NATIONAL LAW INSTITUTE UNIVERSITY

COMMISSISONER OF CENTRAL EXCISE, V M/S GRASIM INDUSTRIES LTD.

INDORE THROUGH ITS SECRETARY1
CIVIL APPEAL NO. 3159 OF 2004

DATE OF JUDGEMENT: 11 MAY 2018

[JUDGES:JUSTICE RANJAN GOGOI, JUSTICE N.V. RAMANA, JUSTICE R. BHANUMATHI,

JUSTICE MOHAN M.SHANTANUGOUDAR, JUSTICE S ABDUL NAZEER
TYPE OF BENCH: CONSTITUTIONAL BENCH]

SUBMITTED TO: SUBMITTED BY:

PROF. (DR). GHAYUR ALAM GAURI KINIKAR
2018BALLB85

1
https://www.sci.gov.in/supremecourt//2008/2008__Judgement_11-May-2018.pdf
last visited on 29/08/2018
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 TABLE OF CONTENTS
ACKNOWLEDGEMENT ................................................................................................................................. 3
MATERIAL FACTS ......................................................................................................................................... 3
QUESTIONS OF LAW ..................................................................................................................................... 4
ARGUMENT ON BEHALF OF APPEALANT ............................................................................................... 5
ARGUMENT OF BEHALF OF RESPONDENT ............................................................................................. 5
ARGUMENTS ACCEPTED WITH REASON ................................................................................................ 6
ARGUMENTS REJECTED WITH REASON ................................................................................................. 7
CONCRETE JUDGEMENT ............................................................................................................................. 7
RATIO DECIDENDI ........................................................................................................................................ 7

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 ACKNOWLEDGEMENT

I wish to express my sincere gratitude to Prof. Dr.Ghayur Alam(common law method), for providing me
with the opportunity to research, study comprehensively and pen this case analysis. Without his aid and
guidance, the completion of this analysis would have been a very difficult task.

I also wish to thank the library administration and staff for helping me find the correct resources required to
compose this project, for resources are useful only when used appropriately.

I also find it of utmost necessity to acknowledge the constant support and encouragement I received from my
parents and friends. They are the true source of my motivation and will to thrive.

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 MATERIAL FACTS

1. The respondent- Assesses are manufacturers of dissolved and compresses industrial gases, liquid
chlorine and other allied products. Cotton yarn and post mix concentrate manufactured by two other
individual assesses are also in issue.
2. Containers are provided by the assesses to the customers on rent whereas in other cases customers bring
their own containers. The assesses charge certain amounts under different heads- packing charges, wear
and tear charges, facility charges, service charges, delivery and collection charges, rental charges, repair
and testing charges. The assesses treat the said amount as income from ancillary or allied ventures.
3. As the decisions in Union Of India v Bombay Tyre International Ltd. and Ors2 and Commissioner Of
Central Excise, Pondicherry v Acer India Ltd.3 went into conflict, three questions were referred to a two
judge bench by an order dated 30th July 20094 which was further referred to a larger bench by order dated
30th March 20165:
This lead to the consideration of this matter.

QUESTIONS OF LAW

1. What is excise duty? What is the relationship between the nature of duty and the measure of levy?
2. Whether the aforesaid charges mentioned in the material facts realised by the assesses are liable to be
taken into account for determination of value for the purpose of levy of duty in terms of section 4 of the
central excise act, 1944 as amended with effect from 1st July, 2000?
3. Whether section 4 of the central excise act, 1944 and the definition of “transaction value” in clause (d) of
subsection (3) of section 4 are subject to section 3 of the act?
4. Whether section 3 and 4 of the central excise act, despite being interlinked, operate in different fields and
what is their real scope and ambit?
5. Whether the concept of “transaction value” makes any material departure from the deemed “ normal
price” concept of the erstwhile section 4(1)(a) of the act?

2
(1984) 1 SCC 467
3
(2004) 8 SCC 173
4
(2009) 14 SCC 596
5
(2016) 6 SCC 391
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 ARGUMENT ON BEHALF OF APPEALANT

1. Transaction value includes all value additions made to the manufactured article prior to its clearance, as
permissible additions to be price charged for purpose of levy.
2. Excise is a levy on the manufacture and upon the manufacture who is entitled under law to pass on the
burden to the first purchaser of the manufactured goods. The point of collection of levy need not
necessarily coincide with the time of manufacture. The stage of collection can and usually is a matter of
administrative convenience and such stage, normally, is the stage of clearance of article when it, for the
first time, enters the trade for sale.

ARGUMENT OF BEHALF OF RESPONDENT

1. On relying the decision of this court in A.K. Roy and Another v Voltas limited6
that having regard to the character of the levy the measure must be restricted thereto.
2. The amount earned from the charges levied for packaging is considered as income from ancillary or
allied ventures hence that amount shouldn’t be included in the value considered for purpose of levy of
duty under central excise act

6
(1973) 3 SCC 503
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 ARGUMENTS ACCEPTED WITH REASON

Arguments of appellant are accepted.

1. The amendment to section 3 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
clear. It 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
judiciously held to be permissible additions to the manufacturing cost and manufacturing units in
Bombay tyre international ltd. This fundamental change by introduction of the concept underlying
value-added taxation in the provisions of section 3 find reflection in the definition of ‘transaction value’
as defined by section 4(3)(d) of the act.

2. The argument was affirmed by citing Governor-General in Council v Province Of Madras7 wherein it
was held inter-alia:

The term duty of excise is somewhat flexible. Their lordships are of the opinion that a duty of excise is
primarily a duty levied on the manufacturer or producer in respect of the commodity manufactured or
produced. It is a tax upon goods not upon sales or the proceeds of sale of goods. The two taxes, one
levied upon the manufacturer in respect of his goods, the other on the vendor in respect of his sales.
There is no overlapping in law though. If in fact they overlap, that may be because the taxing authority,
imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable
article leaves the factory or workshop for the first time on the occasion of sales. But that method of
collecting tax is an accident of administration; it is not of the essence of the duty of excise, which is
attracted by the manufacturer itself.

7
AIR(32) 1945 Privy council 98
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 ARGUMENTS REJECTED WITH REASON

Arguments of respondent are rejected.

1. The levy of a tax is defined by its nature, while the measure of the tax may be assessed by its own
standard. It is true that the standard adopted as the measure of the levy may indicate the nature of the tax
but does not necessarily determine it.
2. The price of an article is related to its value (using the term is general sense) and into that value have
poured several components, including those which have enriched its value and given to the article its
marketability in trade. Therefore, the expenses incurred on the account of the several factors which have
contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to
be included.8

CONCRETE JUDGEMENT

 The effect that ‘transaction value’ defined in section 4(3)(d) of the act would be subject to the changing
provisions contained in section 3.
 The charges realised by the assesses are liable to be taken into account for determination of value for the
purpose of levy of duty in terms of section 3 and section 4.
 There is no discernible difference in the statutory concept of ‘transaction value’ and the judicially
evolved meaning of ‘normal price’.
 Any standard which maintains a nexus with the essential character of the levy can be regarded as a valid
basis for assessing the measure of the levy.

RATIO DECIDENDI

 The price charged for a manufactured article at the stage when the article enters into the stream of
trade in order to determine the value/transaction value for computation of the quantum of excise duty
payable does not come into conflict with the essential character or 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.

8
(2004) 8 SCC 173
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