P.D.DESAI, J. -
(1.) THE petitioner, Gujarat State Fertilisers Company Limited, a Company incorporated under the Companies Act, 1956, challenges herein two orders; first, an order dated January 18, 1979 (Exhibit 'E') passed by the Government of India in exercise of its revisional jurisdiction under section 36 of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') and, second, an order dated September 6, 1979 (Exhibit 'L') passed by the Appellate Collector of Central Excise and Customs, Bombay, in exercise of his appellate jurisdiction under section 35 of the Act. The question which arises herein depends for its determination upon the true construction of section 4, clause (a) read with the Explanation inasmuch as under the impugned orders the petitioner's claim for deduction of 'regional discount', which it claims to be a variety of trade discount, while determining the wholesale cash price of three of its products, has been rejected by the excise authorities in the process of approval of price lists.
(2.) THE petitioner carries on the business of manufacturing and selling different varieties of fertilisers. Three of its products are. (1) Urea, (2) Ammonium Sulphate (hereinafter referred to as 'A.S.' for short). and (3) Ammonium Sulphate Phosphate (hereinafter referred to as 'A.S.P.' for short). Fertilizers of all sorts (excluding natural, animal or vegetable fertilizers when not chemically treated) were at the material time subject to levy of excise duty at the rate of 15 percent ad valorein under item 14 HH of the First Schedule of the Act. The sale price of fertilizers is fixed by the Government from time to time under to provisions of the Fertilizers (Control) Order, 1957 (hereinafter referred to as 'the Control Order') issued under section 3 of the Essential Commodities Act, 1955. Under the provisions of the Control Order, a manufacturer was required by the Central Government, at the material time, to supply fertilizers manufactured by him for sale in specified States. The petitioner was accordingly required to supply fertilizers manufactured by him for sale in specified States. The petitioner was accordingly required to supply its products for sale in States of Gujarat, Maharashtra, Madhya Pradesh, Rajasthan, Haryana, Uttar Pradesh, Punjab, Andhra Pradesh, Karnataka and Union Territory of Delhi. The maximum retail prices of different varieties of fertilizers were also fixed by the Central Government under the Control Order. In other words, the fertilizers in respect of which maximum retail prices were fixed could not be sold by the retail dealers at a price exceeding the uniform retail price fixed by the Central Government. Urea, A.S. and A.S.P. were the varieties of fertilizers inrespect of which maximum retail prices were accordingly fixed by the Central Government at the material time. The petitioner was required to supply those varieties of fertilizers to dealers carrying on business in aforesaid States, some of which are situate at a considerable distance from the factory of the petitioner, which is located in Baroda in the State of Gujarat. Those dealers were required to incur the cost of transporting the fertilizers supplied to them to distant places and to incur other incidental expenditure. Since the maximum retail prices were fixed, as aforesaid, it was found by the petitioner that on that account those dealer were not able to carry on their business in its products without incurring losses. Besides, those varieties of fertilizers were supplied to those dealers also by other manufacturers whose factories were situate at a closer distance from their place of business. The cost of transportation and other incidental expenses incurred by the dealers in procuring fertilizers from those other manufacturers would ordinarily be at a lower scale than that which the dealers had to incur in relation to the goods supplied by the petitioner. SInce the retail sale prices were uniform, dealing in fertilizers procured from the petitioner would ordinarily be a less productive proposition for those dealers. In order, therefore, to maintain the sale of fertilizers at a uniform retail price fixed by the Central Government and, at the same time, to ensure that it could carry on the manufacture and sale of its products in a competitive market, by taking a practical view of the situation, the petitioner decided to give regional discount at different rates to buyers situate in different regions or group of regions, depending upon the distance between the factory of the petitioner and the place of business of those buyers.
In addition to the regional discount the petitioner also gave quantitative discount on bulk purchases of fertilizers made by buyers. Quantitative discount used to be given at a uniform rate to all buyers, irrespective of whether they were carrying on business in one State or the other. We shall at a later stage give further particulars with regard to these two kinds of discount allowed by the petitioner to the dealers with whom it carried on business. At this stage, suffice it to say that for the purposes of determination of the value of fertilizers for the assessment of excise duty, which as earlier stated, is levied on ad valorem basis, the petitioner claimed that under section 4, it should be allowed to deduct the regional discount and the quantitative discount which were offered by it to buyers. This claim succeeded partly. Quantitative discount was allowed to be deducted from the wholesale cash price but not the regional discount. The ground on which the claim with regard to deduction of regional discount was disallowed substantially is that the said discount was not given uniformly to all the buyers who were situate in different regions and that the discount varied depending upon the distance between the factory of the petitioner and the place of business of the buyers. The question, which falls for determination, therefore, is whether, on a true construction of section 4, clause (a) read with the Explanation, it is essential that trade discount should be given uniformly so that it could be taken into consideration as an allowable deduction from wholesale cash price.
(3.) A few further facts will require to be stated in order to come to grips with the problem precisely presented in this case. The memo of Writ Petition does not set out all those in detail. However, reading the relevant averments in the Writ Petition along with the Annexures, it has been possible for us to cull out the relevant facts earlier stated, two orders are impugned herein. The first order, Annexure the period from January 1, 1974 to May 31, 1974 and the second order the period from June 1, 1974 to September 30, 1975. In the first period of fertilizer involved are Urea and A.S. On December 20, 1973, the petitioner submitted revised price lists in respect of Urea and A.S. effective from January 1974 to the Assistant Collector of Central Excise, Baroda Division -II for his. The material particulars furnished in the form of declaration submitted the petitioner were as follows :
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Name Quantity Ex -factory Trade discountof the wholesalercom - price per value perdity Metric Ton Metric Ton. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Rs. Rs.(1)Urea 50 Kg. 830 -00 (i) A uniform quantita - (i) 803 -13tive discount at Rs.26.87 per M.T. to allcustomers purchasingwholesale 1,00,000 M.T.and more during a year.(ii) A uniform discount (ii)803 -13at Rs. 26.87 per M.T. towholesale buyers inHaryana, Punjab andUttar Pradesh.(2) A.S. 50 kg. 470 -00 A uniform quantitative 454 -13discount at Rs. 15 -87per M.T. to all customerspurchasing in wholesale60,000 M.Ts. and moreduring a year. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - It would appear, therefore, that the petitioner claimed that for the purpose of levy of excise duty, the net assessable value in respect of Urea should be computed at Rs. 803 -13 p. per metric ton and in case of A.S. at Rs. 454 -13 p. per metric ton when those products were sold on wholesale basis after giving quantitative and regional discount as the case may be. By a communication dated January 15, 1974, the petitioner was informed that the Assistant Collector, Central Excise, Baroda Division -II had approved the net assessable value in respect of Urea and A.S. with effect from January 1, 1974 as follows : - Urea..... Rs. 830/ - per M.T. A.S...... Rs. 470/ - per M.T.