ORDER
1. The petitioners- Hindustan Lever Ltd. inter alia carry on business of manufacturing soaps and detergents and have for that purpose inter alia factories situated at Haju Bunder, Sewree, Bombay, and at Calcutta. The 1st respondent is the Union of India. The 2nd and the 3rd respondents are the officers of the 1st respondent exercising powers under the provisions of the Central Excise and Salt Act, 1944, and the Rules made thereunder.
2. According to the petitioners, under the pattern of distribution followed by them for the past several years, the petitioners after manufacturing and packing the said soaps and detergents transport the same from their aforesaid factories at Bombay and Calcutta to 41 depots maintained by the petitioners throughout India. Thereafter the petitioners supply the said soaps to their approximately 5000 redistribution stockists or wholesale dealers from such depots. Under the terms of business agree upon between the petitioners and their said stockists, the petitioners sell the said soaps and detergents to the said stockists at the applicable prices and, in addition thereto, recover transport charges and other associated charges described in the invoices as distribution charges but referred to and described as “delivery charges” in the present petition.
3. The petitioners say that since July 1973, they have been supplying such soaps and detergents from their factories at Bombay and Calcutta to their diverse stockists and have been recovering from such stockists a uniform delivery charge based on the amounts expended by the petitioners towards the costs of transport and associated expenses. Under the aforesaid practice, all the said stockists and the customers of the petitioners situated throughout India pay the same uniform delivery charges, regardless of the distance the goods in question have been actually transported. The aforesaid practice inter alia ensures that the various products of the petitioners, which include essential commodities, are available to consumers at a uniform cost, regardless of the location of such consumers.
4. According to the petitioners, the amounts recovered by them from their stockists towards such delivery charges are calculated by them so as to approximate with the amount actually expected to be expended by the petitioners and the aggregate delivery charges thus recovered by the petitioners in the part tow years correspond closely to the aggregate amounts, in fact, expended toward such delivery charges. It is the case of the petitioners that during the relevant period of 1973 and 1974, the petitioners expended towards transportation and associated expenses from their aforesaid factories aggregate sums of Rs. 116.59 lakhs and Rs. 311.80 lakhs respectively aggregating to Rs. 4,28.39 lakhs and recovered during their said stockists as delivery charges aggregate amounts during the said of Rs. 98.38 lakhs and Rs. 352.60 lakhs respectively, aggregating Rs. 450.98 lakhs. In this connection, the petitioners seek to rely on certificate of their Chief Accountant certifying the correctness of the aforesaid figures.
5. The petitioners further say than the invoice prepared and submitted by them from time to time to the said stockists, delivery charges have always been shown separately as contribution charges. The petitioners also say that they have substituted from time to time price-lists of the soaps and detergents manufactured therein the assessable value of the said soaps and detergents under the provision of section 4 of the Central Excise and Salt Act, 1944. In such price-lists submitted by them, they did not include the delivery charges as, according to them, the same are not a part of the wholesale cash price of the said soaps and detergents. The pricelists thus submitted by them from time to time during 1973 and 1974 were approved by the appropriate Central Excise authorities.
6. On or about 30th March, 1978, the petitioners received a notice to show cause from the Superintendent of Central Excise under Rule 10 of the Rules asking the petitioners to show cause why they should not be required to pay an amount of Rs. 2,21,716.34 being the alleged difference in excise duty payable in respect of the soaps cleared by them between 17-7-1973 and 30-9-1973 by including in the assessable value of the said soaps the delivery charges. This show cause notice was hearing No. 1024 and the petitioners replied the same by their letter dated 29-5-1974. Likewise, the petitioners received another show cause notice dated 30-3-1974 bearing No. 1026 requiring them to pay a sum of Rs. 1,36,248.73. The third show cause notice dated 27-9- 1974 bearing No. 2825 related to a sum of Rs. 2,93,515.43. The forth show cause notice was dated 16-12-1974 hereing No. 3689 was for Rs. 2,89,507.61. The sixth show cause notice hearing No. 3690 dated 16-12- 19747 was in respect of Rs. 1,18,239.51. The seventh show cause notice was dated 16-1-1975 – hearing No 205 asking the petitioners to show cause why – a sum of Rs. 2,62,526.19 should not be recovered from them. The eight and the last show cause notice dated 2-1-1976 hearing No. 26 covered a sum of Rs. 1,80,459/-.
7. In the meanwhile, by an order dated 11-12-1974 passed in respect of the first two show cause notice (Ex. C and G to the petition) relating to soap, the 3rd respondent confirmed the same on the ground inter alia that under the provisions of the said Act, there is no question of making any deduction of post manufacturing expenses.
A similar order was passed by the 3rd respondent in respect of the first two show cause notices (Ex E and I to the Petition) relating to detergents on or about 24-12-1974.
8. Being aggrieved by the said orders, the petitioners had filed appeals on or about 3-3-1975. The Appellate Collector has ordered that pending the hearing and final disposal of the said appeals, the recovery of the amount demanded by the said show cause notices should be stayed.
9. In the meanwhile, the petitioners were asked by the 3rd respondent to furnish revised price-lists in respect of soaps and detergents manufactured by them by showing the said delivery charges as part of the assessable value thereof. The petitioners were also asked, if they so desired, to pay the excise duty under protest. It is in these circumstances that the petitioner have challenged the correctness of the decision (Ex. I to the petition) of the Assistant Collector, Central Excise, Bombay Division V. dated 22nd February, 1975 calling upon the petitioners to furnish revised price-lists in respect of all the products falling under T.I. No. 15(SOAP) and T.I No. 15-AA (O.S.A.A.) immediately showing the correct prices, i.e. inclusive of delivery charges. The petitioners further seek a writ of prohibition or a writ, direction or order in the nature of prohibition, prohibiting the respondents from taking any further steps in pursuance of or in implementation of the show cause notices (Ex. K.M.O and Q to the petition) and the aforesaid decision dated 22nd February 1976, Ex U to the petition. The petitioners also seek a writ of mandamus directing the respondents to withdraw or cancel the said show cause notices (Ex. K.M.O. and Q to the petition), to withdraw or cancel the communication or decision dated 22-2-1975 (Ex. U to the petition), not to include in the assessable value of the soaps and detergents manufactured by the petitioners the said delivery charges, and to permit the petitioners to clear the soaps and detergents manufactured by them paying duty thereon without including in the assessable value thereof the said delivery charges.
10. The respondents in their return have stated that they are not aware of the pattern of distribution at the petitioners factory at Calcutta an that the petitioners have not disclosed the terms of business between the petitioners and their stockists and accordingly it is not possible for the respondents to make any submission with regard to the said terms of business. The respondents also do not admit the correctness of the statements, allegations and submission made in paragraph 3 of the petition. According to the respondents, however, upto 16th July, 1973 no separate delivery charges were shown by the petitioners in their invoices to their stockists and Central Excise duty was paid by him on the assessable value arrived at on the basis of the prices charged by them in the invoices. The invoices issued by the petitioners included delivery charges and accordingly it is submitted that till that date the petitioners were paying duty on such delivery charges also. It was only after 16th July 1973 that the petitioners started segregating the so-called delivery charges and showing the same separately in the invoices. These charges were uniform and were recovered uniformly from all the stockists, whether located in Bombay or elsewhere. These charges were, therefore, considered as equalised freight and they formed part of the assessable value of the goods and duty was payable thereon. It is not necessary to refer to the other part of the return.
11. Shri Setalvad, learned Counsel appearing for the petitioners, at the outset of the hearing, pointed out that the principal point arising in this petition is concluded by the decision of this Court in Indian Tobacco Co. Ltd. v. Union of India, 1979 Excise Law Times (J 476). This decision was followed in a later case of Poona Beverages P. Ltd. v. A. K. Bandopadhyay and others, 1980 Excise Law Times 193 (Bombay). These decisions bring out the proposition that freight cannot be included in assessable value where goods are delivered to a wholesaler at a fixed price which includes an element of freight to be charged to the wholesaler as a part of the price and such charges on account of distribution cost of freight are liable to be deducted from the sale price. Shri Dalal, learned Counsel appearing for the respondents, inter alia pointed out that an appeal is pending in the Supreme Court against the decision in Indian Tobacco Co. Ltd. v. Union of India. This however, does not mean that the present petition should be kept pending. It is open to the respondents to pursue such remedies as are open to them. Therefore, following the said two decisions, I allow the petition and make the rule absolute in terms of prayers (a) and (c) (iv).
12. As regards the other point made by Shri Dalal that the matter required to be investigated as regards the alleged delivery charges and/or distribution charges claimed by the petitioners, I think that this submission is well founded. It will be open to the Excise authorities to ascertain the exact extent to which the petitioners would be entitled to the relief of deduction of delivery charges or distribution charges and it is only after the matter is investigated into that the petitioners shall be liable to pay to the Excise authorities the amount so found due. The petitioners are directed to make available their records relating to the distribution charges or delivery charges or other material connected therewith in order to enable the Excise authorities to investigate into this matter and to ascertain the correctness of the figures as claimed by the petitioners and to pay to the Excise authorities such amount as may be found due.
13. There shall be no order as to costs.
