ORDER
I.J. Rao, Member (T)
1. These two appeals involve common points of law and facts. They were therefore heard together and are being disposed of together by this common order.
2. The appellants are engaged in the manufacture of motor vehicles and they are subjected to duty under Tariff Item 34 of the CET. They were liable to pay Automobile Cess at the prescribed rates. The said Automobile Cess has been imposed on the Motor Vehicles w.e.f. 1-1-1984 as per Order No. S.O. 932(E), dated 28-12-1983 of the Ministry of Industry (Department of Heavy Industries), New Delhi under Sub-section (1) of Section 9 of the Industries (Development and Regulation) Act, 1951. As per explanation to Sub-section (1) of Section 9 of the said Act, the “value” on which the said Cess is leviable has been defined to be wholesale cash price, less certain stated deduction.
3. A show cause notice was issued to the appellants on 11th October, 1985 and they were required to show cause as to why the differential “Cess duty” leviable on motor vehicles cleared from 1-1-1984 to 31-8-1985 should not be demanded from them under Rule 9(2) of Central Excises and Salt Act, 1944 read with Rule 3 of Automobile Cess Rules, 1984 and why a penalty should not be imposed on them. The grounds for the show cause notice contained in the statement of allegation was that the wholesale cash price and consequently the value was deliberately mis-declared in order to evade payment of “Cess duty”.
4. After hearing the appellants and observing due process, the Collector in his order confirmed the demand and imposed a penalty.
While doing so he observed as follows :-
have carefully gone through the case records. It is observed that Rule 2(f) of the Automobiles Cess Rules, 1984 provides that ‘words and expressions used herein and not defined but defined in the Central Excises and Salt Act, 1944 (1 of 1944) or the Rules made thereunder shall have the meaning respectively assigned to them in that Act or the Rules’. The fact, however, remains that rules framed under any Act or definitions in other Acts made applicable can in no case have an ever-riding effect over the provisions/definitions or explanations in the original Act. The explanation to Section 9(1) of Industries (Development and Regulation) Act, 1951 clearly states that admissible deductions from the wholesale cash price should be the trade discount and duty then payable, duty referred to in this Act being cess leviable thereto. Therefore, the assessable value for the purpose of cess would be inclusive of Central Excise duty, Sales Tax or any other tax.”
Hence, these appeals.
5. The learned Counsel for the appellants submitted that Section 9 of the Industries (Development and Regulation) Act, 1951 (hereinafter to be referred to IDR Act) provides for Cess to be levied and collected for the purpose of IDR Act on all goods manufactured and automobiles are one of them. He submitted that explanation to Section 9(1) of the IDR Act, provided that the expression ‘value’ in relation to any goods shall be deemed to be the wholesale cash price for which such goods of the like kind and quality are sold or are capable of being sold at the time of their removal therefrom without any abatement or deduction whatever except trade discount and the amount of duty then payable. He further submitted that under Section 30 of the IDR Act, Automobile Cess Rules were made. Rule 2(f) of the said rules provides that words and expressions used therein and not defined in the Central Excises and Salt Act, 1944 or the Rules made thereunder shall have the meaning respectively assigned to them in that Act or the Rules. Save as otherwise provided in these rules, the provisions of the Central Excises and Salt Act, 1944 (1 of 1944) and the Rules made thereunder including those relating to the refund of duty shall, so far as may, apply in relation to the levy and collection of the Cess as they apply in relation to the levy and collection of duty of excise on manufacture of automobiles under the Act and the Rules.
6. The learned Counsel for the appellants referred to “Value” as defined under Section 4 of the Central Excises and Salt Act, 1944 and submitted that either before 1975 when Section 4 thereof was amended or thereafter, assessable value does not and cannot include excise duty sales-tax or any other tax as these have to be deducted from wholesale cash price for arriving at assessable value. He further argued that there was no supression of facts and that the Collector held that there was such supression and mistake only to enlarge the period of limitation of Section 11(A) Central Excises and Salt Act, 1944. He submitted that imposition of penalty was unwarranted.
7. Shri G.V. Naik, the learned JCDR, opposing the arguments submitted that explanation to Section 9 of the IDR Act defines “value” and it was only trade discount and duty payable that were deductable from the wholesale cash price according to the same. Shri Naik submitted that in the section, the “Cess” payable should be considered as duty and only Cess is to be deducted to arrive at assessable value. With reference to Rule 3 of the Automobile Cess Rules, the learned JCDR argued that Act prevails over Rules and Rules can prevail only if no section covers the subject. He submitted that Section 4 of the Central Excises and Salt Act and the explanation to Section 9, IDR Act and not in pari materia and referred to a Calcutta High Court Judgment in the case of Collector of Central Excise, Calcutta and Ors. v. National Jute Manufacturers Corporation Limited and Ors. [1985 (22) E.L.T. 907]. He further argued that Section 9 of the IDR Act is self-contained and there was no question of applying the provisions, old or new of Section 4 of the Central Excises and Salt Act. He submitted that according to Patna High Court Judgment in Rameshwar Jute Mills Limited v. Inspector of Customs and Central Excise and Ors. [1981 E.L.T. 30], Section 9 of IDR Act and Section 4 of Central Excises and Salt Act are not pari materia. The learned Advocate for the appellants submitted that the full bench of the Patna High Court rejected this view in Katihar Jute Mills Limited v. Inspector of Central Excise [1985 TLR 2571]. The learned JCDR further argued that exclusion from the wholesale price was permissible only if the Act specifically permits such exclusion and in this context cited the judgment in Akhil Bandhav Chemicals Industries (P) Ltd. v. Union of India and Ors. [1977 ELT (J 65)]. In sum, he argued that only Cess and trade discount can be deducted and no other item, including Central Excise duty, can be deducted from the wholesale cash price. With reference to Sales-tax, Shri Naik clarified that only actual sales-tax paid has been included as this constituted an element of the wholesale cash price.
8. We have considered the arguments of both sides. In Assistant Collector v. Madras Rubber Factory Ltd. [1987 (27) ELT 553], the Supreme Court held that there is no material Schematic difference between old Section 4 and new Section 4 of the Central Excises and Salt Act, 1944.
9. Prior to the amendment of the section, Central Excise duty, sales-tax and octroi were not being included in the assessable value even though the section did not provide for exclusion of these taxes as is done by the section after it was amended on 1-10-1975. We have also perused the judgment of the Patna High court (full bench) in the case of Katihar Jute Mills v. Inspector of Central Excise [1985 TLR 2571]. In this judgment, the High Court held that after the amendment of Rules 9 and 49 of the Central Excise Rules, 1944, the foundation from the ratio of Rameshwar Jute Mills has been taken away. A perusal of Section 9 of the IDR Act (explanation) and Rules 3 of the Automobile Cess Rules shows that Section 9 defines value for purpose of assessment and Rule 3 of the Automobile Cess Rules provides the method of calculating the same. According to Rule 3 the provisions of Central Excises and Salt Act and the Rules made thereunder are to be applied in relation to levy and collection of the Cess. Therefore, we do not see that the rule intrudes into the area covered by the section.
10. We carefully perused all the judgments which have been cited to show that deduction of trade discount and of the amount of duty paid are allowed for the purpose of arriving at assessable value for the purposes of levy of Central Excise duty. Under the old Section 4 and under the new section several other deductions are also allowed. Important among these are trade discount and deduction of excise duty payable. In our view, a reading of Section 9 of the IDR Act together with Rule 3 of the Automobile Cess Rules shows that the valuation for the purposes of levy of Cess should be in accordance with Section 4 of the Central Excises and Salt Act. This view is in accordance with Rule 2(f) of the Automobile Cess Rules which lays down that “words and expressions used herein and not defined but defined in the Central Excises and Salt Act, 1944 (1 of 1944) or the rules made thereunder, shall have the meaning respectively assigned to them in that act or the rules”. It is, therefore, clear from a reading of Section 9 of IDR Act, Rules 2(f), 3 of Automobile Cess Rules and Section 4 of Central Excises and Salt Act, 1944 that the collection of Cess should be on the same value as the collection of Central Excise Duty. Besides Section 9 IDR Act provides for the deduction of trade discount and the amount of duty then payable. We do not accept the arguments of the JCDR that the word “duty” appearing in these lines is to be read as “Cess”. When the section mentioned duty, there is no basis on which the word can be altered to read as “Cess”. Besides, Rule 3 of the Automobile Cess Rules makes it clear that the provisions of the Central Excises and Salt Act are to be applied for the levy and collection of Cess. Besides, in this context, reading the word “duty” as “Cess” will lead to an anomalous situation in as much as if Cess is to be calculated on the wholesale price (less discount) there is no question again of deducting Cess for the purpose of calculating Cess.
11. In this view, we hold that for the purpose of calculating Cess, the Central Excise duty and Sales-tax, if leviable and included in the wholesale cash price should be deducted. As a result, the appellants’ pleas are accepted. In view of this finding, we need not go into other case law cited as the said judgments are not relevant to the present issue. We have referred to the cases which have a bearing on the question.
12. The appeals are allowed.