Holding

The sale price of the scrap is a cum‑duty price; excise duty is payable, and the duty component must be excluded in determining the assessable value under Section 4(4)(d)(ii).

Summary

M/s. Maruti Udyog Ltd., a motor‑vehicle manufacturer, sold waste and scrap of aluminium and iron‑steel and claimed that no excise duty was payable on such sales. The Commissioner of Central Excise raised a demand for excise duty, which the company contested. The Customs, Excise and Gold (Control) Appellate Tribunal held that excise duty was payable and that the sale price of the scrap was a cum‑duty price, requiring the duty element to be excluded in computing the assessable value under Section 4(4)(d)(ii) of the Central Excises and Salt Act. On appeal, the Supreme Court affirmed the Tribunal’s view, relying on the statutory provision that the wholesale price includes the duty component, which must be deducted for valuation, and on precedents such as Bata India Ltd. and Hindustan Sugar Mills. Consequently, the Court dismissed the appeal, confirming that the scrap sale price is inclusive of excise duty and that the duty is payable.

Issues considered

Whether excise duty is payable on waste and scrap of aluminium and iron‑steel sold by a manufacturer.
Whether the sale price of such scrap should be treated as a cum‑duty price for the purpose of valuation under Section 4(4)(d)(ii) of the Central Excises and Salt Act.

Legislation cited

Central Excise Rules, 1944s. Rule 57A
Central Excises and Salt Act, 1944s. 4(1), s. 4(4)(d)(ii)

Subjects

excise dutywaste scrap valuationcum‑duty priceSection 4MODVATCentral Excise Actassessmentmanufacturer liability

Judgment

COMMISSIONER OF CENTRAL EXCISE, DELHI A
v.
M/S. MARUTI UDYOG LTD.

FEBRUARY 27, 2002

[B.N. KIRPAL, SHIVARAJ V. PATIL AND B
BISHESHWAR PRASAD SINGH, JJ.]

Central Excises and Salt Act, 1944/Central Excise Rules, 1944.
-i
Ss. 4(1) and 4(4)(d)(ii)/Rule 57-A-Sa/e if waste and scrap ofaluminium c
and iron and steel-Assessable value for purposes of excise duty-Maruti
Udyog-Manufacturing Motor vehicles-Availing MOD VAT credit of duty on
import-Manufacturer selling waste and scrap of. aluminium and iron and
steel-Tribunal holding that excise dutj was payable on waste and scrap sold
and the price on which waste and scrap had been so/d"should be considered D
to be cum-duty price and the assessable value should be determined after
deducting the element of excise duty-Held, the sale price realised by the
... manufacturer has to be regarded as the entire price inclusive of excise duty
because it is the manufacturer who has by necessary implication taken on the
liability to pay all the taxes on the goods sold and has not sought to realise
any sum in addition to the price obtained by it from the purchaser-Tribunal E
was right in directing that manufacturer is entitled to the benefit ofs.4(4)(d)(ii).

Asstt. Collector of Central Excise and Ors. v. Bata India ltd, [1996) 4 SCC
~
563 and Hindustan Sugar Mills v. State of Rajasthan and Ors., [1978) 4 SCC

,
271, relied on.
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3783 of
2000.

From the Judgment and Order dated I 9. I l.99 of the Customs Excise
and Gold (Control) Appellate Tribunal New Delhi in A. No. E/2051/93-
-/
Bin F.O. No. 1251 of 1999-B. G
WITH

Civil Appeal No. 660 of 2000.

From the Judgment and Order dated 01.07.99 of the Customs Excise
H
99
100 SUPREME COURT REPORTS [2002] 2 S.C.R. ·

A and Gold (Control) Appellate Tribunal New Delhi in A. No. E/5419/92-
A in F.O. No. 945 of 1999-A.
WITH
c:
A. Nos. 3841, 5867-68/2000, 3913, 4082, 4455, 6072, 8455/2001
and 92 of 2002.
B
Mukul Rohtagi, Additional Solicitor General, Mahendra Anand,
Sr. Adv., N.K. Bajpai, Jaideep Gupta, Ms. Nisha Bagchi, B. Krishna Prasad,
V. Lakshmikumaran, M.P. Devanath, V. Balachandran, A.R. Madhav Rao,
S.N. Mehrotra, Attar Singh, V.J. Francis, P.L Jose, Jenis, S. Nanda Kumar, ·
V. Vijayan, L.K. Pandey, Himanshu Munshi, Rajesh Kumar, M.L. Lahoty,
C Paban K. Sharma, Himanshu Shekhar, Advs. with them for the appearing
parties.

The following Orders of the Court was delivered :

The respondent is manufacturing motor vehicles and it had availed of
D MODYAT credit of the duty paid on inputs under Rule 57A of the Central
Excise Rule~. As it had not paid any exicse duty on the raw material, it
b7came liable to pay excise duty on the waste and scrap of aluminium and
iron and steel which scrap had been sold by the respondent.

The ColleCtor raised a demand of excise duty on the waste and scrap
E which was sold. The demand was challenged by the respondent who contended
that exicse duty was not payable. Having been unsuccessful before the
Collector, an appeal was filed before the Customs, Excise and Gold (Control)
Appellate Tribunal. The ·Tribunal by the impugned order came to the
conclusion that excise duty was payable on the scrap sold by the respondent.
F it further came· to the conclusion that the price on which the waste and scrap
.had been sold should be considered to be cum-duty price and the assessable
value should be determined after deducting the element of excise duty. It is
this part of the decis~on of the Tribunal which is sought to be challenged by
the Revenue·in this appeal.

G The respondent had sold the scrap and according to it the purchaser
was not liable to pay any amount in addition thereto and it is for this reason
the Tribunal regarded this transaction as being one of cum-duty price.

Section 4 of the Central Excises and Salt Act, 1944 provides for valuation
of excisable goods for purposes of ch&rging of duty of excise. Under Section
H 4(1), the duty of excise is chargeable on any excisable goods with reference
COM MR. OF CENTRAL EXCISE v. MARUTI UDYOG LTD. I0I

to the value which is deemed to be the price at which such goods are ordinarily A
sold by the assessee to a buyer in the course of wholesale trade where the
buyer is not a related person and the price is the sole consideration for the
sale. Section 4(4)(d)(ii) states that value in relation to any excisable goods
does not include the amount of duty of excise, sales tax and other taxes, if
any, payable on such goods and, subject to such rules as may be made, the B
trade discount, etc., is also to be allowed as a deduction.

A reading of the aforesaid Section clearly indicates that the wholesale
price which a charged is deemed to be the value for the purpose of levy of
excise duty, but the element of excise duty, sales tax or other taxes which is
included in the wholesale price is to be excluded in arriving at the excisable C
value. This Section has been so construed by this Court in Asstt. Collector of
Central Excise and Ors. v. Bata India Ltd, (1996] 4 SCC 563, and it is thus
clear that when cum-duty price is charged, then in arriving at the excisable
value of the goods the element of duty which is payable has to be excluded.
The Tribunal has, therefore, rightly prceeded on the basis that the amount
realised by the respondent from the sale of scrap has to be regarded as a D
normal wholesale price and in determining the value on which excise dutY. is
payable the element of excise duty which must be regarded as having been
incorporated in the sale price, must be excluded. There is nothing to show
that once the demand was raised by the Department, the respondent sought
to recover the same from the purchaser of scrap. The facts indicate that after
the sale transaction was completed, the purchaser was under no obligation to E
pay any extra amount to the seller, namely, the lespondent. In such a
transaction, it is the seller who takes on the obligation of paying all taxes on
the goods sold and in such a case the said taxes on the goods sold are to be
deducted under Section 4(4)(d)(ii) and this is precisely what has been directed
by the Tribunal. There is also nothing to show that the sale price was not F
cum-duty.

It will be useful here to refer to the observations of this Court in
Hindustan Sugar Mills v. State of Rajasthan and Ors., [1978] 4 SCC 271, at
page 280, as follows:
G
"Take for example, excise duty payable by a dealer who is a
manufacturer. When he sells goods manufactured by him, he always
passes on the excise duty to the purchaser. Ordinarily it is not shown
as a separate item in the bill, but it is included in the price charged
by him. The 'sale price' in such a case could be the entire price
inclusive of excise duty because that would be the consideration H
102 SUPREME COURT REPORTS [2002) 2 S.C.R.

'·. A payable by the purchaser for the sale of the goods. True, the excise
duty component of the price would not be an addition to the coffers y
of the dealer, as it would go to re-imburse him in respect of the
excise duty already paid by him on the manufacture of the goods. But
even so, it would be part of the 'sale price' because it forms a
component of the consideration payable by the purchaser to the dealer.
B It is only as part· of the consideration for the sale of the goods that
the amount representing excise duty would be payable by the
purchaser. There is no other manner ofliability, statutory or otherwise,
under whic)l the purchaser would be liable to pay the amount of
excise duty to the dealer. And, on this reasoning, it would make no
c difference whether the amount of excise duty is included in the price
charged by the dealer or is shown as a separate item in the bill. In
either case, it would be part of the 'sale price' .......... "

The example given in the aforesaid decision is clearly applicable in the
present case. The sale price realised by the respondent has to be regarded as
D the entire price inclusive of excise duty because it is the respondent who has,
by necessary implication, taken on the liability to pay all taxes on the goods
sold and has not sought to realise any sum in addition to the price obtained ......
by it from the purchaser. The purchaser was under no obligation to pay any ~

amount in excess of what had already been paid as the price of the scarp.

E Under the circumstances, the Tribunal was right in directing that the
respondent is entitled to the benefit of Section 4(4)(d)(ii) of the Central
Excises & Salt Act.

For the aforesaid reasons, this appeal is dismissed. No costs.

F C.A. Nos. 660, 3841, 5867-5868/2000, 4082, 4455, 6072, 8455/2001
and 92/2002.

For the reasons stated in our order passed today in Civil Appeal No.
3783 of 2000 entitled Commissioner of Central Excise, Delhi v. Mis. Maruti
Udyog Ltd., these appeals are dismissed.
G Civil Appeal No. 391312001
..._
After hearing the learned counsel for the parties, we see no reason to
interfere with the decision of the Tribunal. Hence, the civil appeal is dismissed.

R.P. Appeals dismissed.