought to recover the unpaid duty on the value of the "wheel-sets" also. This claim for recov- ery  of the short-levy having been adjudicated  against  the appellant, an appeal was taken before the Tribunal.     3. Before the Tribunal, it would appear, two contentions were raised: First that the goods manufactured by the appel- lant were only the wagon-bodies mounted on the  "wheel-sets" supplied by the Railway Administration and that,  therefore, the  assessable value could only be the value of the  wagon- bodies excluding the "wheel-sets" 326 supplied  by the Railways and, secondly, that at all  events the value in excess of the ’invoice value’ which represented the  price of the wagonbodies was exempt from levy  of  duty under  the  Exemption Notification No.  120/75-CE  dated  30 April, 1975 issued under Rule 8 of the Central Excise Rules, 1944. What is implicit in the second contention is that, but for the said Notification No. 120/75-CE dated 30.4.1975, the assessable-value would otherwise require the exclusion in it the  value of the "wheel-sets" also on the premise that  the "wheel-sets"  became  an integral part of the  wagons,  even though  the "wheel-sets" had been supplied free of  cost  by the  Railways  themselves. The  Notification  No.  120/75-CE exempted  "so much of the duty of excise ........  as is  in excess  of  the  duty calculated on  the  basis  of  invoice prices".     4. On the first contention:--that the ’assessable-value’ of the ’goods’ could not include the "wheel-sets" which were not fabricated or manufactured by the appellant, the  Tribu- nal, rejecting the contention said:               "On going through the facts and in view of the               clear findings given by the lower  authorities               that no wagon is complete without the  wheels;               what  has  been  cleared and  removed  by  the               appellants is the wagon mounted on wheel  sets               and not the wagon body alone  ....                        On  the  issue  of  determination  of               assessable  value, the Supreme Court has  held               that  for the purpose of levy of excise  duty,               the value of the article is the full intrinsic               value of the article inclusive of the cost  of               the materials and components supplied free  by               the customer and irrespective of the fact that               no expenditure was incurred by the manufactur-               er on such components." No  fault can be found with this reasoning of the  Tribunal, indeed, considerations of ownership of the goods are  extra- neous  to  levy  of duties of excise which  are  imposts  on manufacture.     5. The second contention on which Dr. Pal laid  particu- lar  emphasis, indeed, assumes the correctness of the  first proposition  and  claims exemption on the  strength  of  the Notification No. 120/75-CE. That Notification says:               "The  Central  Government has  exempted  goods               falling

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             327               under Item No. 68 of the First Schedule to the               Central  Excises  and  Salt Act,  1944  (1  of               1944),  cleared from the factory  of  manufac-               ture,  on  sale, from so much of the  duty  of               excise leviable thereon as is in excess of the               duty  calculated on the basis of  the  invoice               price (excluding duty and local taxes, if any,               included  in such price) charged by the  manu-               facturer for the sale of such goods:                         Provided  that the aforesaid  exemp-               tion shall be admissible only if--               (i)  the manufacturer files with the  Superin-               tendent of Central Excise having  jurisdiction               a  written declaration to the effect  that  he               opts to avail of the said exemption:               (ii) Omitted as unnecessary               (iii)               (iv)  the invoice price is not  influenced  by               any  commercial, financial or other  relation-               ship whether by contract or otherwise  between               the  manufacturer or any person associated  in               business  with the manufacturer and the  buyer               other than the relationship created by sale of               the aforesaid goods:               (v) Omitted as unnecessary.               Provided ... (Omitted as unnecessary) The  Tribunal also rejected the claims for  exemption  under the Notification. It said:                        "We  are  unable to  agree  with  the               arguments  of  the  appellants’  counsel  that               assessable  value of the article is  different               from the consideration received by the  appel-               lants  to  claim  benefit  under  Notification               120/75.                .....   To claim exemption on  benefit  under               Notification 120/75 it should be subjected  to               in  compliance with the  conditions  specified               therein. Condition No. IV of Notification  No.               120/75 required that the invoice value  should               be               328               the  full  commercial price  of  the  article.               According to the decision of the Supreme Court               (supra)  the value of the article is  the  in-               trinsic value and not restricted consideration               received  by  the appellant as  urged  by  the               appellants’  counsel.  In  the  view  we  have               taken,  the  appellants are  not  entitled  to               concession under Notification No. 120/75 dated               30.4. 1975 ."     6.  Dr.  Pal appearing in support of the  appeals  urged that the Tribunal misdirected itself in law in its construc- tion of the exemption Notification and in its reasoning that there was something in Clause (iv) of the Notification which detracted  from  the permissibility of its  benefit  in  the present case. Dr. Pal said that it was erroneous to read the said  condition as requiring the ’invoice value’ to  be  the full  commercial  price of the goods including  therein  the value of the "wheelsets". Dr. Pal said that clause (iv)  did no  more  than  merely importing the  requirement  that  the invoice  price should reflect a transaction at arms’  length and  not that appellant’s invoice-price should also  include the value of the "wheel-sets" supplied by the Railways.  Dr. Pal further urged that the very purpose of the exemption was

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to  relieve the manufacturer from bearing the burden of  the duty on such part of the assessable-value as did not reflect the  value  of his supply and services but  represented  the value  of the "wheel-sets" supplied by the Railway  Adminis- tration itself free of charge. If Clause (iv) was  construed in  the way in which the Tribunal did, the  effect,  counsel said, would be to take away with one hand what the notifica- tion gave with the other.     7. Shri Subba Rao, learned counsel for the Revenue, with his usual tenacity contended that Clause (iv) of the Notifi- cation  signified  and imported idea of  full-value  of  the manufactured  goods  being required to be reflected  in  the invoice  and  that  the reasoning  of,  and  the  conclusion reached by, the Tribunal was correct. 8. On a consideration of the matter we are afraid the Tribu- nal fell in to an error in its understanding of the  notifi- cation. The Notification posits and predicates the possibil- ity  that  the  ’invoice-value’ could  be  lesser  than  the "assessable-value"  and,  taking into account  the  need  to mitigate  the hardship on the manufacturer of  being  called upon  to  pay’ duty on the value in excess  of  the  invoice value, seeks to exempt the manufacturer from payment of duty "in  excess of the duty calculated on the basis of  the  ’i- nvoice-price’.  There  is no dipute in this  case  that  the invoice price represented the value of the wagons, less  the value  of  the "wheel-sets" supplied by  the  Railways.  The invoice-price            329 could  not be required to include the value of  the  "wheel- sets".  But the "assessable-value" would take  into  account the  full  commercial value including that  of  the  "wheel- sets".  It  is in order to mitigate the  hardship  that  may arise  by  requiring the manufacturer to pay  duty  on  this difference  in such cases that the Notification  No.  120/75 came  to  be promulgated. There is nothing  in  Clause  (iv) which enjoins upon the appellant to include the value of the "wheel-sets". The contract between the parties does not also require  this. The way in which the Tribunal looked  at  the Notification  is neither good sense nor good law. Such  con- struction  would  make the Notification  and  the  exemption contemplated thereunder meaningless. The need for the exemp- tion  arose in view of the fact that "assessable-value"  was higher  than the ’invoice-value’. Requiring the  former  and the  latter to be the same as something compelled by  Clause (iv) is really to construe the Notification against itself.     9.  Shri  Subba Rao placed strong reliance on  the  pro- nouncement of this Court in M/s. Burn Standard Company  Ltd. &  Anr. v. Union of India & Ors., [1991] 3  Judgments  Today 108.  On the contentions raised and argued in that case  the judgment,  if we may say so with great respect, is  correct. The question of the effect of the exemption Notification No. 120/7.5-CE  was  not raised and argued in  that  case.  That apart, the exemption Notification itself makes it clear that it does not apply or is attracted to every case automatical- ly,  but that the manufacturer should expressly opt for  the benefit of the Notification. Since no such claim was made in that  case, the decision therein is of no assistance to  the revenue.     10.  We accordingly allow these appeals; set  aside  the order of the authorities as well the affirming order of  the Tribunal under appeal and hold that the appellant was  enti- tled under the said Notification No  120/75/CE, to exemption from that part of the duty as was in excess of the  invoice- price which, we hold, was not required to include the  value of the "wheel-sets".

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V.P.R.                               Appeals allowed. 330