·A f:B ;C BATA SHOE CO. (P) LTD. & OTHERS v. THE COLLECTOR OF CENTRAL EXCISE & ORS. 25th April, 1985 [D.A. DESAI, A.P. SEN AND V. BALAKRISHNA ERWI, JJ.] Central Excise and Salt Act, 1944 Section 4, scope of-Detern1ination 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 Noli· fication 1Vo. G.S.R. 171{67 dated 24th July, 1967-lnterpretation of the Noli· fication.
·By virtue of Entry 36 of the First Schedule in the Ceatra1 Excises an·d Salt Act, 1944 "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 10% ad valorem in respect of ''footwear" and .15% ad valorem in resp.!ct of"partsoffootw.!ar". Bya NJtification dated J~ly 24, .196?, issus:d tn exercise of the pow.!rs conferred by sub-rule (I) of rule 8 of the Central Excise Rules, 19~4. the Central Government exempted, with effect from the 26th May, 1967, footwear1 falling under item -No. 36 of the· First Schedule to the Central Exci'ies and Salt Act, 1944, of which the value did not exceed Rs. 5 per pair from the w:tole of the duty of exci~e leviable thereon. During the year 1967 and 1968, Bata Shoe C.ompany was manufdcturing ,,certain item> Of footw.:ar 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 exem- ption 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 appli- cability 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 manufac- turing establishments attracting the jurisdictions of these Courts. The Patna High Court allowed the writ petition accepting the contention of the company and granted c~rtificlte of .ipp~1I to tlu: dep.trtment. The Jligh Court of Calcutta ilATA siloil co. v. CENTRAt llXciSE
'961 dismissed the petition and accepted the stand of the Department that the e:icpression "va·lue" occurring in the Notification dated July 24, 1967 is not the deemed "value" ca.Jculati:d according to the provisions of section 4 of the Act, but h the real and a:tu1l "valu~" of the goods after the payment of the duty, The High Court of Punjab & Haryana dismissed the petition in llmini on the ground of Jaches. Both these two High Courts, however, granted certificate of appeal to the company. Hence the three appeals by certificates. Allowing the appeals pf the company and dismissing the State appeal, 1he Court,
HELD: J.J While-computing the "value" of the articles of footwear ·for the purposes of testing the avalability of the exemption granted under the Notification dated July 24, 1967 section 4 of the Central J?xcises and Salt Act, 19tt gets attracted. Section 4 is comprche:ic;ive in its coverage and it lays down · th;;: procedure to be follOw.;:d for ·d~termbation of "value" of any article in every case where the articfo is chargeable with duty at a rate depende11t 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 chargeability or otherwise to duty of excise of footwear falling under item 36.of the 'First Schedule is made wholly depeaderit upon the "value" of the article of footwear ; in ca5e sucll "value" exceeds Rs. 5 per pair, duty will. be chargeable at the rate of 10% whereas if th.e value does not execed Rs.5 per pair, no duty will be chargeable on such item.s of footwear. that is the rate of duty will be nil, Thus entry 36 read alorig with thC 'Notification dated July 24, 1967 clearly shows that the chargeab1Jity to duty in respect of any article of foot- wear is made dep.:ndent upon its value in the sense that the chargeabJility to duty of excise will arise only if t11e ''v41Ui:" of the article does not exceed Rs. 5 per pair. [9 :6D·E, 967/\-B)
· 1.3 Before determining the question of availability of the exemption under the Notification dated July·24, 1967; the first essential step, therefore, i.s to deter .. mirle the "vaiue" ~f tlle article in tbe manner prescobed in section 4 'Of the Act, The fact that on such a computation .thi: artic'ie may ultimately be' found to be I, A
exempted from excise duty does not have any bearing on the question of applia ,•F 'cibility Ot '.seCli'on 4 Of the A6t· for detetri:tining ·the ''va~Ui" for 'putpose of duty. (9//B•D)
h4 fb.e e.tpression ·'f1Jr the "pLlrpo:ie of duty" occurring in section 4 has a wide import. For all purposes connected with the de'termination of charg"eability 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 Priec: 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. L967D-E] In ihe in·stant case, iri as much as the value of the articles of footwear in ·-r —
~62 SUPRBME COURT ll.EPciars (1985] 3 s.c.a. · A 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 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 a1nounts of duty illegally realised by the Department. [967G-H]
:· •.B The Collector of Central Excise, Patna & Ors. v. The Bala Shoe Company c Ill (P) Ltd. AIR Patna–approvtd. 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 Pur,jab & Haryana-reversed. CiVIL APPBLLATB JURISDlCTION : 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. 1330/70).
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
Apppellants. 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 BALARKISHNA ERA DI, 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. _DATA Sfl)E C.J. v. CBNTR~L 8XCIS8 {Balalcrishna Eradi, J.) 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, Shakespoare 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 manu· facturing establishments namely, a factory a Batanagar in the dis- trict of 24- Parganas, West Bengal, another factory at Bataganr- near Patna in the State of Bihar and a third manufacturing esta· blishment at Faridabad in the State of Haryana. By virtue of Entry 36 of the First Schedule in the Central Exci.ses 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 fifeen per cent ad valorem in respectof '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 Suh-rule (1) of Rule 8 of the Central Excise Rules, 1944 for short "the Rules" footwear and parts thereof were complely exemp- ted 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:-
"NOTIFICATION CENTRAL EXCISES G. S. R. In exercises of the powers conferred by Sub-rule (I) of rule 8 of the Central· Excise Rule, . 1944 the Central Government hereby exempts, with effect froin
. the 26th may, 1967, footwear falling under Jtem 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 levi- able thereon.
(No. 171/67)" ·E ff SUPREME COURT RBPORTS The sole question raised in these appeals concerns the inter- pretation of this Notification. During the year 1967 and 1968, the company was manufac;
luring certain items of footwear of which the wholesale price was B 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 c 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 purp"e of judging the applic1bility of the. exempiion, the duty D 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 E 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 separte Writ Petition in the High Courts of Calcutta, Patna and Punjab and Haryana. The Patna High Court allowed Writ Peti- F tion 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, 1'967. 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 G the Department that the expression "value" occurring in the Noti- fication 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 p remedies before the hi~hest Departmenal a A11th9rities &s . well
.I BATA SHOB co v. CBNTRAL EXCISE (Balakrishna Eradi, J.) as before the Patna and Calcutta High Courts. A Division Bench donsisting of two learned Judges of the Punjab and Haryana High Courtdismissed the company's Writ Petition in limini on the ground that the company had approached the High Court at a very be- lated stage. The Division Bench however, certified the case to be fit one to this Court under Article 133 of the Constitution oflndia. Similar certificates were granted to the company and to the Un.ion of 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 lhe High Court of Patna is the correct one and the contrary view taken by the High Court of Calcutt a cannot be sustained. We are also o( opinion [that on the facts and cricumstances of the High Court of .Punjab and Haryana · was not justified in dismissing the Writ Petition of the company in· /imini on the gronud 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 l 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 ·ror purposes of charging of duty of excise.
We shall reproduce that section as it sto~d at the relevant time, omitting portions there- of w!1ich are unnece:iqary for our present purpose : "4. Determination of value for the purposes of duty-
where under \his 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 $Ol\I at tbe time of the re01oval of the articles char\leable 11. e ·C ( 1985] 3 S.C.R. with duty from the factory or any other premises of manu-
facture or prodcution for delivery at the place of manu· facture 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 (l) trade discount and (2) the amount of duty payable on the article a.t 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 compreheusive 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 rate dependent on the value of the article. On a careful reading of the Notification dated July 26, 1967, it also become clear that the effect of the Notification is tci render the chargeability or otherwise to duty of excise of footwear falling under Item 36 of the First Schedule is made wholly depen- dent 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 ifthe value does not exceed Rs. 5 per pair, no 'uty 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 Sec- tion 4 gets attracte<\ because as expressly stated in the opening part DATA SflOE°CO. v. CBNTRAL EXCISB (8alakrishna Eradi, J.)
pari of the said section the mode of determination of 'value' speci· q ed ·in. the section will be applicable to all cases where any article is charge1ble 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 Ent~y 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 will 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 tlie 'value, for purpose of duty. The expression ··ro.r the purposes of duty' occurring in Section 4 has a wide import.
For all purposes connected with the deter- mination 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 pric~. This is the view taken by .the High Court of Patna in the judgment appealed against C. A. No. 1469 of 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 interpre- tation 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, !967.
c c (1985] 3 S.C.R. In the result, C. A. No, 1470 of 1972 arising out of the judg· ment 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 amounts of duty ille- gally realised by the Department from the company should be forthwith refilnded 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 i972 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. Cfril Appeal Nos. 353/ 191 J and 1470/2 allowed. Civil Appeal No. 1469/72 dismissed.