JAY ENGINEERING WORKS LIMITED Vs. GOVERNMENT OF INDIA

JUDGEMENT

(1.) The Writ Appeal is at the instance of the petitioner in the Writ Petition seeking to quash the order No. 1586/73 dated 21-11-1973 of the Government of India, Ministry of Finance confirming the orders of the Controller of Central Excise and Superintendent of Central Excise. The Writ petition is concerned with the validity of levy of excise duty on freight charges, cost of packing material and regulator for the fan and also deduction of permissible discount to determine the assessable balance for determination of excise duty. The petitioner claimed that the freight charges should not form part of assessable value for the purpose of excise duty. The Collector negatived this claim on the ground that the equalised freight is an element of cost and as such no abatement can be given under section 4 of the Central Excises Act. This order was confirmed in the appeal as well as in the Revision by the Government. The learned signal judge held that as the procedure of equalised freight is adopted, the petitioner is not entitled for deduction of the freight charges. So far as packing material is concerned, the primary authority viz., the Collector held that the petitioner did not disclose the packing charges separately and the element of packing charges is linked with cost price. This order was confirmed in appeal and revision as well. In the writ petition, the learned single Judge held that the cost of packing material is not post-manufacturing expenditure and as such liable to be included in the wholesale cash price. In this view, the order was confirmed.

(2.) It is contended by the learned counsel for the appellant that the expenditure towards freight as well as packing material is post-manufacturing expenditure and as such cannot form part of manufacturing cost. We are relieved of the task of dealing with this matter in depth as the issue pertaining to freight charges and packing materials as well in covered by the decisions of this Court reported in Union of India v. Vazir Sultan Tobacco Co. Ltd. - 1978 (1) AN. W.R. 233 and 1979 E.L.T. 334. It is held by this court that freight and packing material does not form part of the price of the product and as such cannot be included in the assessable value under Section 4 of the Act. We follow the reasoning and the conclusion in the said decisions and uphold the appellants contentions.

(3.) The other aspect for consideration is, whether the cost of regulator can be included in the price of the fan for the purpose of imposing excise duty payable on ad valorem basis. The primary authority included the value of the regulator and the same was upheld in the appeal by the Collector of Central Excise and affirmed on further revision before the Government of India. The Collector held that the ceiling fans are sold with a regulator only and the practice of trade is to include the cost of regulator in the price of the ceiling fan. The revisional authority held that though the regulator is not an integral part of the ceiling fan, it is considered as one unit with the ceiling fan and this price is included in the cost of the fan and as such the regulator is part and parcel of the fan. In the writ petition, the learned single judge after adverting to the circular of the Central Board of Revenue and Indian Standard Specification held that the regulator is treated as part of the ceiling fan according to the commercial and trade practice and declined to interfere with the orders. The learned counsel for the appellant contended that the regulator cannot be considered as an integral part of the fan and the Indian Standard Institution is not competent to deliberate or describe the commodity and in any event the report of the Indian Standard Institution in this regard has not been considered in proper perspective and the consideration of method of preparing the bill at the time of sale of the fan is extraneous to the levy of excise duty and the Circular of the Board of Revenue is not binding. It is also contended that in view of the amendment to Item 33 of Schedule made with effect from 19-6-1977 roping in the regulator for the purpose of levy of excise duty, the regulator is excluded from the purview of fan and is not exigible to levy of excise duty anterior to 19-6-1977. The learned standing counsel for the Central Government contended that the fan is considered as inclusive of regulator in ordinary parlance and in commercial and trade practice and the report of I.S.I. indicates that the fan should always be understood as comprehending regulator and though the circular of the Board of Revenue is not binding, but is indicative of the intention that the fan comprises regulator also. The learned counsel for the respondent further contended that the amendment made from 19-6-1977 to the effect that the fan includes regulator throws flood of light as the amendment in the context is tantamount to exposition of exiting state of facts. The relevant portion of Item 33 of Schedule 1 to the Central Excises Act is as follows : Electric fans including air circulators............... 1. Table, cabin, carriage, pedestal and air circulator fans. 2. All other fans. This item has been amended with effect from 19-6-1977 and the relevant position is herewith extracted. 33. Electric fans, including regulator for electric fans all sorts :- 1. ........... 2. Electric fans, designed for use in an industrial system. 3. Electric fans, not otherwise specified and regulators.