JUDGMENT
Subyasachi Mukharji, J.
1. The subject matter of challenge in this application under Article 226 of the Constitution is an order in revision passed by the Government of India on 20th September, 1975. The petitioner manufactures steel furniture falling “under item 40 of the First Schedule of the Central Excises and Salt Act, 1944. It had been giving trade discount to its distributors and wholesale dealers at varying rates ranging between ‘nil’, 1½ per cent, 10 per cent and 15 percent. The Assistant Collector had allowed the discount of 10 percent in respect of cash box and .12 per cent in respect of safe and wall coffers but in other cases he did not allow any discount. In this application, I am concerned with the last mentioned cases, that is, not in respect of cash box or safe and wall coffers. The Appellate Collector had in all other cases admitted abatement of discount allowed by the petitioners at varying rates ranging from ‘nil’ to 15 per cent in the orders in appeal. He had held as follows :- .
“I, therefore, set aside the order of the Assistant Collector and admit the appeal inasmuch as when discount is actually allowed by the appellant” (meaning thereby the petitioner) ‘it shall be deducted from the assessable value’.”
2. The Central Government was of the view that the value for the purpose of assessment under Section 4 of the Central Excises and Salt Act, 1944, is one at which the petitioner sells the goods to its distributors/wholesale dealers subject to the deduction of trade discount given ‘uniformly’ to all such distributors/wholesale dealers at the time, of removal of the goods from the factory. The Central Government was further of the opinion that in the instant case the petitioner was giving varying discount ranging from ‘nil’ to 15 per cent. Therefore, according to the Central Government since the trade discount was not given by the petitioner uniformly the lowest discount was only admissible in the instant case. Being aggrieved by the aforesaid order the petitioner has moved this application under Article 226 of the Constitution.
3. The contentions of the petitioner will have to be judged in this case in the light of Section 4 as stood prior to amendment which came into operation on 1st October, 1976.* The said Section as it stood then was to the following-effect:-
“4. Determination of value for the purpose of duty.- Where under this Act if any article is chargeable with duty at a rate dependent on the value of the article, such value to be deemed to be –
(a) the wholesale cash price for which an article of the like kind and quality is sold or capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production,for delivery at the place of manufacture or production, or if a wholesale market does not exist for such articles at such place, at the nearest place where such market exists, or
(b) where such price is not ascertainable the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production cr if such article is not sold or is not capable of being sold at such place nearest thereto.
Explanation.-In determining the price of any article under this section no abatement or deduction shall be allowed except in respect of trade discount and amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid.”
The scheme of the section is designed to meet the situation of levying duty on manufactured article where the levy is ad valorem. In such a situation, section directed that tax should be levied on the value of the article to be determined in the manner indicated in Clause (a) or (b) of the section. The explanation made it clear that in determining the price of an article under this section no abatement or deduction shall be allowed except in respect of trade discount and amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises. Therefore, abatement on account of trade discount was allowable. Section 4 after its amendment, of course, envisages the possibility of varying trade discounts to varying persons or classes. Therefore, there can be more than one price in respect of one manufactured article. But that was not the position prior to introduction of new section in 1976. Therefore, there had to be one price for the manufactured article computed in the manner contemplated either by Clause (a) or (b) of Section 4 of the Act. It is clear, as was observed by the Supreme Court in the case Union of India v. Delhi Cloth and General Mills-AIR 1963 SC 791 that excise is a tax on production and manufacture of goods. Therefore, post-manufacturing profits or post-manufacturing costs have to be eliminated in computing the value of an article for the purpose of levying duty. It is well settled that in implementing the scheme of this nature commercial pragmatic view of the matter is admissible and indeed is necessary. On behalf of the petitioner it was contended that trade discount was normally not to be given from the manufacturing cost. Trade discount was allowed only by curtailing the post-manufacturing profit of a manufacturer. Therefore, it was urged that is consistent with the ordinary human conduct that if maximum trade discount is allowed in a case it comes out of the post-manufacturing profits or post-manufacturing cost. Of course, this is a course of human conduct of which judicial notice can be taken. If one keeps in view this background of human conduct then when in fact a trader allows the maximum trade discount of 15 per cent it must have come out of its post-manufacturing profit. Therefore, in such a. case the maximum trade discount in my opinion, shall be allowable abatement provided the authorities concerned are satisfied that in a particular case such maximun trade discount had, in fact, been allowed as trade discount as such. There is no dispute in the case on this scope. If this is the position then, in my opinion, the petitioner would be entitled to abatement -on the basis of maximum trade discount in the instant case. In not examining the case from this point of view, in my opinion, the Central Government has committed an error of law and, therefore, this order cannot be sustained.
4. The impugned order is, therefore, set aside and the respondent authorities are directed to allow the abatement and rectify the demand in accordance with the above observations. The Rule is, therefore, made absolute to the extent indicated above. It is however, made clear that this is only applicable up to the transactions before 1st October, 1976. There will be no order as to costs.
