KIRLOSKAR BROTHERS LTD., DEWAS (M.P.) versus UNION OF INDIA AND ORS.

Citation: [1992] 2 S.C.R. 81 · Decided: 10-03-1992 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

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Judgment (excerpt)

KIRLOSKAR BROTHERS LTD., DEWAS (M.P.) 
v. 
UNION OF INDIA AND ORS. 
MARCH 10, 1992 
[S. RAN GANA THAN, V. RAMASW AMI AND YOGESHW AR 
DAYAL, JJ.] 
Central Excises and Salt Act, 1944: Section 4-Explanation (prior to 
Amendment) and Section 36(2). 
Excise Duty-Central Government's Notification No. 84/72-CE dated 
17.3.72 as amended by Notification No. Jl3/72 dated 22.3.72-Power driven 
and monoblock pumps-Electric Motors purchased and used in manufacture 
of pumps-Excise duty paid on Electric Motors-Whether deductible in arriv-
ing at assessable value. 
Trade discount-Discount given to distributors providing after sales 
service-Also discount given to wholesalers not providing after sales ser-
vice-Whether entitled for deduction from excise value. 
A 
B 
c 
D 
The appellant-Company was manufacturing power-driven pumps E 
and monoblock pumps. It was purchasing electric motors from another 
---< 
company and using them in the manufacture of these pumps. The Super-
intendent of Central Excise issued show cause notices to the appellants for 
recovery of short levy of duty relating to the period from 17th March, 1972 
_...... 
to 31st March 1973 stating that (1) thei:e was less determination of the 
assessable value of pumps due to non-inclusion of Central Excise duty paid F 
on electri.c motors used in the manufacture or pumps and that (2) there 
,1 
was deduction of irregular trade discount on wholesale cash price while 
,,1.... 
determining the assessable value of the articles in question. 
The Assistant Collector directed the appellant to pay the duties short 
levied holding that the excise duty paid by the appellant on electric motors G 
fitted to the pumps could not be deducted while computing the assessable 
value or the pump sets for purposes of assessment and that the wholesale 
':>< 
cash pri.ce minus the trade discount, which is uniformly given to all 
wholesale dealers, would represent the assessable value for assessment 
purposes. 
81 
H 
82 
SUPREME COURT REPORTS 
(1992) 2 S.C.R. 
A 
Against the orders of the Assistant Collector the appellant preferred 
an appeal before the Appellate Collector who allowed the appeal and 
quashed the demand notices holding (i) that the assessable value of the 
pumps had to be arrived at after deduction from the wholesale cash price 
of the excise duty payable not only on the pumps which are manufactured 
B but also the excise duty paid on the electric motors which were used as a 
component of the pumps and (ii) that in determining the assessable value 
of the PD pumps a discount of 30 per cent declared by the appellant and 
allowed to wholesale dealers was liable to be deducted from the wholesale 
c 
.. ~ 
cash price of the pumps under the provisions of the section 4 of the Central 
Excises and Salt Act, 1944. 
In exercise of the powers conferred on it under section 36(2) of the 
Act the Central Government suo moto issued a show cause notice dated 
>--
21st June, 1976 to the appellant proposing to set aside the order of the 
Appellate Collector and restore the orders of the Assistant Collector 
D stating that the Appellate Collector has erred in his decision. The appel· 
lant filed its reply to the IJOtice and also made its submissions during the 
course of personal hearing. After considering the appellant's reply as well 
as points urged by it during the course of personal hearing the Central 
Government set aside the Appellate Collector's order and restored the 
Assistant Collector's orders. 
E 
The appellant filed a writ petition in the Madhya Pradesh High 
Court challenging the Central Government's order contending that the 
Central Government erred in setting aside the order of the Appellate 
Collector and in restoring the orders of the Assistant Collector. The High 
F 
Court held that the Explanation to Section 4 of the Act provides for 
deduction of trade discount and the amount of duty payable at the time of 
removal of the article from the factory. The 'duty' referred to in the 
explanation is the duty payable on the product which is manufactured and 
does not refer to the duty paid on the raw material or the component of 
the product manufactured. The High Court agreed with the order of the 
G Central Government on the deduction on trade discount and rejected the 
app..lllant's contention that the excise duty paid on the component parts 
could not be treated as manu~acturing cost and that it was not competent 
for the Government to levy excise duty on excise duty paid.

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