JUDGMENT
C.M. Nayar, J.
1. The present petition is directed against the respondents for issuance of a writ of certiorari to quash the order dated August 4, 1983 passed by the Customs, Excise and Gold (Control) Tribunal, New Delhi upholding the orders dated May 24, 1980 and 20th February, 1981 respectively passed by the Assistant Collector of Central Excise and the Appellate Collector, Central Excise, New Delhi.
2. The petitioner No. 1 is a private limited company incorporated under the Indian Companies Act, 1961 with its registered office and Headquarters situated at Jaipur. Petitioner No. 2 is the Director of petitioner No. 1 company. In this petition the challenge is made to the levy of excise duly on the product manufactured by the petitioners, namely, woollen felt as an excisable item under Tariff Item No. 68 of Schedule I of the Central Excise and Salt Act (hereinafter referred to as ‘the Act’). Earlier the petitioner company was being charged excise duty on woollen felt under Item 21 as if it was a woollen fabric. It was challenged on the ground that woollen felt did not fall under the term woollen fabric. The relief in the present petition is claimed in the form of exemptions as granted by the above said Item No. 68 particularly the Small Scale Units. The petitioner company has sought the relief on the basis of the Exemption Notification No. 176/1977 dated June 18, 1977 which grants exemptions to those small scale units in which the investments on plant and machinery does not exceed Rs. 10 lakhs from levy of Excise Duty and further provided the total value of excisable goods cleared for home consumption by the manufacturer does not exceed Rs. 30 lakhs in preceding financial year. The relevant Notification is stated in the writ petition and reads as follows :
“Notification No. 176/1977-CE dated 18.6.1977 as amended by Notification No. 244/1977-C.E. dated 15.7.1977.
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rule, 1944 the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excise and Salt Act, 1944 (1 of 1944), and cleared for home consumption on or after the first day of April, in any financial year, by or on behalf of a manufacturer from one or more factories from the whole of the duty of excise leviable thereon, if an officer not below the rank of an Assistant Collector of Central Excise is satisfied that the sum total of the value of the capital investment made from time-to-time on plant and machinery installed in the industrial unit in which the goods, under clearance are manufactured, is not more than rupees ten lakhs :
‘Provided that this exemption shall not be applicable to a manufacturer if the total value of all excisable goods cleared by him or on his behalf in the preceding financial year had exceeded rupees thirty lakhs.’
‘Provided further that the exemption contained in this Notification shall apply to the first clearances for home consumption by or on behalf of the manufacturer referred to in this Notification, from one or more factories upto a value not exceeding rupees thirty lakhs during a financial year subsequent to 1977-78 and upto a value not exceeding rupees twenty-four lakhs during the period commencing on the 18th day of June, 1977, and ending on 31st day of March, 1978.
Explanation-I.
For the purposes of determining the value of any capital investment, only the face-value of such investment at the time when such investment was made shall be taken into account.’
Explanation-II………….
3. The petitioners have next submitted that the gross clearing of the petitioner’s company during 1977-78 was Rs. 21,04,237.46 and, as such, the petitioner company was entitled to exemption from payment of excise duty on clearance of goods upto the value of Rs. 30 lakhs in the year 1978-79. The gross clearance for the subsequent year 1978-79 was stated to be Rs. 29,37,047.01 and as it was considered to be less than the prescribed limit of Rs. 30 lakhs the petitioner company claimed that it was entitled to get the benefit exemption from payment of excise duty in the year 1979-80 as provided in the above said Notification. Respondent No. 5 wrongly calculated the clearance of the company for Ihe year 1978-79 as more than Rs. 30 lakhs and issued a show-cause notice to the company. Reply to the same was filed and it was pleaded that actual gross clearance of the petitioner company in 1978-79 was Rs. 29,37,047.01 only which does not exceed the prescribed limit of Rs. 30 lakhs. The petitioner company did not deny the gross sale of Rs. 34,42,961.17 but claimed that out of this amount a sum of Rs. 5,05,914.16 cannot be considered as clearance because of the reasons and details which have been stated in the following manner :
“(i)
Rs. 2,39,866.50
Documents pending with Bank in respect of which
delivery of goods covered by them were not taken by the buyers and the goods
were received back.
(ii)
Rs. 1,05,938.57
Bill discount (being cash discount) allowed to
one party only.
(iii)
Rs. 1,60,109.00
Bill discount @ 5% on sales as per
agreement.”
4. The Assistant Collector examined the matter and considered the contentions of the petitioners which were raised in the following manner :
“Shri N.K. Mishra, Chief Accountant of M/s. S. Zoraster & Co. Ltd., Jaipur appeared on behalf of the unit and further argued about the above deduction as below :
1. Rs. 2,39,966.50. This relates to the value of goods which were despatched to the customers in year 1978-79 but were not received back in the same year. Since the goods have not been received back the question of deduction of this amount from the gross sale is not relevant for consideration.
2. Rs. 1,05,938.57. This cash discount was given to M/s. A.K. Shah, Chaura Rasta, Jaipur as the cash facilities award during the year. This amount of discount was said to be calculated monthly i.e. at the end of the month. But the party was unable to produce any document/ agreement in support of their version. Thus this is also not relevant for deduction.
3. Rs. 1,60,109.00. This is a bill discount @ 5% on the total sale which is covered by an agreement according to one of the conditions of the agreement. The party shall pay commission @ 5% for the services rendered in connection with the sale of the goods and this commission will be included from the sale price.
In support of their version the party was asked to furnish some sale invoices which was produced on 14.3.1980. From the perusal of the sale invoices submitted by the party it was observed that no commission whatsoever which was likely to be paid to M/s. A.K. Shah, Chaura Rasta, Jaipur has been deducted at the time of sale and thus the commission which is said to have been paid to M/s. A.K. Shah, Chaura Rasta, Jaipur is included in the sale prices.”
5. The above pleas were duly considered and the following conclusions were rendered which read as follows :
“I have examined the facts of the case and the submission put forth by M/s. S. Zoraster & Co. Jaipur in their written reply furnished on 1.2.1980 and plea advanced on 12.3.1980 the date on which the case was heard. From the perusal of the sale vouchers issued by the unit, it will appear that the party has charged full value of the goods including the commission which was to be paid to M/s. A.K. Shah, Chaura Rasta, Jaipur and had also paid sales tax as per invoices value. Thus it will appear no amount has been deducted in form of discount at the time of sale of the goods. Even in the agreement dated 30th June, 1973 produced by the unit para 6 save that in consideration of the services to be rendered the company shall pay a commission @ 5% in net sale. Thus the commission paid by the unit to M/ s. A.K. Shah, Chaura Rasta, Jaipur is in form of a remuneration to them for the services rendered and thus this payment cannot be abetted or deducted because it was not a trade discount nor duty as laid down in the explanation to Section 4 of the Central Excise & Salt Act.
Keeping in view the circumstances explained above the plea of M/s. S. Zoraster & Co., Jaipur for deduction of Rs. 5,05,914.16 from the total gross sale of Rs. 34,42,961.17 cannot be deducted and the unit will have to pay Central Excise duty at appropriate rate on value of the goods Rs. 4,42,961.17 cleared in excess of Rs. 30 lakhs in the year 1978-79 and also pay excise duty at appropriate rate for the goods cleared from the factory right from 1.4.1979 in the year 1979-80. The amount of duty has been calculated as follows which may be paid immediately by M/s. S. Zoraster & Co., Jaipur.
1. Sale of goods in excess of Rs. 30 lakhs from 1.4.1978 to 28.2.1979 comes to Rs. 2,70,742.53 and duty calculated @ 5% comes to Rs. 13,537.13.
2. Sales of goods in March, 1979 comes to Rs. 1,72,218.64 and duty calculated
@ 8% ad valorem comes to Rs. 13,777.50.
3. Sale of goods during the year 1979-80 comes to Rs. 15,46,936.99 and duty calculated @ 8% ad valorem comes to Rs. 1,23,754.96. Thus total duty to be , paid by M/s. S. Zoraster & Co. (Supplies), Jaipur comes to Rs. 1,51,069.59.”
6. The matter went in appeal and once again the contention of the petitioners were repelled by the findings as recorded below :
“The argument that in case of goods which were not taken delivery of by the customers, the value of the goods should not be added, does not have much reliance in the context of the nature of Central Excise. It is well established that in order to attract excise duty. It is not necessary that the articles must have actually been sold, that would equate to a sales tax, whereas excise duty is a tax on manufacture. Therefore, the argument that the appellant’s goods were not actually sold would not in any way exclude it from the levy of Excise duty once it is held to be an excisable item.
As regards the deductions on account of cash discount in respect of M/s. A.K. Shah, as also regarding the bill discount at 5% allowed to M/s. Rajasthan Enterprises Pvt. Ltd. consideration of their admissibility have to be seen in the light of criteria for allowing such a discount within the ambit of Section 4 of the Central Excise and Salt Act, 1944.
It is observed that trade discount admissible for abatement under Section 4 of the Act, is that which is outright at the time of removal of the goods from the place of manufacture. On principle, the quantity discount is permissible provided it is granted as indicated above. In case of the appellant, the discount or abatement are seen to be based on a contingency and could not have been said to be outright at the time of removal of goods. It may be recalled that identical principle was adopted by the Government of India regarding admissibility of trade discount in Revision Order No. 1364 of 1977 dated 11.7.1977.”
7. The petitioners filed an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi to impugn the findings of the Assistant Collector as well as of the Appellate Collector raising the same pleas which have already been referred to in the earlier part of the judgment. The contentions were rejected and earlier orders were affirmed by the Tribunal. The only” question which arises for consideration is as to whether the petitioners were entitled to Exemption Notifications in the facts and circumstances of the case. The deductions as claimed by the petitioner were rejected by the Authorities on cogent grounds, such as, that it was not proved that the goods were received back for the amount as claimed to be deducted from the total amount of Rs. 34,42,961.17. The question of deduction from the sale consideration could not be relevant for consideration and as the parties were also unable to produce any document/ agreement in support of the cash discount given to M/s. A.K. Shah the amounts could not be validly permitted to be deducted from the amount for the gross sale price. There is no infirmity in the findings given by all the Authorities to the effect that the Central Excise is levied on manufacture and not on sale of excisable goods and the department was concerned with the levy of Central Excise duty till the stage of clearance from the factory gate. Once the goods were cleared from the factory, the Department had nothing to do with such goods or how they were utilised by the parries and to whom they were sold or supplied. The question of exclusion of the amounts from the gross sale price has been disposed of by concurrent findings of facts by all the Authorities to the effect that petitioners were not able to prove the amounts which were claimed to be deducted from the total value of excisable goods as cleared by the petitioners to enable them to get benefit of the Exemption Notifications. There is, therefore, no illegality in the Orders nor the Authorities have exercised jurisdiction which is not permissible in law. The present writ petition is, therefore, dismissed. There will be no order as to costs.
