LexUNION OF INDIA AND ANR. versus CENTURY MANUFACTURING COMPANY LTD.
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A UNION OF INDIA AND ANR. v. CENTURY MANUFACTURING COMPANY LTD. f\1A y 14, 1992 B (S. RANGANATHAN, V. RAMASWAMI AND YOGESHWAR DAYAL, JJ.) Central Excises and Salt Act, 1944: c Sections 3(2), 4 and First Schedule-Fixation of ad valorem rate of tariff by Central Government-Adoption of mode of fu:ation havi'!g nexus with manufacture or production-Detemiination of value as provided under section 4 not the only basis-Power conferred on Government Fixation at average price-Whether unrestricted and arbitrary-Whether violative of Ar- D ticle 14 of the Constitution of India. Constitution of India, 1950: Article 14-l'ower conferred on Central Government under section 3(2) of the Central Excises and Salt Act, 1944-Fixation of ad valorem rate of E duty-With reference to average prices-Whether c¢1itrary, unrestricted and violative of. In exercise of its power conferred under section 3(2) of the Central Excises and Salt Act, 1944, the Central Government issued notifications dated 28.11.1970 and 26.7 .1971 fixing the tariff value on the basis of which F excise duty was to be levied on sulphuric acid and liq!lid chlorine respec- ·"" +--'- ~ + ~~ IC. .~I . tively. ~ The Respondent-assessee challenged the fixation of the tariff values for the abovesaid two items, by filing Writ Petitions before the High Court. The main contentions of the assessee were that excise duty being a duty on G manufacture or production, its levy could be based on the cost of produc- tion or manufacture together with any margin of profit the manufacturer may be able to make when he sells the goods in a whole-sale market at or )c::- near the factory gate; that the tariff value fixed under section 3(2) of the Act could also be only on the basis mentioned above and could not be based H on the sale price of the goods much less on a weighted average sale price; 282 U.0.1. v. CENTURY MFG. CO. 283 and that section 3(2) gave a wide and unfettered discretion to the Central A >-f- Government to fax the value at any figure it chose and so section 3(2) of the Act was violative of Article 14 of the Constitution of India, as no guidelines have been indicated in the statute. ~ - -+- -'r _. ~- The High Court allowed the Writ Petitions and gave certain direc- , tions to the Central Government. Being aggrieved· against the said judg- B ment of the High Court, the Revenue has preferred the present appeals. Allowing the appeals, this Court, HELD: 1. The tariff values of sulphuric acid and chlorine were c validly f1Xed under the respective notifications issued by the Central Government. Section 3(2) of the Central Excises and Salt Act, 1944 and the notifications dated 28.11.1970 and 26.7 .1971 are valid and constitution- al. [299 D, E] 2.1. The High Court's reasoning restricts the freedom of rate faxation D under section 3(1) to the mode of determination of value set out in section 4 and to the manufacturing cost and profit of an individual manufacturer- assessee before the authorities. It overlooks that, reading ss.3(1), 3(2) and 4 together, in the light of Bombay ~yres, it is clear that the rate of excise duty need not necessarily be ad valorem; that, even when it is ad valorem, E the mode of determination of value outlined in section 4 is only one of the modes available to the Central Government which comes into operation only where the value of any item of goods is not otherwise specified in notifications issued under section 3(2); and that even where the value is to be determined under section 4, it can have any nexus with the wholesale price and is not limited to manufacturing cost and profit. The High Court F has erred in reading ss.3(1) and (2) as being subject to the parameters of section 4. It is clear that section 3(1) read with the schedule is very wide and unrestricted in its language and permits the levy of duty on any basis that has nexus with manu~acture or production. Section 3(1) comes into operation only in cases of goods where an ad va/orem duty is set forth in G the schedule but, subject only to this restriction, this sub-section too does not carry any limitation as to the manner in which the value is to be fixed, much less any limitation that the value should be determined in the same manner as under section 4. [294 C-G] ·2.z. Even section 4 does not restrict the levy to manufacturing cost H 284 SUPREME COURT REPORTS (1992] 3 S.C.R. A and profit. This section read with the relev
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