Holding

The tribunal erred in not examining the applicability of Ashok Leyland Ltd. v. Collector of Central Excise in the context of Rule 6(b); the matter is remitted to the tribunal for fresh factual consideration.

Summary

Escorts Ltd. challenged a demand under Section 4(1) of the Central Excise and Salt Act, 1944, based on Rule 6(b) of the Central Excise Valuation Rules, 1975, after a show‑cause notice alleging contravention of the Excise Rules. The tribunal, relying on Ashok Leyland Ltd. v. Collector of Central Excise, held that because a price could be ascertained from the 2% of goods sold in the spare‑parts market, Section 4(1)(b) did not apply and valued the captively consumed goods on that market price, dismissing the appeal. Escorts argued that the goods sold in the market were not identical to those captively consumed and that Rule 6(b) applies only when price is unascertainable. The Supreme Court held that courts must not rely blindly on precedent and that the tribunal failed to consider the relevance of Ashok Leyland in the context of Rule 6(b). Consequently, the Court remitted the matter to the tribunal for fresh consideration of the factual matrix and the applicability of Ashok Leyland, allowing the appeals without costs.

Issues considered

Whether the tribunal correctly applied the Ashok Leyland principle to value captively consumed goods where only a small portion is sold in the market.
Whether Rule 6(b) of the Central Excise Valuation Rules, 1975, is applicable when the price of the goods is ascertainable.
Whether a court may rely on a precedent without a detailed factual comparison.

Legislation cited

Central Excise and Salt Act, 1944s. 4(1)
Central Excise Rules, 1944
Central Excise (Valuation) Rules, 1975s. 6(b)
Constitution of Indias. 141

Subjects

Central Excisevaluation of captively consumed goodsRule 6(b)precedent analysisAshok Leyland principleSection 4(1)show cause noticeremand

Judgment

ESCORTS LTD. A
v.
COMMISSIONER OF CENTRAL EXCISE, DELHI-II

OCTOBER 25, 2004

[ARIJIT PASAYAT AND C.K. THAKKER, JJ.] B

Central Excise and Salt Act, 1944-Section 4(1)-Central Excise Rules
1944-Central Excise Valuation Rules, 1975-Rule 6(b)-Show cause notice
to assessee for· contravention of provisions of 1944 Rules read with section C
4(1) and demand made referring to Rule 6(b)-Remittance of matter to the
tribunal-Tribunal applying Ashok Leyland's case in holding the case of
assessee that price ascertainable by way of direct sales, as such section 4(1)
does not apply and dismissing assessee 's appeal-On appeal, held: With
regard to the demand made, department's case rested on Rule 6-Tribunal
did not consider the applicability of Ashok Leyland's case in the background D
of Rule 6 though it has substantial bearing on the dispute-As such th,e
matter remitted to the tribunal for considering the factual aspect and
applicability of Ashok Leyland's case to the facts of the instant case.

Constitution of India, 1950-Artic/e 141-Precedents-Reliance on-
Principles to be taken care of-Held: Courts should place reliance on E
decisions after discussing as to how the factual situation fits in with the facts
situation of the decision on which reliance is placed-Observations of Courts
cannot be read as Euclid's theorems or provisions of the statute but in the
context in which they appear to have been stated-While interpreting words,
phrases and provisions of a statute, judges may embark into lengthy F
discussions which is meant to explain and not to define-Further the judges
do not interpret judgments since the judgments are not to be construed as
statutes-Also the words of statutes are to be interpreted, their words are not
to be interpreted as statutes-Interpretation of Statutes.

Appellant was issued show cause notice for contravention of various G
provisions of Central Excise Rules, 1944 read with section 4(1) of Central
Excise and Salt Act, 1944 and demand was made referring to Rule 6(b) of
Central Excise Valuation Rules, 1975. Both Collector of Central Excise and

- tribunal confirmed the demand. However, this Court remitted the matter to be
heard afresh.
603 H
604 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A 98% of the goods were capitvely consumed by assessee and there was
2% direct sale in the spare market. For ascertaining the value of goods
captively consumed by assessee, tribunal applied the decision of Ashok
Leyland's case that when price is ascertainable by way of direct sale, section
4(1 )(b) would not apply, and as such the valuation of goods captively consumed
B is to be based on market price of goods directly sold, and dismissed the appeals ..
filed by the assessee. Hence the present appeal.

Appellant-assessee contended that the tribunal was wrong in applying
the principles laid down in Ashok Leyla1:1d's case as the judgment in that case
can be applicable only in a situation where the goods sold in the spare parts
,€ market are identical and complete in all respects to the goods captively
consumed and in the instant case, the goods captively consumed are different
and not identical to the goods sold in the spare parts market; and that the
department based its case on Rule 6 which has application only when prices
are unascertainable.

D Respondent-department contended that the assessee did not bring out
any factual difference so far as the instant case is concerned vis-a-vis what
was decided in Ashok Leyland's case as such the order of the tribunal does
not warrant any interference.

Allowing the appeals, the Court
E
HELD: 1. Courts should not place reliance on decisions without
discussing as to how the factual situation fits in with the facts situation of
the decision on which reliance is placed. Disposal of cases by blindly placing •
reliance on a decision is not proper. Circumstantial flexibility, one additional
or different fact may make a world of difference between conclusions in two
F cases. Observations of Courts are neither to be read as Euclid's theorems
nor as provisions of the statute and that too taken out of their context These
observations must be read in the context in which they appear to have been
stated. Judgments of Courts are not to be construed as statutes. To interpret
words, phrases and provisions of a statute, it may become necessary for judges
G to embark into lengthy discussions but the discussion is meant to explain
and not to define. Judges interpret statutes, they do not interpret judgments.
They interpret words of statutes; their words are not to be interpreted as
statutes. (608-A-q

Collector of Central Excise, Calcutta v. Mis Alnoori Tobacco Products
H and Anr., C.A.Nos. 4502-4503 of 1998 decided by Supreme Court on
..
ESCORTSLTD.v. C.C.E.DELHI-11 [PASAYAT,J.) 605

21.7.2004, referred to. A
London Graving Dock Co. Ltd. v. Horton, (1951) AC 737; Home Office
v. Dorset Yacht Co., (1970) 2 All ER 294 and Herrington v. British Railways
Board (1972) 2 WLR 537, referred to.

2. In the instant case, the department's case rested on Rule 6 of the B
Central Excise Valuation Rules, 1975. The tribunal did not consider the
applicability of Ashok Leyland's case in the background of Rule 6 though it
has substantial bearing on the dispute. Therefore, the matter is remitted to
the tribunal for considering the factual aspect and the applicability of Ashok
Leyland's case to the facts of the instant case. [609-D-E]
c
Ashok Leyland Ltd. v. Collector of Central Excise, Madras [2002] 10
sec 3'44, referred to.
eIVIL APPEL LATE JURISDICTION : Civil Appeal Nos. 7310-7312 of
2003,r1·,\/ i.1
D
From""the Judgment and Order dated 4.4.2003 of the Central Excise
Customs and Gold (Control) Appellate Tribunal, New Delhi in A.No.E./1574
and 3180/93-A and E/1668/94-A in F.O. Nos. 163-165 of2003-NB(A).

V. Lakshmi Kumaran, Alok Yadav and Rajesh Kumar for the Appellant. E
R. Mohan, Additional Solicitor General, Krishnamoorthy Swamy, T.A.
Khan and P.Parmeshwaran with him for the Respondent.

The Judgment of the Court was delivered by

ARIJIT PASA YAT, J. Appellant calls in question legality of the judgment F
rendered by the Customs, Excise and Gold (Control) Appellate Tribunal (in
short the 'CEGA T') in Appeal Nos. E/1574 and 3 l 80/93A and E/1668/94-A.
The factual background in a nutshell is as follows:

Show cause notice was issued on 29.04.1993 to the appellant in respect
of the period I.I 0.1992 to 11.3 .1993 alleging contravention of the various G
provisions of Central Excise Rules, 1944 (in short the 'Rules') read with
Section 4(1) of the Central Excise and Salt Act1 1944 {in short the 'Act'). A
reference was made to Rule 6(b) of the Central Excise Valuation Rules, 1975
(in short the 'Valuation Rules') and it was indicated that there was a short
. levy of duty amounting to Rs.38,08,127.40. A reply to the said notice was H
606 SUPREME COURT REPORTS [2004) SUPP. 5 S.C.R.

A furnished on 29 .05 .1993 by the noticee (hereinafter referred to as the
'Assessee') taking the stand that there was no contravention as alleged.

On consideration of the materials on record and the show cause
noticee's reply the Collector .of Central Excise, New Delhi, confitmed the
demand of the aforesaid amount. It was held that the stand taken by the
B assessee in the reply was without substance.

The assessee p~eferred appeals before CEGAT which by its order dated
5.10.1998 dismissed the appeals. The matter was brought before this Court
taking th~ stand that the appeals were disposed of without grant of an
C opportunity being heard to the assessee. By order dated 24.8.2001 this Court
set aside the order passed by the CEGA T and remanded the matter for fresh
consideration on merits without expressing any view on the merits of the
case. Thus the matter was heard afresh by CEGA T.

According to the CEGA T the issue involved is •ene relating to
D determination of the value of goods captively consumed by the assessee. It
took note of the fact that there was admittedly 2% directr~tue !n_ the spare
market though 98% of the production was being captively consµmed. It was
noted that how the value of goods captively consumed is to be ascertained
has been settled by this Court in Ashok Leyland Ltd. v. Collector of Central
Excise, Madras, [2002] I 0 SCC 344 it was noted that as per the said decision,
E since price is ascertainable by way of direct sale, the question of applying
Section 4(1)(b) of the Act would not arise. The valuation of the goods
captively consumed is to be based on the market pri~e of the goods directly
sold. Therefore, the appeals filed by the assessee were dismissed, but that
part of the order passed by the Collector, which related to penalty, was set
F aside.

Mr. V. Lakshmi Kumaran, learned counsel appearing for appellant
submitted that the Tribunal was wrong in applying the decision in the Ashok
Leyland's case (supra) as the factual position was different. Department based
its case on Rule 6 of the Valuation Rules which has application only when
G prices are unascertainable. As the judgment in that case can be applicable
only in a situation where. the goods sold in the spare parts market are identical
and complete in all respects to the goods captively consumed, admittedly,
since in the present case, the goods captively consumed are different and not
identical to the goods sold in the spare parts market, the principles laid down
in Ashok Leyland's case (supra) will not apply.
H
ESCORTSLTD.v. C.C.E.DELHI-II[PASAYAT,J.] 607

In response Mr. R. Mohan learned Additional Solicitor General, A
appearing for the Revenue, submitted that the assessee did not bring out any
factual difference so far as the present case is concerned vis-a-vis what was
decided in Ashok Leyland's case (Supra). Therefore, the CEGA T's decision
does not warrant any interference.

In Ashok Leyland's case (supra) it was, inter alia, held as follows: B
"In our view, the provisions of the Act are very clear. Excise duty
is payable on removal of goods. As there may be no sale at the time
of removal, Section 4 of the Act lays down how the value has to be
determined for the purposes of charging of excise duty. The main
provision is Section 4(l)(a) which provides that the value would be C
the normal price thereof, that is, the price at which the goods are
ordinarily sold by the assessee to a buyer in the course of a wholesale
trade. Section 4(4)(e) clarifies that a sale to a dealer would be deemed
to be wholesale trade. Therefore, the normal price would be the price
at which the goods are sold. in the marked in the wholesale trade. D
Generally speaking, the normal price is the one at which goods are
sold to the public. Here the sale to the public is through the dealers.
So the normal price is the sale price to the dealer. The proviso, which
has been relied upon by learned counsel, does not make any exception
to this normal rule. All that the proviso provides is that if an assessee
sells goods at different prices to different classes of buyers, then in E
respect of each such class of buyers, the normal price would be the
price at which the goods are sold to that class. The proviso does not
mean or provide that merely because the assessee sells at different
prices to different classes of buyers, the price of that commodity
becomes an unascertainable price. The price of that commodity will F
remain the normal price at which those goods are ordinarily sold by
the assessee to the public, in other words, the price at which they are
sold in the market. The mere fact that sale is also made to the Defence
or to the Civil Department of the Government at different prices would
not mean that the price becomes an unascertainable price. In the case
of the appellants, a price is ascertainable. They admittedly sell in the G
market at a particular price. Section 4(1 )(b) would not come into play
and would not apply at all. Section 4(1)(b) of the Act would not apply
if the price cannot be ascertained. In this case, as indicated above, the
price is ascertainable and, therefore, the question of application of
Section 4(1)(b) does not arise. If Section 4(1)(b) does not apply, Rule H
608 SUPREME COURT REPORTS [2004) SUPP. 5 S.C.R.

A 6 will also not apply."

Courts should not place reliance on decisions without discussing as to
how the factual situation fits in with the fact situation of the decision on
which reliance is placed. Observations of Courts are neither to be read as
Euclid's theorems nor as provisions of the statute and that too taken out of
B their context. These observations must be read in the context in which they
appear to have been stated. Judgments of Courts are not to be construed as
statutes. To interpret words, phrases and provisions of a statute, it may
become necessary for judges to embark into lengthy discussions but the
discussion is meant to explain and not to define. Judges interpret statutes,
C they do not interpret judgments. They interpret words of statutes; their words
are not to be interpreted as statutes. In London Graving Dock Co. Ltd v.
Horton (1951) AC 737 at p. 761, Lord Mac Dermot observed:

"The matter cannot, of <:ourse, be settled merely by treating the
ipsissima vertra of Willes, J as though they were part of an Act of
D Parliament and applying the rules of interpretation appropriate thereto.
This is not to detract from the great weight to be given to the
language actually used by that most distinguished judge."

In Home Office v. Dorset Yacht Co., (I 970) 2 All ER 294 Lord Reid said,
"Lord Atkin's speech .... .is not to be treated as if it was a statutory definition
E It will require qualification in new circumstances." Megarry, Jin (1971) I WLR
I 062 observed: "One must not, of course, construe even a reserved judgment
of Russell L.J. as if it were an Act of Parliament." And, in Herrington v.
British Railways Board (1972) 2 WLR 537 Lord Morris said:

"There is always peril in treating the words of a speech or judgment
F as though they are words in a legislative enactment, and it is to be
remembered that judicial utterances made in the setting of the facts
of a particular case."

Circumstantial flexibility, one additional or different fact may make a
world of difference between conclusions in two cases. Disposal of cases by
G blindly placing reliance on a decision is not proper.

The following words of Lord Denning in the matter of applying
precedents have become locus classicus:

"Each case depends on its own facts and a close similarity between
H one case and another is not enough because even a single significant
ESCORTS LTD. v. C.C.E. DELHI-II[PASAYAT,J.] 609

detail may alter the entire aspect, in deciding such cases, one should A
avoid the temptation to decide cases (as said by Cordozo) by matching
the colour of one case against the colour of another. To decide
therefore, on which side of the line a case falls, the broad resemblance
to another case is not at all decisive."

*** *** *** B
"Precedent should be followed only so far as it marks the path of
justice, but you must cut the dead wood and trim off the side branches
else you will find yourself lost in thickets and branches. My plea is
to keep the path to justice clear of obstructions which could impede
it." c
This aspect has been highlighted in Collector of Central Excise,
Calcutta v. Mis Alnoori Tobacco Products and Anr., (Civil appeal nos. 4502-
4503of1998 decided on 21.7.2004).

It is correct as contended by learned counsel for the assessee-appellant D
that the department's case rested on Rule 6 of the Valuation Rule. CEGAT did
not consider the applicability of Ashok Leyland's case (supra) in the
background of Rule 6 of the Valuation Rules though it has substantial bearing
on the dispute. In the aforesaid circumstances without expressing any view
on the merits we remit the matter to the CEGAT for considering the factual E
aspect and the applicability of Ashok Leyland's case (supra) to the facts of
the present case. The appeals are allowed to the extent indicated above
without any order as to costs.

N.J. Appeals allowed.