Collector of Central Excise Vs. White Way Products - Court Judgment

Excerpt:
1. respondent is absent in spite of notice of hearing. we have heard shri d.s. negi, sdr, for the appellant-collector and perused the papers.2. respondent was engaged in the manufacture of patent and proprietary medicines falling under erstwhile tariff item 14e and enjoyed the benefit of notification no. 83/83, dated 1-3-1983 during the year 1983-84. the notification provided exemption for first clearance upto rs. 7.5 lakhs. alleging that clearance for the year exceeded rs. 7.5 lakhs by rs. 1,43,410.06, notice was issued to the respondent to pay duty on the excess amount and objecting to the discount claimed as deduction from the assessable value. notice was resisted contending that the respondent was also entitled to the benefit of notification no. 161/66-ce. which laid down that assessable value was to be determined at the drug price control order wholesale price less discount of 10% stated to be increased to 15% subsequently. according to the respondent, if the assessable value is determined on that basis, no more duty is payable. assistant collector overruled this contention, recalculated the assessable value and confirmed the demand for part of the amount shown in the show cause notice. notice issued for penalty was dropped. department took up the matter before the collector (appeals), who confirmed the order of the assistant collector holding that the respondent would be entitled to the deduction of discount.this order is now challenged by the collector of central excise.3. the finished goods in question are drugs, governed by drugs (price control) order, 1970. the price control order specifies prices to retailers (which may be regarded as wholesale prices) and retail prices (which may be regarded as price to the consumer). according to the respondent, assessable value under notification no. 83/83 is to be arrived at by deducting discount of 10% on the wholesale prices or prices to retailers and if the value on clearances is reckoned on this basis, it will not exceed rs. 7.5 lakhs. the collector (appeals) agreed with this view.4. notification no. 161 /66 is an exemption notification under rule 8(1) of the central excise rules, 1944. it relates to patent or proprietary medicines falling under item 14e of the tariff. the notification provides exemption from so much of the duty leviable on the medicines as is in excess of the duty calculated on the basis of formulae mentioned in clause (i) or (ii) of the notification. clause (i) refers to value arrived at after allowing discount of 10% on the prices specified in the price list referred to in paragraph 8 of the 1970 price control order showing the prices at which the medicines are sold to a retailer. these prices are referred to in clause (i) as wholesale prices. clause (ii) refers to value arrived at after allowing discount of 25% on the prices specified in the price list showing the retail prices referred to in the said order. respondent has sought to invoke clause (i) of the notification. the notification does not deal with the method of arriving at assessable value for any purpose. it grants exemption to duty in excess of duty calculated on the wholesale prices less 10%. the value of clearances under notification 83/83 has to be arrived at on the principles laid down in section 4 of the central excises act, 1944 (for short, the act). it would not be lawful to arrive at the assessable value under section 4 of the act deducting 10% discount from the wholesale prices fixed in the price control order.5. the prices declared by the respondent are wholesale prices. it is not the respondent's case that any discount was being given on the declared wholesale prices. the exemption under notification no. 161/66 was not contingent on discount actually being given to wholesalers.what we are concerned with is to arrive at the assessable value under section 4 of the act. the value depends on the wholesale price at the factory gate. value of clearances under notifiction no. 83/83 is reckoned on the basis of assessable value under section 4 of the act.admissible trade discount is deductible under section 4 of the act.since the respondent has no case that any discount was actually offered or was being given to the customers, the discount referred to in the notification for the purpose of reckoning the quantum of exemption, cannot be regarded as discount actually given and required to be deducted for the purpose of arriving at the assessable value under section 4 of the act. the view taken by the collector (appeals) is erroneous.6. we set aside the order passed by the collector (appeals) and restore the order passed by the assistant collector. the appeal is allowed.

Judgment:
1. Respondent is absent in spite of notice of hearing. We have heard Shri D.S. Negi, SDR, for the appellant-Collector and perused the papers.

2. Respondent was engaged in the manufacture of Patent and Proprietary Medicines falling under erstwhile Tariff Item 14E and enjoyed the benefit of Notification No. 83/83, dated 1-3-1983 during the year 1983-84. The notification provided exemption for first clearance upto Rs. 7.5 lakhs. Alleging that clearance for the year exceeded Rs. 7.5 lakhs by Rs. 1,43,410.06, notice was issued to the Respondent to pay duty on the excess amount and objecting to the discount claimed as deduction from the assessable value. Notice was resisted contending that the Respondent was also entitled to the benefit of Notification No. 161/66-CE. which laid down that assessable value was to be determined at the Drug Price Control Order wholesale price less discount of 10% stated to be increased to 15% subsequently. According to the respondent, if the assessable value is determined on that basis, no more duty is payable. Assistant Collector overruled this contention, recalculated the assessable value and confirmed the demand for part of the amount shown in the show cause notice. Notice issued for penalty was dropped. Department took up the matter before the Collector (Appeals), who confirmed the order of the Assistant Collector holding that the respondent would be entitled to the deduction of discount.

This order is now challenged by the Collector of Central Excise.

3. The finished goods in question are drugs, governed by Drugs (Price Control) Order, 1970. The Price Control Order specifies prices to retailers (which may be regarded as wholesale prices) and retail prices (which may be regarded as price to the consumer). According to the respondent, assessable value under Notification No. 83/83 is to be arrived at by deducting discount of 10% on the wholesale prices or prices to retailers and if the value on clearances is reckoned on this basis, it will not exceed Rs. 7.5 lakhs. The Collector (Appeals) agreed with this view.

4. Notification No. 161 /66 is an exemption notification under Rule 8(1) of the Central Excise Rules, 1944. It relates to patent or proprietary medicines falling under Item 14E of the Tariff. The notification provides exemption from so much of the duty leviable on the medicines as is in excess of the duty calculated on the basis of formulae mentioned in Clause (i) or (ii) of the notification. Clause (i) refers to value arrived at after allowing discount of 10% on the prices specified in the price list referred to in Paragraph 8 of the 1970 Price Control Order showing the prices at which the medicines are sold to a retailer. These prices are referred to in Clause (i) as wholesale prices. Clause (ii) refers to value arrived at after allowing discount of 25% on the prices specified in the price list showing the retail prices referred to in the said order. Respondent has sought to invoke Clause (i) of the Notification. The notification does not deal with the method of arriving at assessable value for any purpose. It grants exemption to duty in excess of duty calculated on the wholesale prices less 10%. The value of clearances under Notification 83/83 has to be arrived at on the principles laid down in Section 4 of the Central Excises Act, 1944 (for short, the Act). It would not be lawful to arrive at the assessable value under Section 4 of the Act deducting 10% discount from the wholesale prices fixed in the Price Control Order.

5. The prices declared by the respondent are wholesale prices. It is not the respondent's case that any discount was being given on the declared wholesale prices. The exemption under Notification No. 161/66 was not contingent on discount actually being given to wholesalers.

What we are concerned with is to arrive at the assessable value under Section 4 of the Act. The value depends on the wholesale price at the factory gate. Value of clearances under Notifiction No. 83/83 is reckoned on the basis of assessable value under Section 4 of the Act.

Admissible trade discount is deductible under Section 4 of the Act.

Since the respondent has no case that any discount was actually offered or was being given to the customers, the discount referred to in the notification for the purpose of reckoning the quantum of exemption, cannot be regarded as discount actually given and required to be deducted for the purpose of arriving at the assessable value under Section 4 of the Act. The view taken by the Collector (Appeals) is erroneous.

6. We set aside the order passed by the Collector (Appeals) and restore the order passed by the Assistant Collector. The appeal is allowed.