Punjab Anand Batteries vs Assistant Collector of C. Ex.

V.K. Bali, J.—The petitioner takes exception to issuance of Annexure P-4 vide which the Assistant Collector, Central Excise Range, Mohali, pending decision of the Collector in the review proceedings of a similar case, permitted it (petitioner) to clear the goods provisionally in terms of Rule 9B of the Central Excise Rules, 1944, on payment of duty on the basis of whole sale price (exclusive of C.E. duly and other taxes) at which M/s. Peico Electronics and Electricals Limited, Bombay, sell their goods to their wholesale dealers. The facts, as made out from the petition are that the petitioner company manufactures dry cell batteries for sale of its own and also for sale to M/s. Peico Electronics and Electricals Limited. The batteries manufactured by the petitioner forsale to M/s. Peico Electronics and Electricals Limited. The batteries manufactured by the petitioner for sale to M/s. Peico Electronics and Electricals Limited (hereinafter referred to as ''Peico Limited'') conform to I.S.I, specifications and are manufactured with its own technical know-how. The production of batteries is under the exclusive control and supervision of the petitioner and M/s. Peico Limited has no interference with the working of the petitioner company. M/s. Peico Limited, as is stated, has no financial involvement nor any control over the policies of the petitioner or over its operation of manufacture of batteries. Only an order is placed by M/s. Peico Limited for the purchase of dry cell batteries from the petitioner giving certain specification of the product. Petitioner alone brands the batteries as per the requirement of the buyer. M/s. Peico Limited has a right to reject the goods which fall short of agreed specification. It is further made out that M/s. Peico Limited is neither favoured buyer nor is a related person by any stretch of imagination with the petitioner company. The sale made to M/s. Peico Limited is in the usual course of business and price at which the batteries are sold to M/s. Peico Limited is at a normal price and it is the sole consideration while transacting business with it. The price charged by the petitioner from M/s. Peico Limited represents the full value of the goods and the transaction is on a principal to principal basis. The relationship between the petitioner and M/s. Peico is that of a seller and a buyer and there is no direct or indirect interest in the business of each other. There are no extra commercial benefits influencing the price charged by the petitioner from M/s. Peico Limited and the petitioner does not function as a distributor or agent of M/s. Peico Limited. It is, therefore, made out that the petitioner sells dry cell batteries of agreed quality and design at a price representing the full value of the goods to M/s. Peico Limited. The buyer i.e., M/s. Peico Limited would not use the batteries for its own consumption but would sell the same at a higher price in wholesale.

In the circumstances reproduced above, the case made out by the petitioner is that it is a manufacturer of dry cell batteries which product is sold to M/s. Peico Limited at a price where price is the sole consideration and the purchaser is unrelated person and, therefore, the duty of excise is chargeable at the price at which the dry cell batteries are sold to an unrelated person in the course of wholesale trade. Inasmuch as excise is a tax on production and manufacture of goods, the real value includes only the manufacturing costs and manufacturing profits and it excludes the post-manufacturing costs and profits. In the present case, it is stated that the value at which dry cell batteries are sold by the petitioner to M/s. Peico Limited would represent only manufacturing costs and manufacturing profits.

The provisions of Section 4 of the Central Excises & Salt Act, 1944 (hereinafter referred to as ''the Act'') have been relied upon to state that valuation of excisable goods for purposes of charging of excise duty where the duty of excise chargeable on any excisable goods with reference to value would be the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the asscssee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale. It shall be useful to reproduce Section 4 of the Act which runs as under:-

"4. Valuation of excisable goods for purposes of charging of duty of excise - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be:-

(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale;

provided that:-

(i) where in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a) be deemed to be the normal price of such goods in relation to each such class of buyers;

(ii) where such 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, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof;

(iii) where the assessee so arrange that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related persons shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail;

(b) where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.

(2) Where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price.

(3) The provisions of this section shall not apply in respect of any excisable goods for which a Tariff value has been fixed under sub-section (2) of Section 3.

(4) For the purpose of this section:-

(a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent;

(b) "place of removal" means -

(i) a factory or any other place or premise of production or manufacture of the excisable goods; or

(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;

(c) "related person" means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor.

Explanation. - In this clause "holding company", "subsidiary company" and "relative" have the same meanings as in the Companies Act, 1956;

(d) "value" in relation to any excisable goods -

(i) Where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee.

Explanation. - In this sub-clause "packing" means the wrapper, container, bobbin, pirn, spool, reel or wrap beam or any other thing in which or on which the excisable goods are wrapped, contained or wound;

(ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale;

(e) "wholesale trade" means sale to dealers, industrial consumers, Government, Local authorities and other buyers, who or which purchase their requirements otherwise than in retail."

The petitioner further goes on to say that while submitting the price lists effective from 14-6-1979, 1-1-1980, 19-6-1980, 19-9-1980, the same were approved by respondent No. 1 on various dates and respondent No. 1 approved the price list as submitted by the petitioner without any amendment or change in the assessable value of the goods. However, the Collector issued a show cause notice dated 12-2-1981 u/s 35A of the Act for reviewing the price lists approved by respondent No. 1 and according to the show cause notice the Collector was of the view that levy of excise duty should be imposed not at the price charged by the petitioner from M/s. Peico Limited but at the price at which M/s. Peico Limited further markets the goods in the wholesale thereby meaning that M/s. Peico Limited and not the petitioner is the manufacturer of the goods. A reply to the aforesaid show cause notice was given and the matter was heard by the Collector, Central Excise, Chandigarh, on April 24,1981. Thereafter, the Collector issued yet another show cause notice in the form of addendum on 20-8-1981 (Annexure P-3) and as per notice Annexure P-3 the Collector was of the view that it is, in fact, M/s. Peico Limited who owned the brand name (Philips) and they are the manufacturers of the dry cell batteries that the petitioner manufactures and, therefore, the petitioner shall have to pay the excise duty on the normal price at which the said branded goods are being sold to M/s. Peico Limited. This tentative decision of the Collector is the subject-matter of challenge by way of present writ petition. The petitioner has been permitted to clear the goods provisionally in terms of Rule 9B of the Central Excise Rules on payment of duty on the basis of wholesale price at which M/s. Peico Limited, Bombay, sells their goods to their wholesale dealers pending decision of the Collector in the review proceedings of the petitioner''s case.

In paragraph 2 of the written statement filed by Sh.Y.D. Gupta, Assistant Collector, Central Excise Division, Chandigarh, on behalf of the respondents, it is made out that M/s. Peico Limited are the owners of brand named ''Philips''. The petitioner is engaged in the manufacture of dry cell batteries, which is sold in the marked under the brand name "Punjab Anand" and the petitioner does not manufacture ''Philips'' brand dry cell batteries on their own, but manufacture them only as and when M/s. Peico Limited places orders for supply thereof. It is also mentioned in the said paragraph of the written statement that M/s. Peico Limited has also a right to reject the dry cell batteries which fall short of agreed specifications and the brand name ''Philips'' is printed on the metal jacket before it is used in the manufacture of a dry cell battery. M/s. Peico Limited would market the dry cell batteries under their brand name ''Philips''. After giving the narration of facts, practically admitting the contents of the petition to the effect that the petitioner while selling the product at its own level would do so in the name of ''Punjab Anand'', whereas M/s. Peico Limited would do so in the name of "Philips". It is still averred in paragraph in question that the petitioner manufactures "Philips" brand dry cell batteries for and on behalf of M/s. Peico Limited and as such M/s. Peico Limited is the manufacturer within the meaning of Section 2(f) of the Central Excises and Salt Act.

The learned Counsel for the petitioner forcefully contends that the basic fact that the petitioner sells dry cell batteries according to the specification given by M/s. Peico Limited and the same is done at a wholesale cash price, having not been denied, the value on which goods were supplied to M/s. Peico Limited will be the only price on which excise duty shall be chargeable. It is further contended that the wholesale price at which the goods with the trade mark affixed to them are sold by the petitioner to M/s. Peico Limited having been stipulated in the agreement, it is that value of the goods which shall be a determining factor for levying excise duty. In support of his contention, the learned counsel relies upon Joint Secretary to the Government of India and Others Vs. Food Specialities Ltd., .

The crucial question that requires determination, is therefore, that as to whether the Collector, Central Excise can order that the petitioner can clear the goods in terms of Section 9B of the Central Excise Rules, 1944, on payment of duty on the basis of wholesale price (exclusive of C.E. duty and other taxes) which M/s. Peico Limited are charging by selling the goods to their own wholesale dealers as also as to whether the interim order reflected in Anncxure P-4 can be agitated in a writ petition under Article 226 of the Constitution of India without first getting the final order from the authorities and if the said final order turns against the petitioner, without challenging the same in the appellate and revisional forum.

I have heard learned Counsel for the parties and examined the record.

From the narration of facts given in the petition which facts on material particulars have been admitted in the written statement, it is made out that the petitioner manufactures goods according to the specification supplied by M/s. Peico Limited at a wholesale price stipulated under the agreements with aforesaid M/s. Peico Limited. What is being sold and supplied by the petitioner are goods manufactured by it and, therefore, it is the wholesale price of the said goods that must determine the value for the purpose of assessment of excise duty. In the case cited as "Joint Secretary to Government of India and Ors. (supra), it was held that even though the purchaser may affix the trade mark belonging to it on the goods after having purchased the same from the manufacturers, the excise duty would be on the value on which the manufacturer had sold it to the buyer as stipulated under the agreement and that the trade mark of the buyer of the goods affixed on them would not make any difference. The facts of the judgment, quoted above, would go to show that the manufacturer of the goods was supplying it to the buyer according to the specification given by the buyer and the buyer would affix its trade mark on the goods. The only difference in the present case is that herein the petitioner is affixing trade mark on the goods and, to my mind, that would not make any difference in the proposition of law as enunciated in the case cited above. In view of what has been staled above, it is only the price for which the dry cell batteries are being sold to M/s. Peico Limited that will determine the excise duty and not the price at which M/s. Peico Limited is selling the said product to its wholesale agents.

In so far as preliminary objection taken in the written statement is concerned, suffice it to say that it will be too late in the day to relegate the petitioner to first suffer a final order of the concerned authorities and then to take up the matter in the appellate and revisional forum. Once the petition stands admitted, the plea of alternative remedy at the time of final arguments and that too after a decade would pale into total insignificance and cannot be permitted to be raised. Otherwise too, the impugned order would manifest that it is not simply a case of an interim order when the view of the authorities is certainly reflected in no uncertain terms. Additionally, when the facts are admitted it shall be well within the scope of writ jurisdiction to determine the question of law and in such circumstances, it would neither be just nor equitable to relegate the petitioner to redresss his grievance from either the Collector of Central Excise or appellate forum or revisional authority. The petitioner relies upon Mysore Acetate and Chemical Co. Ltd. Vs. Assistant Collector, Central Excise, Mysore, ; Y. Moideen Kunhi and Others Vs. Collector of Central Excise, Bangalore and Others, ; and Alembic Glass Industries Limited Vs. Union of India and Others, , to contend that this Court would be justified in appropriate cases to decide the case on merits and not to insist upon getting a final decision from the authorities concerned.

In view of the facts fully detailed above, this petition succeeds. Annexure P-4 is set aside and a direction is issued to the respondents to levy excise duty based upon the price fixed and charged by the petitioner from M/s. Peico Limited and not on the price that is being charged by M/s. Peico Limited from its wholesale agents. The petitioner is stated to have given bank guarantee which shall be released after taking the amount which the petitioner is liable to pay on the price aforesaid. There shall, however, be no order as to costs.