JUDGMENT
1. This is an appeal by the Union of India in the Department of CentralExcise against a decree passed by the learned Joint Civil Judge, SenioDivision, Jalgaon, in favour of the respondents Mansingka IndustriesPrivate Limeted, a Company incorporated under the Indian Companies Actand inter alia manufacturing vegetable products at Pachora in DistrictJalgaon.
2. The respondents- plaintiff filed a suit in the court of the CivilJudge, Senior Division, at Jalgaon, contending that the union of Indiahad illegally recovered from them certain moneys purported to be exciseduties under the Central Excise and Salt Act, 1944 (hereinafter referredto as”the Act of 1944″).
3. As stated, the suit was decreed by the learned trial Judge, who interalia ordered that an amount of Rs. 60,334,44, being the balance amountillegallycollected as excise duty, be refunded to the respondents.
4. Two short points arise in this appeal. But before we discuss them itis necessary to set out some facts.
5. It has been stated that the respondents are manufacturers ofvegetableproducts and under Item no. 13 of the First Schedule to the Actof 1944 the excise duty leviable before the 1st of march, 1969 was byweight i.e. per quintal of the excisable goods.
6. By the Finance Act of 1969, which came into forces on the 1st ofMarch, 1969, Item No. 13 of the said First Schedule was amended so thatfrom that date the excise duty leviable was made ad valorem. Therfore,the duty of excise which was earlier chargeable on the actual weight ofthe vegetable products i.e. the excisable goods, was altered to advalorem duty on the value of the vegetable products.
7. Under Rule 173-C the respondents were required to file a price listof goods assessable ad valorem for the purpose of determinastion of valuein accordance with Section 4 of the Act of 1944. It would appear that therespondents’ price list were not acceopted by the Central ExciseAuthorities and that the respondents were ordered to pay excise duty onhigher prie.]
8. After some correspondence with the Central Excise Authorities therespondents disputed the power of the Central Excise Authorities to levyexcise duty on the basis of a wholesale price, which included the priceof the tincontainers and freight. The respondents filed the suit in theCourt of the Civil Judge Senior Division, at Jalgaon, being Special CivilSuit No. 58 of 1969, prayinf therin that the orders of the defendantsmodifying the price list furnished by the respondents and then approvingthe price lists as prepared by the defendants and purported to have beenmade under the provisions of the Act of 1944 and the Central ExciseRules, 1944, and demanding from the respondents duty of excise on ahigher value than warranted should be decleared illegal and that theamount charged in excess of what should be lawfully charged under the actof 1944 and the Rules be decleared to have been illegally charged and anorder for refund should be made. The respondents also prayed for an orderand injunction restraining the appellants from making such illegal ordersand collecting duty of excise on such basis which, according to therespondents was an illegal levy.
9. It required to be noticed that the principal ground on wwhich suchdemand for duty excise was challenged was that, the value at which thevegetable products duly packed in tin-containers of 16.5 Kgs. of netcapacity having been determined by the Government as not to exceed themaximum sale price fixed statutorily under the Vegetable Oils Controlorder, 1947, the cost of non-excisable tin-containers in which theexcisable goods were packed and the freight paid theron ought to bededucted before the levy of the duty of excise could be made on the valueof the vegetable product.
10. It is to be noticed that the respondents, after lodging theirprotests, made payments of the duty as sought by the appellants withoutprejudice to their right to resort to legal steps to obtain relief.
11. It is approciate at this stage to refer to the fact that with effectfrom September 1968 the maximum price for sale of the relevant vegetableproduct was fixed by the Governemnt of india in excrcise of powersconferred by the Vegetable Oil Products Contol Order, 1947, read will therelevant provisions of the Essential Commodities Act, 1955.
12. The grievance of the respondents, threrfore, is that to the value ofthe vegetable product that is to say, hydrogenated oil in the case beforeus falling under Item No. 13 of the First Schedule of the Act of 1944 theappellants have illegally and improperly added the value of thetin-containers which are not excisable goods under Item 13 as well as therailway freight. In other words, the respondents is that the appellantshave illegally and improperly disallowed the deduction of the cost of thetin-containerrs and the railway fright. It is not disputed that thevalue of the tin-containers if Rs. 3.78 and the railway fright is Re.0.99 P. per tin of 16.5 Kgs.
13. On the question of quantum, therefore, there is no dispute. It mayalso be mentioned that there was at one time a difference of opinionbetween the parties as to which maximum price was applicable because theGovernment of India in the relevant Notification prescribed differentmaximum price as between the producer and wholesaler, and the wholsealerand the dealer. Foetunately, tjis disputw has been resolved and need nottherefored be discussed by us.
14. The claim of the respondents as the plaintiffs in the suit, is,therefore, for recovery of the amount levied illegally on the value ofthe tin-containersand on account of the fright on the products.
15. The appellants have taken up two defences. According to theappelants,the article manufactured by the respondents viz., thevagetable oil,is such that it cannot be present for sale in the marketwithout a container. The appellants even contended that the vegetableproduct becomes fully manufactured and assessable only after the same ispacked in tins and that this processis ancillary to the manufacture ofthe product and without which the vegeetable product annot be sold in themarket. According to the apellants, their act in not allowing abatementon account of the cost of the tin container and the cost of freight isquite with the Explanation to Section 4 of the Act of 1944 (as it wasbefore the amendment in 1973). It was also the contention of theappellants that the Central Excise Authorities were bound to accept themaximum price fixed by the Central Government from time to time as therespondents had been selling their vegetable oil products at such prices.In other words, the attitude of the department seems to have been thatthe tin-containers were to be taken as part of the products presented inthe market and the argument which was urged was that packing ofhydrogenatedvegetable oil is incidental to the process of manufacture ofthe vegetable product itself.
16. The second defence taken up by the appellants was that therespondents had not exhausted the remedies provided by the Act of 1944and that in any event the suit was barred under Section 40 of the Act of1944, as it stood then.
17. It would appear that this defence was taken up in the form that thesuit was not maintainable by the respondents without exhausting theremedies provided by the Act of 1944, actually it would seem that thedefence intended to be taken up by the apellants was not that the remedyprovided by the Act of 1944 had first to be exhausted before a suit couldbe filed but that a suit could not be instituted at all that therespondents’ only remedy was under the Act of 1944 itself.
18. Now taking the question of value on which the ad valorem duty ofexcise could be lawfully levied by the Central Excise Authorities, it isappropriate to notic one of the price lists which is on recod. this pricelist, which is for the period from the 1st of March, 1962 to the 7the ofMarch, 1969 mantions the wholesale price by producer to wholesale buyerfor the vegetable product packed in tin-contianers containing 16.5 kgs,as bing Rs.65.58. the freight to destination is shown as 0.99 P. and thecost of tin-containers at Rs. 3.78.
19. According to the respondents, the value for the purpose of assesmentunder section 4 of the act of 1944 would, therfore, be Rs. 65.58 lessRs.4.77. The Central Excise authorities contend that the value for thepurpose of ad valorem duty must include the value of the container aswell as the cost of freight.
20. Some of the relevent provisions of the Act of 1944 and the rulesmade thereunder may now be notice.
21. Section 2(4) of the Act of 1944 defines “excisavle goods” to mean”goods specified in the First Schedule as being subject to a duty ofexcise and include salt”.
22. Section 2(f) defins “manufacture” as including any processincidental or ancillary to the completion of a manufactured product.
23. Item No. 13 of the First Sechdule with which we are concerned refersto vegetable product in the following words :-
“Vegetable product’ means any vegetable oil or fat which, whether byitself or in admixture with any other substance, has by hydrogenation orby any other process been hardened for human consumption.”
It is obvious that Item No. 13 read with Section 2(d) of the Act of 1944would clearly show that the excisable goods which are the subject- matterof this appeal consist of hydrogenated vegetable oil or what is popuralyknown as “vanaspati”.
24. Section 3 is the charging section and it provided in terms that-
“There shall be levied and collected in such manner as may be prescribedduties of excise on all excisable goods….Which are produced ormanufactured in India”.
This showa that the duties specified in the First Schedule are dutiesleviable on excisable goods and as we have noticed may be levied on thebasis of weight or at a fixed tariff or ad valorem.
25. Section 4 of the Act of 1944 which at lest before its amendment in1973 has been the subject matter of consideration in various casesprovided for determination of value for the purposes of duty. Thus thevalue of any article or excisable goods which is chargeable to duty at aare dependent on the value of the article is to be determined in themanner provided.
26. It is important to notice under Section 4 such value is deemed to bevalue as provided therin. This will show that the authorities concernedare to determine the value of an article on the basis of the severalfactors enumerated viz. (1) the wholesale cash price, (2) the time factori.e. when the articles is removed from the factory, and (3) the place atwhich the wholesale market exists.
27. Now, there was an Explanation to Section 4 of the Act of 1944 (before its amendment) which provided as follows :-
” In determining the price of any article under this section, noabatement or deduction shall be allowed except in respect of tradediscount and the amount of duty payable at this thime of the removal ofarticle chargeable with from the factory or other premises aforesaid.”
28. The next provision of law which may be noticed is Rule 173-C of theCentral Excise rules, 1944, which provides that an assessee has to fillethe price list of the goods assessable ad valorem and that the properoffice shall approve the price list in such a manner as to bring thevalue shown to be the correct value for the purpose of assessment asprovided in Section 4 of Act. a duty is, therfore cast on the properoffice to determine the value in terms of Section 4 of the Act of 1944and not otherwise.
29. As we have mentioned, Section 4 of the Act of 1944, beforeitsamendment, came in for determination in many cases. In voltas Limitedv. A.K. Roy, 73 Bom. LR 229, a Division Bench of this court interpretedthe term “wholesale cash prrice.” as contained in clause (a) of Section 4 of the Act of 1944 and held that the phrase”wholesale cash price ” asused in the sectionwas in contradistinction with retail price and thatthat price is relieved of the loading represented by post-manufactureexpenses unless they form part of the profits of the manufacturerhimself.
30. The matter went in appeal to the Supreme Court and the SuperemeCourt affirmed the judgment of this Court and held that Section 4 of theAct of 1944 provides that the value should be found after deducting theselling cost and the selling profit and that the real value can includeonly the maunfacturing cost and the manufacturing profit.
31. This is what the Supreme Court observed in A.K.Roy v. VoltasLimited,
“Excise is a tax on the production and manufacture of goods (see Union ofIndia v. Delhi Cloth and General Mills, . Section 4 of theAct therfore provides that the real value should be found after deductingthe selling cost and selling profits and that the real value can includeonly the manufacturing cost and the manufacturing profit. The sectionmakes it clear that excise is levied only on the amount representing themanufacturing cost plus the manufacturing profits and excludespost-manufactuing cost and the profit arising from post- manufacturingoperation, namely, selling profit. the section postulates that thewholesale price should be taken on the basis of cash payment thuseliminating the interest in wholesale price which gives credit to thewholesale buyers for a period of time and that the price has to be fixedfor delivery at the factory gate thereby eliminating freight, octroi andother charges involved in the transport of the article..”
32. This state of the law clearly shows that only the value of theexcisable product itself is to be taken into consideration at the pointwhere manufacture of the excisable product is complete.
33. in the case before us we have noticed that the product which can bemade subject to excise duty under Item NO. 13 of the First Schedule tothe Act of 1944 is the hydrigenated vegetable oil itself. Item No. 13does not contemplate the container in which the hydrogenated vegetableoil may be put as being part of the product. It was sought to becontended by the appellants that the tin container should be treated as apart of the product and the manufacture of the vegetable product is notcomplete until it is packed in a tin container.We find no warrant forsuch a construction.
34. First of all, it can naver be stated with any show of reason thatmanufacture of hydrogenated vegetable oil is incomplete until it ispacked in tin-containers. It cannot be forgotten that hydroenatedvegetable oil is also sold and transported in bulk containers, in tankersand it may be indeed sold by a manufacturer to a wholesale buyer whobrings his own container for receving the product.
35. In facts, our attention has been drawn by Mr. Nain , the learnedAdvo cate for the respondents, to certain items of the 1st Sch. to theAct of 1944 itself which go to show that where it was the intention ofthe Legislature to include the packaging in the defination of excisablegoods it has so. For instance, Item No. 3 of the First Schedule whichdeals with”Tea”, specifically provides that tea may be sold in bulk andwould be assessed to excise duty at a particular rate. But sub-clause (2) of item No. 3 refers to “package tea, that is to say, tea packed in anykind of container not more than 27 kgs. net of tea” as being excisablegoods within the meaning of Section 2(d). thus, in the case of loose teathere is one rate per kilogram and in the case of package tea there is adifferent rate.
36. Now, Item No. 13, which deals with vegetable products, does notmention any packaging at all and it follows that the only articles onwhich duty can be levied is the vegetable products or the hydrogenatedvegetable oil which constitutes excisable goods and not the container.
37. Mr.Nain has also referred to Section 2(f) of the Act of 1944 whichdefine”manufacture” and has shown to us that where it was intended thatpackaging should be included as a process of manufacturing, theLegislature has said so. In sub- clause (iii) to Section 2(f) there is aprovision that in relation to patent or proprietary medicines as definedin Item No. 14-E as also in relation to cosmetics and toilet preparationsas defind it Item No. 14-F of the First Schedule to the Act of 1944manufacture would include labelling or relabelling of containers intendedfor consumers and re-packaging from bulk packs to retail packs, or theadoption of any other treatment to render the product marketable to theconsumers. This shows that in the case of medicines, the packagingthereof is by statute considered to be a part of the manufacturingprocess. It is a matter of common knowledge that patent and proprietarymedicines are sold in bottles, tins and foil packing and cosmetics likebeauty crems or talcum powders or lotions are also sold in some kind ofcontainers.
38. It is to be noticed that the duty on items comprised in Items Nos.14_E and 14-F is also as valorem and it was, therfore the specificintention of the Legislature that the value of the container should beincluded in the value of excisable goods. It is also significant that bythe amended Section 4 of the Act of 1944, it has provided in terms thatvalue in relation to any excisable goods is to included the cost ofpacking except the cost of such packing which is of a durable nature andis returnable by the buyer to the assessee.
39. The argument of Mr . Kamat, the learned Asstt. Government Pleader,that packaging of vanaspati in tin-container wsas an integral part of themanufacture of hydrogenated vegetable product even before the amendmentof Section 4 is untenable and canot be accepted.
40. If this is the correct position, then the cost of the tin- containermust be treated as post-manufacturing cost and in the words of theSupreme Court in Voltas case [(1977 E.L.T. (J 177)] it must be excludedfrom the value of the excisable productson which duty excise is to belevied.
41. Now, as regards the freight is concerned, it cannot be contendedwith any show of reson that item of expenditure could be anything but apost-manufacturing expenses.
42. It is to be noticed that the cost of freight has nowhere in the Actof 1944 been taken as part of the value of the excisable product.
43. The view taken by the learned trail Judge that packaging in atin- container and incurring of freight charges for transporting of therelevent excisable goods could not form part of the value for the purposeof assessment of excise duty is, therfore correct and we affirm the same.
44. The next point to be considered is the challenge to themanitanability of the suit on the ground that such a suit is barredbecause the respondents have not availed of the remedies provided by theAct of 1944 itself in form of an appeal under Section 35 and revisionunder Section 36 of the Act of 1944 as well as by Section 40 of the Actof 1944, which, according to the learned Assistant Government Pleader,bars the filling of a suit in matters arising under the Act of 1944.
45. Section 35 of the Act of 1944 provides that any person deeminghimself aggrieved by any person deeming himself aggrieved by any decisionor order passed by a Central Excise Officer under Act may file an appealas therin provided and that every such order passed in appeal underSection 35 shall, subject to the power of revision conferred by Section36, be final.
46. Section 36, of course, provides for a revision by the CentralGovernment. These two sections obviusly come into play when an order hasbeen passed under the Act and any person is aggrieved by any suchdecision or order.
47. Section 40 of the Act of 1944 as it stood before 1973 provided for”bar of suits and limitaiton of suits and other legal proceedings” andits specific phraseology may be noted. It reads as follows :-
“(1) No suit shall lie against the Central Government or agaist anyofficer of the Government in respect of any order passed in good faith orany act in good faith done or ordered to be done under this Act. (2) No suit, prosecution, or other legal proceedings shall be institutedfor anything done or ordered to be done under this Act after theexpiration of Six months from the accural of the cause of action ot fromthe date of the act or order complained of.”
48. The learned Assistant Government Pleader has argued that by reasonof these three sections, which we have referred to above, recourse to aCivil Court by a suit is denied to a manufacture who is liable to payexcise duty on the products manufactured by such a person.
49. Now, Section 9 of the Code of Civil Procedure provides that a CivilCourt shall have jurisdiction to try all suits of civil nature “exceptingsuits of a civil nature “excepting suits of which their congnizance iseither expressly or impliedly barred”. On the of Section 9 of the Code ofCivil Procedure and Section 40 of the Act of 1944 the learned AssistantGovernment pleader has contended that the suit as filed is barred.
50. Our attention has been invited to a decision of the Supreme Court ofIndia in Dhulabhai v. State of M.P.,, where this questionin relation to various enactments has been considered in depth andHidayathullah, C.J., who spoke for the Court after analysing the severaldecisions of the Supreme Court and other Courts summarised the state ofthe law. The relevant portions of the summary are as follows :-
“(1) Where the stature gives a finality to the orders of the specialtribunals the civil court’s jurisdiction must be held to be excluded ifthere is adequate remedy to do what the civil courts would normally do ina suit. Such provision, however,does not exclude those cases where theprovisions of the particular Act have not been complied with or thestautory tribunal has in acted in conformity with fundamental principlesof judicial procedure.
“(2) Where there is an express bar of the jurisdiction of the Court, anexamination of the scheme of the particular Act to find the adefuancy orthe sufficiency of the remedies provided may be relevent but is notdecisive to sustain the jurisdiction of the court.
“(3) Where there is no express exclusion the examination of the remediesand the scheme of the patitcular act to find out the intendment becomesnecessary and the result of the inquiry may be decisive. In the lattercase it is necessary to see if the statute creates a special right or aliability and provides for the determination of the right or liabilityand further lays down that all question about the said right andliability shall be determined by the tribunals so constitiuted, andwhether remedies normally associated with actions in Civil Courts areprescribed by the said statute or not.”
“(5) Where the particuler Act contains no machinery for refund of taxcollected in excess of constitutional limits or illegally collected asuit
“(7) An exclusion of the jurisdiction of the Civil Court is not readilyto be inferred unless the conditions above set down apply.”
51. Now, in the case before us we have held that imposition of centralexcise duty on the tin-container and on fright was not warranted by anyof the provisions of the Act of 1944. Thus any levy of central exciseduty on the value of the tin-container and the cost of freight was whollyoutside the law and it could Central Excise and Salt Act of 1944 onlyprovides for the duty of excise on excisable goods so that when anattempt is made to levy duty of excise on goods which are not excisablethen such a levy falls outside the law and, therfore, would be illegal.
52. Even if Section 40 of the Act of 1944 wewre to be construed as thelearned Assistant Government Pleader would have us do, that is to say,that it bars the jurisdiction of civil courts, the legal position asenundiated by the Supreme Court clearly shows that the juridiction of theCivil Courts would not be thereby excluded. But the querstion may beasked -Does Section 40 of Act of 1944 really bar a suit for recovery ofan amount levied illegally as duty? It is manifest from a plain readingof the section itself that is applies only to suits for deamages andcomprnsation in respect of acts said to be done under the Act of 1944.The section mearly enacts immunity or protection against claims ofdamages against the Government itself or any of its officers for actsdone in good faith under Act, of 1944. Questions of collection of illegalduty and/or its recovery or refund are not questions dealt with by thesaid provision. There are anumber of authorities on this proposition, butit is not necessary to refer to them in detail. See Bomidala v. union ofIndia, , Union of India v.Ballabhadra, , Rohtas Industries Limited v. Union of India Mooljibhai v. Union of India, (1962) 3 Guj LR 762).
53. It requires to be noticed that in 1973 the Act of 1944 was amendedand among other amendments, Section 4 and 40 have been substituted. Nowreads as fgollows:-
“(1) No suit , prosecution or other legal proceeding shall lie againstthe Central Government or any officer of the Central Government or aState Government for anything which is done or intended to be done, infaith, in pursuance of this Act or any rule made therunder.
(2) No proceeding, other than a suit shall be commenced against theCentral Government or any officer of the Central Government or anyofficer of the Central Government or a State Government for anything doneor purporated to have been done in pursuance of this Act or any rule madethereunder, without giving the Central Government or such officer amonth’s previous notice in writing of the intended proceeeding and of thecause thereof or after the expiration of three months from the accrual ofsuch case.”
54. It is significant that the new phraseology itself suggested thatthis provision like the former section was not intended to bar a remedyby was of a suit> Indeed, the sub-heading has been changed from “Bar ofsuits ” to “Protection of action under the Act.”
55. The amendmenrt is not only of a clarificatory nature but somefurther protection to the Government and its officers (who act in goodfaith and under the Act) is provided for , in the form of a previousnotice in relation to the proposed prosecution or legal proceedings otherthan a suit and the period of limitation has been shortened.
56. It is , therefore, clear that Section 40 as it stood before theamendment and even as it stands now, does not bar the jurisdiction ofCivil or Criminal Courts.
57. The contention of the Assistant Government Pleader that the CivilCourt had no jurisdiction to try the suit, fails.
58. In the result the decree of the Court is a affirmed and this appealdismissed with costs throughout.
