Central Excise Act, 1944 – ss.3 and 4 – Whether s.4 of the Central Excise Act, 1944 (as substituted with effect from 1-7-2000) and the definition of “transaction value” in clause (d) of sub-section
(3) of s.4 are subject to s.3 of the Act – Held: The observations made in Acer India Ltd. to the effect that ‘transaction value’ defined would be subject to the charging provisions contained in s.3 of the Act will have viewed in the context of a situation where an addition of the value of a non-dutiable item was sought to be made to the value of a dutiable item for the purpose of determination of the transaction value of the composite item – This is the limited context in which the subservience of s.4(3)(d) to s.3 was expressed and has to be understood – If so understood, the views expressed in that paragraph of Acer India Ltd. case cannot be read to be in conflict with the decision of Bombay Tyre International Ltd.. Central Excise Act, 1944 – ss.3 and 4 – Whether ss. 3 and 4 of the Act despite being interlinked, operate in different fields – Held: The measure of the levy contemplated in s.4 of the Act is not controlled by the nature of the levy – So long a reasonable nexus is discernible between the measure and the nature of the levy both ss.
3 and 4 would operate in their respective fields – The view expressed in Bombay Tyre International Ltd. is the correct exposition of the law in this regard.
Central Excise Act, 1944 – ss.3 and 4 – Whether the concept of “transaction value” makes any material departure from the deemed normal price concept of the erstwhile s.4(1)(a) of the Act – Held: “Transaction value” as defined in s.4(3)(d) brought into force by the Amendment Act, 2000, statutorily engrafts the additions to the ‘normal price’ under old s.4 as held to be permissible in Bombay Tyre International Ltd. besides giving effect to the changed description of the levy of excise introduced in s.3 of the Act by the Amendment of 2000 – There is no discernible difference in the statutory concept of ‘transaction value’ and judicially evolved meaning of ‘normal price’.
Answering the referred issues, the Court
HELD: 1. The amendment to Section 3 of Central Excise Act, 1944 by substitution of the words “a duty of excise on all excisable goods” by the words “a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods” is conspicuous. The amendment of Section 3 to the Act not only incorporates the essentials of a changed concept of charging of tax on additions to the value of goods and services at each stage of production but also engrafts in the statute what was judicially held to be permissible additions to the manufacturing cost and manufacturing profit in Bombay Tyre International Ltd.. This fundamental change by introduction of the concept underlying value-added taxation in the provisions of Section 3 really find reflection in the definition of ‘transaction value’ as defined by Section 4(3)(d) of the Act besides incorporating what was explicitly held to be permissible in Bombay Tyre International Ltd.. Section 4(3)(d), thus, defines ‘transaction value’ by specifically including all value additions made to the manufactured article prior to its clearance, as permissible additions to be price charged for purpose of the levy. [Para 21][1119-B-F]
2. Considering the decision in Acer India Ltd. in the said case, softwares which were duty free items and could be transacted as softwares came to be combined with the computer hardware which was a dutiable item for purposes of clearance. The Revenue sought to take into account the value of the computer software for the purposes of determination of ‘transaction value’ with regard to the computer. This Court negatived the stand of the Revenue taking the view that when software as a separate item was not dutiable its inclusion in the hard-disk of the computer cannot alter the duty liability of the software so as to permit the addition of the price/value of the software for the purpose of levy of duty. It is in the above context INDUSTRIES LTD.THR. ITS SECY.
that the decision of this Court in Acer India Ltd. has to be understood. The observations made in paragraph 84 thereof to the effect that ‘transaction value’ defined in Section 4(3)(d) of the Act would be subject to the charging provisions contained in Section 3 of the Act will have to be viewed in the context of a situation where an addition of the value of a non-dutiable item was sought to be made to the value of a dutiable item for the purpose of determination of the transaction value of the composite item. This is the limited context in which the subservience of Section 4(3)(d) to Section 3 of the Act was expressed and has to be understood. If so understood, the views expressed in Acer India Ltd. can be read to be in conflict with the decision of Bombay Tyre International Ltd. [Para 22][1119-F-H; 1120-A-C]
3. The measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy. So long a reasonable nexus is discernible between the measure and the nature of the levy both Section 3 and 4 would operate in their respective fields. The view expressed in Bombay Tyre International Ltd. is the correct exposition of the law in this regard. Further, “transaction value” as defined in Section 4(3)(d) brought into force by the Amendment Act,2000, statutorily engrafts the additions to the ‘normal price’ under the old Section 4 as held to be permissible in Bombay Tyre International Ltd. besides giving effect to the changed description of the levy of excise introduced in Section 3 of the Act by the Amendment of 2000. In fact, there is no discernible difference in the statutory concept of ‘transaction value’ and the judicially evolved meaning of ‘normal price’. [Para 23][1120-C-F]
Union of India and Ors. v. Bombay Tyre International Ltd. and Ors. [1984] 1 SCR 347 : (1984) 1 SCC 467 – affirmed
Commissioner of Central Excise, Pondicherry v. Acer India Ltd.[2004] 4 Suppl. SCR 676 : (2004) 8 SCC 173; C.C.E. Indore v. Grasim Industries Ltd. [2009] 12 SCR 204 : (2009) 14 SCC 596; C.C.E. Indore v. Grasim Industries Ltd. (2016) 6 SCC 391; The Province of Madras v. Messrs. Boddu Paidanna & Sons A.I.R. (29) 1942 Federal Court 33 (from Madras);GovernorGeneral in Council v. Province of Madras [A.I.R. (32) 1945 Privy Council 98]; R.C. Jall Parsi v. Union of India and anr. 1962 AIR 1281 : [1962] Suppl. SCR 436; A.K. Roy and Another v. Voltas Limited [1973]
2 SCR 1089 : (1973) 3 SCC 503; Atic Industries Limited v. H.H. Dewa, Asstt. Collector of Central Excise and ors. [1975] 3 SCR 563 : (1975) 1 SCC 499 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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