TaxTMI 
TaxTMI 
1985 (10) TMI 162
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....ries Limited, also a public limited company incorporated under the Companies Act, which is the petitioner in W.P. No. 4766 of 1981, is engaged in the manufacture of caustic soda, liquid chlorine. Hydrochloric Acid and Sodium Tripoly-phosphate at its factory situated near Karwar. The goods manufactured by the petitioners are exigible to payment of excise duty under and in accordance with the Central Excises and Salt Act of 1944 (Central Act 1 of 1944) ('the Act'). 4.   In order to appreciate properly one of the principal questions that is common in these cases, we consider it useful to set out the facts and contentions urged in W.P. No. 4766 of 1981 in some detail. 5.  W.P. No. 4766 of 1981. - The petitioner is engaged in the manufacture of caustic soda at its factory situated at Karwar. Prior to 16-6-1976, caustic soda and caustic potash was dutiable to excise duty under Tariff Item No. 14B of the Act at the rate provided therein. 6.  In exercise of the powers conferred by Rule 8 of the Central Excise Rules of 1944 ('the Rules') framed under the Act, Government of India by its Notification No. 198/76, dated 16-6-1976 (published in the Gazette Extraordinary o....
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....by him under this notification ; and (ii) (a) the auxiliary duty which he would have otherwise paid but for this notification, and   (b) the auxiliary duty actually paid by him under the relevant notification and relating to auxiliary duty read with this notification. Explanation.-In this clause, "auxiliary duty" means the duty leviable under Section 36 of the Finance Act, 1976 (66 of 1976). 6.  This notification shall come into force on the 1st day of July, 1976 and remain in force upto and inclusive of the 31st day of March, 1979. S. No. Item number of the First Schedule to Cenral Excise and Salt Act, 1944 Description of goods Unit for calcuation 1. 2. 3. 4. 5. 6. 13. ** ** ** ** ** 14B ** ** 14HH ** ** ** ** ** Caustic Soda and Caustic Potash. ** ** Fertilizer ** ** ** ** ** Weight ** ** Weight On the basis of this notification, the petitioner filed its price lists and produced necessary proof to sustain its claim for exemption on the exempted goods before the authorised officer, who on an examination of the said claim, provisionally ....
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....Excise understandably gave effect to the same and collected excise duty from it thereafter. On making payments under protest, the petitioner made three applications before the Assistant Collector, I.D.O. Hubli (Assistant Collector) for refund of duty of excise paid by it for different periods, who by his Order No. C. No. V/14H/18/26-80 B5, dated 22-5-1980 (Exhibit C) rejected the same. 8.1.  The Finance Act, 1982, (Central Act No. 14 of 1982) by Section 47 has inserted an Explanation to Section 4(4)(d)(ii) of the Act with retrospective effect from 1-10-1975 the validity of which is challenged by the petitioner. 8.2.  The petitioner has also challenged the Trade Notice, dated 21-3-1977 issued by the Collector (Exhibit B) the order made by the Assistant Collector on 25-5-1960 (Exhibit G) and has sought a mandamus to the respondents for the refund of the difference of duty collected from it on the basis of the said trade notice. 8.3.  The petitioner has urged that the Explanation added to Section 4(4)(d)(ii) of the Act is beyond the legislative competence of the Union Parliament and even if it was within its legislative competence in such an event also, it was ....
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....mpetence of the Union Parliament. Shri Bhat urged that the amending provision was within the legislative competence of the Union Parliament. 13.  Article 246 of the Constitution read with Entry 84 of the Union List - List 1 of 7th Schedule to the Constitution, empowers Parliament to legislate on the topic of duties of excise on tobacco and other goods manufactured in the country except those that are excepted in that very article. The power to legislate on excise duty comprehends in itself the power to legislate in respect of all matters/incidental to the levy of duty. The explanation added to Section 4(4)(d)(ii) of the Act is really on the topic of 'excise duty'. We are of the view that on the ratio of the rulings of the Supreme Court in Bombay Tyre International v. Union of India (1983 E.L.T. 1896 =A.I.R. 1984 S.C. 420 = 1984 (1) SCC 467 and Empire Industries Ltd. v. Union of India [1985 E.L.T. 179 (S.C.)] and Khandelwal Metal and Engineering Works v. Union of India [1985 (20) E.L.T. 222 (S.C.)]=(A.I.R. 1985 S.C. 1211), the Union Parliament without doubt was competent to legislate the explanation. We see no merit in this contention of Sri Sundaraswamy. 14.  Sri Su....
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....mbit. But even that does not clothe the Collector with power to add to the terms and conditions stipulated by Government. 21.  An examination of the trade notice discloses that the Collector by inaptly describing that Government had decided, was in effect usurping the powers of Government by adding to the terms and conditions stipulated in the exemption notification. We are clearly of the view that the power exercised by the Collector was clearly unauthorised, illegal and the same therefore calls for our interference. But this conclusion by itself does not conclude the controversies as it is now necessary to examine the serious contention pressed before us for the respondents viz., that the explanation added to Section 4(4)(d)(ii) of the Act with retrospective effect really supplies what the Collector had sought to do in his trade notice and the orders impugned in these cases are in conformity with the same. 22.  Sri Sundaraswamy has urged that the explanation added to Section 4(4)(d)(ii) with retrospective effect does not in any way alter the assessable value of manufactured goods under Section 4 of the Act and does not undo the benefit of exemptions granted to hel....
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....duction or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of duty, but not only relates to the machinery of collection for administrative convenience. ....." ** ** 13.  We think we have shown sufficiently that while the levy is on the manufacture or production of goods, the stage of collection need not in point of time synchronize with the completion of the manufacturing process. While the levy in our country has the status of a constitutional concept, the point of collection is located where the statute declares it will be." ** ** 15.  Section 4 envisages a method of collecting tax at the point of the first sale effected by the manufacturer." ** ** 16.  As we have said, it was open to the....
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....) of Section 4 is the basis for determination of excisable value provided, of course, the buyer is not a related person within the meaning of sub-section-(4)(c) of Section 4 and the price is the sole consideration for the sale. This proposition is subject to the terms of the three provisions to sub-section (1)(a) of Section 4 ; (ii)  Where the price of excisable goods in the course of wholesale trade for delivery at the time and place of removal cannot be ascertained for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in the manner prescribed by the Central Excise (Valuation) Rules, 1975 should be taken as representing the excisable value of the goods ; (iii)  Where wholesale price of any excisable goods for delivery at the place of removal is not known and the value thereof is determined with reference to the wholesale price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery should be excluded from such price ; (iv)  Of course, these principles cannot apply where the tariff value has been fixed in respe....
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....ion 4 of the Act for ascertaining the 'value' or 'assessable value' a conceptual value defined in clause (d) of that section. 25.  With the above analysis, it is first useful to ascertain the legislative history of the explanation and then ascertain its scope and ambit. 26.  The annual Finance Bill for the year 1982 called 'The Finance Bill' 1982 (Bill No. 14 of 1982) to give effect to the financial proposals of Central Government for the financial year 1982-83 introduced in the Lok Sabha on 27-2-1982, inter alia, contained proposals to amend various provisions of the Act. Clause No. 47 of that Bill proposed to introduce an explanation to Section 4(4)(d) (ii)of the Act with effect from 1-10-1975 and validate the actions earlier taken to the extent indicated therein. The Statement of Objects and Reasons of the Bill did not state the objects of the proposed amendment. But in the notes on clauses of Clause 47 appended to the Bill, Government stated the object of the proposed amendment thus : "Clause 47 seeks to insert an Explanation to sub-section 4(4)(d)(ii) of the Central Excises Act, to make it clear that in computing the amount of duty of excise deductible from ....
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....ve been inserted with effect from the 1st day of October, 1975, namely :- 'Explanation. - For the purpose of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be the sum total of- (a) the effective duty of excise payable on such goods under this Act; and (b)  the aggregate of the effective duties of excise payable under other Central Acts, if any, providing for the levy of duties of excise on such goods, and the effective duty of excise on such goods under each Act referred to in clause (a) or clause (b) shall be - (i)  in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to or reduction of duty of excise on such goods equal to, any duty of excise already paid on the raw material or component parts used in the production or manufacture of such goods) from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act in respect of such goods as reduced so as to give full complete effect to such exemption ; and (ii)  in any other case, the duty of excise computed wit....
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....ct came into force. We must, therefore, read this explanation as if it was part of that Section from the very day it was placed on the statute book. From this it follows that every action to the extent it is affected and not expressly excepted and saved therein, has necessarily to be regulated in terms of that provision. 28.  An explanation is generally added to clear what is obscure or serve as legislative dictionary. An explanatary enactment is generally declaratory of the law and is retrospective. Even the question of the courts construing whether the explanation added by the Finance Act is retrospective or not, does not arise as the same has been expressly given retrospectivity. Whatever the explanation has or has not achieved, one thing that is clear is that it is not permissible to read the same, as wholly destroying the concept of assessable value for giving effect to the charge of excise duty under the Act. 29.  In determining the 'value' or the 'assessable value' under Section 4 of the Act, the first part of the explanation declares that the amount of duty of excise on any excisable goods shall be the sum total of the effective duty of excise on such goods ....
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....31.  What emerges from the above is that the question of adding back any duty that is not passed on to the consumer or paying any additional duty on the same on the ground that the same had not been passed to consumer s as if that was a requirement of the explanation is wholly misconceived and is not sound. 32.  In the cases decided by the High Courts of Delhi, Madras, Andhra Pradesh and Orissa, referred to earlier, the precise question on the dimension imported to it by the introduction of the 'explanation, did not arise for consideration and therefore, those rulings do not really bear on the point. But however, the view expressed in all of them to the extent they hold that the manufacturers are under no obligation to pass on the benefit of exemption to consumer and on such default they do not incur any liability, if we may say so with great respect to the learned Judges that decided those cases, even after the introduction of the explanation is correct. We are in respectful agreement with that part of the enunciation in all of them. 33.  In B.K. Paper Mills' case, the High Court of Bombay had occasion to examine the question in relation to an exemption grante....
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....on is now made clear by virtue of an 'explanation' which has been added to Section 4(4)(d)(ii) with retrospective effect from 1st October, 1975 under Section 47 of the Finance Act of 1982. The explanation sets out what is meant by 'the amount of duty of excise payable on any excisable goods'. By the amount of duty of excise is meant the effective duty of excise payable on such goods under the Act. The effective duty of excise is explained as follows : In a case where there is an exemption notification, the duty of excise computed with reference to the rate specified in the Act in respect of such goods as reduced so as to give a complete effect to such exemption. The effective duty of excise therefore is the duty of excise which is calculated on the basis of the prescribed rate as reduced by virtue of an exemption notification. This alone is excluded from normal price under Section 4(4)(d)(ii)." We are of the view that this enunciation made by the learned Judge is in accord with what we have expressed earlier. We are of the view that it is unnecessary to examine the other questions that were decided in that case. 34.  In Bata Shoe Co. case, the question arose under Sectio....