BURN STANDARD COMPANY LTD. AND ANR. versus UNION OF INDIA AND OTHERS

Citation: [1991] 2 S.C.R. 960 · Decided: 16-07-1991 · Supreme Court of India · Bench: K.N. SINGH · Disposal: Dismissed

Judgment (excerpt)

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BURN STANDARD COMPANY LTD. AND ANR. 
v. 
UNION OF INDIA AND OTHERS 
JULY 16, 1991 
[K.N. SINGH AND KULDIP SINGH, JJ.] 
Central Excises and Salt Act, 1944--Sections 3 and 4--Excise 
duty-Whether chargeable on the invoice-Value of wagon or on the 
value of completed wagon including that of the ''free supply items". 
The appellant-company manufactured railway wagons in accor-
dance with the specifications, terms and conditions contained in the 
agreements entered between the appellant and the Railway Board from 
time to time. The Railway Board "ithout charging any price supplied 
wheel-sets, axle boxes and various other itnisbed components of 
wagons, which were termed as "free supply items," to the appellant, 
which were used in the manufacture of wagons and supplied the comp-
lete wagons to the Railway Board. The invoice-value of the wagon 
charged by the appellant did not include the value of the "free supply 
items." 
The central excise authorities issued show cause to the appellant 
as to why the excise duty he not computed and charged on the value of 
the complete,wagon, including that oftbe "free supply items". 
The appellant challenged the show cause notices by itling a Writ 
Petition before the High Court. Holding that the excise duty could only 
be charged on the invoice-value under the contract, the Single Judge 
allowed the petition. 
The appeal itled by the Respondents against the judgment of the 
Single Judge was allowed by the Division Bench of the Court, against 
which the present appeal was made by the appellant-company. 
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On the question, whether the excise duty under sections 3 and 4 of 
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the Central Excises and Salt Act, 1944 was to he charged on the 
invoice-value of the wagon or on the value of completed wagon including 
that of the "free supply items". 
Dismissing the appeal, this Court, 
960 
BURN STANDARD v. U.0.1. (KULDIP SINGH, J.] 
961 
HELD: 1. Section 3 of the Act provides for levy of the duty of 
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excise. It is a levy on goods produced or manufactured· in India. Section 
4 of the Act lays down the measure by reference to which the duty of 
excise is to be assessed. The dnty of excise is linked and chargeable with 
reference to the value of the excisable goods and the value is further 
defined in express terms by the said section. In every case the funda-
mental criterion for computing the value of an excisable article is the 
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normal price at which the excisable article or an article of the like kind and 
quality is sold or is capable of being sold by the manufacturer. [904G-965A] 
2. What comes down from the assembly-line of the appellant's 
factory is a complete wagon and as such the appellant being manufac-
turer of wagons, is liable to pay duty of excise on the value of a complete C 
wagon. The "free supply items" like wheel-sets etc. in the process of 
manufacturing become part of the complete wagon and loose their 
identity. It hardly matters how and in what manner the components of 
the wagon are procured by the manufacturer, so long as the appellant is 
manufacturing and producing the goods called "wagons" it is liable to 
pay duty of excise on the normal value of the wagon. [%5A-C] 
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Empire Industries Limited and Others v. Union of India and 
Others, [1985] 3 S.C.C. 314 and M/s. Ujagar Prints and Others v. 
Union of India and Others, [1989] 3 S.C.C. 488, followed. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3041 
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of 1988. 
From the Judgment and Order dated 2.2.1988 of the Calcutta 
High Court in Original Order Tender No. (F.M.A.T.) No. 181 of 
1987. 
Dr. Shankar Ghosh, Mrs. Naresh Bakshi and K.D. Prasad for 
the Appellants. 
Ashok H. Desai, P. Parmeshwaran and A. Subba Rao for the 
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Respondents. 
The Judgmemt of the Court was delivered by 
KULDIP SINGH, J. M/s. Burn Standard Company Limited, the 
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· appellant before us, is one of the leading manufacturer of wagons. The 
wagons manufactured and produced by the appellant are primarily 
supplied to the Railway Board. The wagons are manufactured in H 
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962 
SUPREME COURt REPORTS 
[1991] 2 S.C.R. 
accordance with the specifications, terms and conditions contained in 
the agreements entered between tjie appellant and the Railway Board 
from time to time. It is the admitted case of the parties that the Rail-
way Board supplies wheel-sets, axle boxes and various other finished 
components of wagons to the appellant which are termed as "free 
supply items". These items are not manufactu

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