UNION OF INDIA Vs. I T C LTD

JUDGEMENT

(1.) These appeals arise out of the common order passed by the learned Single Judge in WPs.1957 of 1974 and 1292 of 1973 respectively. The petitioner in WP.1957 of 1974 is the ITC.Ltd (formerly known as India Tobacco Coy Ltd). It is a company engaged in the manufacture of cigarettes at several places in India. The petitioner in WP.1292 of 1973 is M.M.Rubber Coy(P) Ltd. It is a company which manufactures rubber products. The petitioner in WP.1957 of 1974 sells its goods to wholesalers in Bangalore as well as ther places. Similarly the petitioner in WP.1292 of 1973 has got its Branch Offices at several places where the goods manufactured by it are sold to wholesalers. Until the decision of the Supreme Court in A.K.Roy v. Voltas Ltd., AIR, 1973 SC. 225, was rendered, the petitioners were paying excise duty on the basis of the list prices at which the goods were sold to wholesalers at different places in India. After the above decision was rendered, the petitioners claimed before the Central Excise Authorities that the computation of their liability under the Central Excises and Salt Act, 1944 on the basis of the prices at which the goods were actually sold to the wholesalers at different places in India was incorrect and inconsistent with the principles laid down in Voltes' case (1). They contended that while determining the basis for the levy of excise duty, the Central Excise Authority should deduct from the prices at which the goods were sold to wholesalers at different places, several items of expenditure incurred by them, which according to them were incurred subsequent to the manufacture of the goods. The Asst Collector of Central Excise, Bangalore, passed an Order on 1-4-1974 rejecting the contentions of ITC.Ltd. in respect of the ceriods referred to therein. In respect of the three other periods he made a demand on that Company on the basis of the abovesaid Order to file fresh price lists so that Excise Duty payable by it could be computed on the basis of the prices at which the goods were sold to the wholesalers at different places. ITC.Ltd. filed WP.1957 of 1974, aggrieved by his Order dt.1-4-1974 and the three notices in respect of the subsequent periods.

(2.) M.M.Rubber Coy (P) Ltd has challenged the notice dt.26-4-1973 issued by the Asst Collector of Central Excise calling upon it to show-cause as to why it should not be made liable to pay excise duty in respect of 19.5 per cent of the list prices at which it sold its goods to the wholesalers, which according to the Company was attributable to post-manufacturing expenses incurred by it.

(3.) The learned Single Judge held that the expenses incurred in connection with marketing and distribution of goods, interest on the value of goods attributable to the period between the time at which the goods Jeave the premises and the time at which the price is paid by the wholesaler and the freight charges for transporting the goods from the factory gate to the selling points, where the goods are sold to the wholesalers, clearly fall outside the scope of the manufacturing expenses in view of the enunciation made by the Supreme Court in Volta's case(1) and that a proportionate deduction from the list prices has to be made before arriving at the wholesale cash price. He also held that the Assessing Authority has to decide on the evidence produced before him to what extent the advertisement expenditure incurred by the petitioners can be traceable to the selling activity and to allow deduction to that extent on the basis of such a finding from the list prices. He, accordingly, allowed the writ petitions quashing the Order passed by the Asst Collector of Excise as well as the three notices issued to the petitioner in WP.1957 of 1974 and the notices issued to the petitioner in WP.1292 of 1973. He further directed the Asst Collector of Excise to issue fresh notices to the petitioners in both the cases in the light of the decision in Volta's case(1) and the observations made by him and to determine the liability of the petitioners under the Act. The Union of India has come up in appeal against the above order