KANPHA LABS Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner herein is a licensed manufacturer of drugs and medicines covered by Tariff Item 14-E of Schedule I of the Central Excises and Salt Act, 1944, and excise duty is payable in respect of drugs and medicines manufactured by them on an ad valorem basis under the said Act. The petitioner submitted a price list which included only the manufacturing cost and the manufacturer's profit to the Excise authorities for their approval and the second respondent herein rejected the same and returned it for re-submission after showing correctly the assessable value. Aggrieved by the said order of the second respondent dated 24-12-1981, the petitioner has approached this Court for the issue of a writ of certiorified Mandamus to quash the said order of the second respondent and to direct the respondents to forbear from levying and collecting excise duty from the petitioner by including the post-manufacturing expenses, namely, distribution cost, onward freight, promotional expenses, cost of packing materials, picking charges and trade concession in the assessable value of the drugs and medicines manufactured by the petitioner. In this writ petition, the petitioner has attacked the constitutional validity of Section 4(1)(a) proviso (ii) of the Central Excises and Salt Act, 1944, as amended by Central Act 22 of 1975 which provides that where a price is fixed for an article under any law for the time being in force, then such price shall be deemed to be the normal price referred to in clause (a) of Section 4(1). According to the petitioner, the second proviso referred to above enables the excise authorities to equate the price fixed under any other statute on the normal price fixed under Section 4(1)(a) and if the price fixed under any other statute includes the post-manufacturing expenses incurred by the manufacturer, then such a provision which enables the authorities to include post-manufacturing expenses as well in the value to be fixed for the purpose of ad valorem duty will be contrary to the charging section 3 which enables the levy of excise duty on the goods manufactured which normally includes the manufacturing charges as well as the manufacturer's profit. It is also pointed out in the writ petition that the excise duty leviable under the Central Excises and Salt Act, 1944, can only be levied on the manufacturing cost plus manufacturer's profit and not on the manufacturer's post-manufacturing expenses incurred for the purpose of facilitating the sale of the goods and this position has been established by the various decisions of the Supreme Court and the High Courts and, therefore, Section 4(1)(a) proviso (ii) in so far as it enables the excise authorities to take into account the retail price which normally includes the post-manufacturing expenses should be taken to be unconstitutional. It has also been pointed out by the petitioner that even otherwise the impugned order of the second respondent passed on 24-12-1981 is erroneous and illegal in that the second respondent has taken the view that after S. 4 was amended, it enables the excise authorities to levy excise duty even on the post-manufacturing expenses as well and that view cannot be taken as legally tenable.

(2.) In the counter affidavit filed on behalf of the respondents it has been stated that whatever was the position before Section 4 was amended, after the amendment, under proviso (ii) to Section 4(1)(a) the excise authorities are bound to take the statutory fixation of the price or the maximum price of the goods under any law for the time being in force as the normal price of the goods within the meaning of Section 4(1) and such being the legal position, the authorities have no other alternative except to take the statutory fixation of the price of the maximum price for the articles as the normal price. As regards the petitioner's attack on the validity of the said proviso (ii) to Section 4(1)(a), the respondents have merely stated -

(3.) Before me, the learned counsel counsel for the petitioner contends that both before or after the amendment of Section 4, the excise duty can be imposed under the Central Excises and Salt Act, 1944, only on the price of the manufactured goods, in the wholesale market. Before the amendment, Section 4(1) provided that excise duty is chargeable on any excisable commodity with reference to the wholesale price the goods will fetch if sold at the factory gate. After the amendment, Section 4(1) provides that the excise duty is chargeable on excisable goods taking its normal price, the normal price being the price at which the goods are ordinarily sold by the manufacturer to buyer in the course of a wholesale trade. Therefore, according to the learned counsel, even after the amendment, the wholesale price can only be taken as the basis for the purpose of the levy of excise duty and not the retail price which normally includes the post-manufacturing expenses incurred by the manufacturer as also the expenses incurred by the retailer and his profits. It is also contended by the learned counsel for the petitioner that the duty of excise being a duty on the manufacture, the duty cannot be imposed on a retail price which includes not only the manufacturing cost and manufacturer's profits but also the post-manufacturing expenses, and retailer's profit. According to the learned counsel, the second proviso to Section 4(1)(a) runs counter to the basic idea contained in Section 4(1)(a) of the normal price which refers only to a price which a manufacturer charges in the course of a wholesale trade and that if the second proviso is understood as enabling the excise authorities to levy excise duty even on a retail price fixed under any other law for the time being in force deeming it to be a normal price, then that will be contrary to the charging section 3 and also exposes the provision to constitutional attack on the ground that in the guise of levying duty of excise, a duty is levied on the post-manufacturing expenses as also the retailer's profits. The learned counsel has referred to the decisions of the Supreme Court in A. K. Roy v. Voltas Ltd. AIR 1973 S.C. 325 = 1977 E.L.T. (J 177) and Atic Industries Ltd. v. N. H. Dave, Assistant Collector, Central Excise and others, which had been rendered before the amendment of Section 4, and says that the ratio of the decision in those case still governs the interpretation of Section 4 as amended. The said decisions of the Supreme Court have been followed by a Division Bench of this court in India Tobacco Co. Ltd. v. Union of India 1979, E.L.T. (J 476), and Century Spinning and Manufacturing Co. v. Union of India, 1979 E.L.T. (J 199). The amended provision in Section 4 came up for consideration before the various High Courts in India and in those decisions it has been held that the ration laid down by the Supreme Court in the above two cases still holds good.