Full Judgment
2. The respondent company has sent a letter in response to the notice of hearing stating that personal hearing is not desired and that the matter may be disposed of on merits. The Department's appeal has been contested by placing reliance on the Tribunal's Final Order Nos.
3771-3772/96-A, dated 5-12-1996 in the case of Mepro Chemicals v. CCE, Bombay 1997 (93) E.L.T. 252 (Tribunal). A copy of the said order of the Tribunal has been submitted in support of the contention raised that the Collector (Appeals) has decided the appeals correctly and that the impugned orders-in-appeal requires no interference.
3. Shri K. Srivastava, learned Senior Departmental Representative, while generally supporting the grounds taken in the Department's appeals, fairly stated that the Tribunal's order cited by the respondent is against the stand of Revenue taken in the present appeals.
4. We have considered the contentions raised in the appeals and taken note of the Tribunal order relied upon by the respondent. One of us (K.Sankararaman, Technical Member) was a party to that decision wherein the question whether an assessee is compelled by law to avail the benefit of exemption Notification 245/83 and forgo the facility of deduction of discounts from the wholesale price to arrive at the assessable value was considered. It was noted that, according to proviso (iii) of the Notification, the benefit of exemption thereunder was allowable only if the manufacturer claimed the exemption in respect of all the medicines cleared by him, the retail price of which was specified in the price list [issued under the Drugs (Price Control) Order, 1979]. It was observed that the said proviso (iii) would indicate that exemption was not mandatory in the sense that every manufacturer was compelled to avail the notification. The proviso made it a matter of volition on the part of the manufacturer inasmuch as he could refrain from claiming exemption in respect of some medicines in which case he became not entitled to exemption in respect of other medicines also. It was, therefore, held that in the absence of any other factor militating against such circumstances, an asses-see would be justified in requiring the assessable value to be reckoned under Section 4 of the Act and also claim deductions permitted thereunder.
5. In the present appeals, the ground taken is that the Collector (Appeals) erred in interpreting proviso (ii) to Section 4(1)(a) of the Act to mean that the price fixed for any goods under a statute must be wholesale. Referring to proviso (ii) of Section 4(1 )(a) it has been contended in the appeal that it has not been mentioned whether prices fixed should be for wholesale trade or for retail. Regarding the claim and the finding that an exemption Notification cannot override the statutory provisions, the contention is that if an assessee refused to avail the concession, the goods may become assessable at the maximum retail price fixed under the Drugs (Price Control) Order and hence the exemption cannot be pleaded as a justification to get out of the provision, [viz., proviso (ii)] of the law. It is contented that once a statutory price has been fixed, resort to valuation under Section 4(1)(a) cannot be had and, as a corollary, once resort is had to the proviso, the question of grant of any reduction on account of discount does not arise as proviso (ii) does not provide for any deduction but specifically lays down that the price statutorily fixed shall be the assessable value. The finding of Collector (Appeals) that proviso (i) does not, in any way, prohibit the deduction permitted under Section 4(1)(a)(i) and (ii) has been assailed on the ground that the said proviso prohibits the deduction of any trade discount from the assessable value fixed under a statute. Under the Notification, it is urged, Patent or Proprietary medicines would be assessed in wholesale at the retail prices (underlining, for emphasis, ours) of the medicines specified in the price list issued under the Drugs (Price Control) Order, 1979.
6. We have in the preceding paragraph extracted extensively the contention raised in the appeals for dislodging the findings of the Collector (Appeals), if only, to highlight the sheer untenability of such contentions. The glaring contradiction involved in the phrase "assessed in wholesale at the retail prices of the medicines" gives the game of the Department away. The Collector (Appeals) was correct in his understanding of proviso (ii) of Section 4(1)(a) which lays down that where the goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price being the maximum fixed under any such law when that price or that maximum price shall be deemed to be the normal price. This proviso refers to sale by the assessee in the course of wholesale trade at a price fixed under any law and in that context such prices should be with reference to sale in wholesale trade. Sale in wholesale at retail prices is incongruous and incompatible. The reference to retail price fixed under Drugs (Price Control) Order in the exemption Notification in question will become relevant only where the assessee chooses to avail himself of that benefit if he finds that it is more advantageous to him to pay duty on such retail price less 15% discount thereon than on the wholesale price less admissible discount, if any. The department's stand in the appeals reveals a lack of proper understanding of the different parts of Section 4, particularly the proviso (ii) in question and the exemption Notification. An exemption Notification cannot have the effect of casting a heavier burden of duty than that under Section 4 of the Act itself. An exemption Notification is issued only for the purpose of reducing the duty burden determined under the said Section.
The subject Notification provided for the exemption of duty in excess of the amount of duty calculated on the basis of the value of medicines arrived at after allowing the discount of 15% on their retail price specified in the price list issued under Para 19 of the Drugs (Price Control) Order issued under Section 3 of the Essential Commodities Act, 1955. The first proviso lays down that the exemption shall be allowed only if no other deduction of discount from such retail price is claimed. The only effect of the manufacturer claiming such other deduction will be to deny the benefit of the exemption under the Notification. In that event, assessment under Section 4(1)(a) will come to the fore which, read with Sub-section (4)(d)(ii), will bring in its wake the deduction of discount. The subject exemption Notification will be relevant where sales are made in retail at the controlled retail prices from which deduction of 15% is to be allowed. If the manufacturer of such goods sells the goods in wholesale and gives trade discount which will result in the assessable value being less than the controlled retail price less 15% discount, then the former value which will be consistent with Section 4(1)(a) read with Section 4(4)(d)(ii) can certainly be adopted by the assessee and the exemption Notification need not be availed of. The conflict is not between Section 4(1)(a) and proviso thereunder but between the said Sub-section and the exemption Notification. As has been considered and observed above, the Notification cannot override the main Section. This is what Collector (Appeals) has held and rightly so, according to us. Even where goods are to be assessed on the basis of the controlled prices in terms of proviso (ii) to Section 4(1)(a), price list in Part III which is to be filed for the purpose provides for appropriate deductions to be claimed from the price under Sections 4(2) and 4(4)(d). It is thus obvious that claiming deductions from such controlled retail prices is permissible.
It is only the Notification which rules out deductions other than 15% from the controlled retail price but that will apply only where the Notification is availed of and does not apply in a case where the manufacturer does not opt for it. The impugned order-in-appeal is upheld and the appeals are dismissed. Any consequential benefit for the respondent will be governed by the provisions of Section 11B of the Act as in force at present.