SABYASACHI MUKHARJI - (1.) I have had the advantage of reading in draft the judgment proposed to be delivered by my learned brother Venkatachaliah, J. I respectfully agree with him. There is, however, one aspect of the matter in respect of which I would like to say a few words. Contention (c) as noted by my learned brother in his judgment deals with the determination of the assessable value. The processors in the cases before us say that they have filed classification lists under Rule 173-B of the central Excise Rules, 1944, as they had no other choice and that if the proper principles of determination of the assessable value do not legally justify the consequences flowing from the classification it is open to them to contend against the validity of the determination and they are not estopped from doing so. The processors are right in contending that the true principle should be followed in determining the assessable value. Then what is the true principle? S. 4 of the Act deals with the valuation of excisable goods for purposes of charging of duty of excise. S. 4(1(a) of the Act stipulates that the value should be subject to other provisions of the S. the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale. For the present purpose, we are not concerned with the provisos nor the situation where the normal price of goods is not ascertainable for any reason.
(2.) IN Empire INdustries Limited v. Union of INdia, it was held that where for the purpose of calculating assessable value, a notional sum is laid down by the legislature to be arrived at on a certain basis, it is not permissible for the courts to engraft into it any other deduction or allowance or addition or read it down on the score that unless the said deduction or allowance or addition is authorised elsewhere in the Act or in the Rules. A statutory charge should be measured by the method of its own computation as laid down in the statute and not by any other method of computation. The circumstances that thereby the benefit of any exemption granted by the legislation may be lost and that in some cases hardship might result are not matters which would influence courts on the construction of the statute. A tax payer is entitled only to such benefit as is granted by the legislature. It was emphasised that the taxation under the Act is the rule and the benefit and exemption, the exception. And it was held that there was no hardship in these cases. It was further reiterated that when the textile fabrics are subjected to the processes like bleaching, dyeing and printing etc. by independent processes, whether on their own account or on job charges basis, the value for the purposes of assessment under S. 4 of the central Excise Act will not be the processing charge alone but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of S. 4 of the Act. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any, paid on the grey fabrics will be given pro forma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the relevant rules. In Ujagar Prints v. Union of indict Bhagwati, C.J. held that the processes of bleaching, dyeing, printing, mercerising etc. carried on by a processor on job work basis in respect of grey cotton fabrics and manmade fabrics belonging to the customer and entrusted by him for processing amount to 'manufacture within the meaning of the Act prior to its amendment so as to attract levy of excise duty on the processed fabrics and in any event, after the Amendment Act, these processes amount to manufacture and excise duty is leviable on the processed fabrics. The learned chief justice also dealt with the other question, namely, what is the value of the processed fabrics liable to be assessed. Referring to the aforesaid decision of the Empire Industries, he illustrated the problem by reference to the example set out in the judgment. In that example illustrated by him the value of the grey cloth in the hands of the processor was Rs. 20.00. The value of the job work was Rs. 5.00. TraderS selling price inclusive of his selling profits etc. was put at Rs. 30.00. Bhagwati, C.J. at page 655 of the report observed that the assessable value of the processed fabric must obviously be taken to be the wholesale cash price of the processed fabric at the factory gate that is when the procesied fabric leaves the factory of the processor and it cannot possibly include the selling profit of the trader who subsequently sells the processed fabrics. The learned chief justice reiterated that it is at the point when the processed fabric leaves the factory of the processor that its assessable value has to be determined and that assessable value cannot include the selling profit of the trader. Empire Industries did not say that the post-manufacturing profits or postmanufacturing costs could be included in the assessable value of the processed fabric. If the trader, who entrusted cotton or manmade fabrics to the processor for processing on job work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market that would be taken by the excise authorities as the assessable value of the processed fabrics and excise duty would be charged to the processor on that basis. Where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at the arms length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise. But the price received by the wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to other dealer, would be irrelevant for determination of the value of the goods and the goods would not be charged on that basis. This has been explained in Atic Industries Ltd. v. H. H. Dave, Assistant Collector of central Excise. This has also been explained in Union of India v. Bombay Tyre International Ltd. It has to be reiterated that the valuation must be on the basis of wholesale cash price at the time when the manufactured goods enter into the open market. See in this connection the ratio of this court in Union of India v. Cibatul Ltd and the Joint Secy. to the Govt. of India v. Food Specialities Ltd. It was emphasised in Union of India v. Cibatul that the value of the trademarks was not to be taken into account in computing the assessable value as the affixation of the trademarks of a particular brand was extraneous to manufacture. The values of such extraneous or additional factors do not enter into the computation of assessable value and as such the wholesale cash price at which the goods enter into the wholesale market would be independent of the value of the trademarks. So that cannot be taken into the computation of the assessable value. Similarly, in the case of Joint secretary to the Govt. of India v. Food Specialities Ltd., it was held that the value of NestleS trademarks could not be added to the wholesale price charged by the dealer to NestleS for the purpose of computing the value of the goods manufactured. The goods in both these cases were manufactured independently of the addition of the trademarks. The price thereof at the factory gate was not after taking into account the value of the trademarks. If that was the position the value of the trademarks cannot be added to the wholesale cash price charged by the dealer. Affixation of trademarks for enhancement of the, value thereof is extraneous to and independent of the process of manufacture. The charges for the same are not part of the assessable value and cannot enter into computation of the wholesale cash price on the basis of which excise duties are to be levied. In the aforesaid view of the law and for the reasons mentioned by my learned brother, I agree with his answer to this contention. The assessable value would, therefore, include the value of the grey cloth in the hands of the processors plus the value of the job work done plus manufacturing profits and manufacturing expenses whatever would be included in the price at the factory gate. The correct assessable value must be the value of the fabric at the factory gate, that is to say, the value at which the manufactured goods leave the factory and enter the mainstream.
(3.) ONE more aspect will have to be reiterated. Computation of the assessable value is one question and as to who should be liable for the same is another. Duties of excise are imposed on production or on manufacture of goods and are levied upon the manufacturer or the producer in accordance with the relevant rules. This is quite independent of the ownership of goods. It is, therefore, necessary to reiterate that the value for the assessment under S. 4 of the Act will not be the processing charge alone but the intrinsic value of the processed fabrics which is the price at which tha fabrics are sold for the first time in the wholesale market. The rules are clear on the computation of that value. If the valuation is made according to the rules as adumbrated in Empire Industries and as clarified by my learned brother in this judgment no difficulty should arise. M.N.VENKATACHALIAH These appeals, by special leave, preferred against the judgments of the High court of Gujarat and the High court of Bombay and the batch of Writ Petition under Article 32 of the Constitution of India are heard together and disposed of by this common judgment as they all involve questions - common to them - concerning the validity of the levy of duties of excise under tariff items 19 and 22 of the Schedule to the central Excises and Salt Act 1944 ("Central Excise Act") as amended by the central Excises and Salt Additional Duties Excise (Amendment) Act, 1980 ("Amending Act") treating as "Manufacture" the process of bleaching, dyeing, printing, sizing, mercerising, waterroofing, rubberising, shrink-proofing, organdie, processing etc. done by the processors who carry out these operations in their factories on job work basis in respect of 'cotton fabric and 'manmade fabric belonging to their customers.;