Holding

The value for the automobile cess must be computed in accordance with the Central Excises and Salt Act, 1944, as applied through Rule 3 of the Automobile Cess Rules, 1984, not as defined in the Explanation to Section 9(1) of the IDR Act.

Summary

The Collector of Central Excise, Patna appealed against the Customs, Excise & Gold (Control) Appellate Tribunal’s order that the value of motor vehicles for the automobile cess should be computed under the Central Excises and Salt Act, 1944, as per Rule 3 of the Automobile Cess Rules, 1984. The assessee, Tata Engineering & Locomotive Co., argued that the valuation should follow the Explanation to Section 9(1) of the Industries (Development and Regulation) Act, 1951, which defines "value" as the wholesale cash price. The Supreme Court held that the Explanation to Section 9(1) applies only to that subsection and not to the cess valuation; the relevant provision is Rule 3, which incorporates the Central Excises and Salt Act for cess calculation. Consequently, the cess is to be levied on the value determined as if it were excise duty, and the appeals were dismissed.

Issues considered

The proper basis for determining the "value" of motor vehicles for the levy of automobile cess under Section 9(1) of the Industries (Development and Regulation) Act, 1951.
Whether the Explanation to Section 9(1) governs the valuation for cess, or the provisions of the Central Excises and Salt Act, 1944 as incorporated by Rule 3 of the Automobile Cess Rules, 1984.

Legislation cited

Subjects

automobile cessvaluation of goodsIndustries Development and Regulation ActCentral ExciseRule interpretationtax assessment

Judgment

THE COLLECTOR OF CENTRAL EXCISE, PATNA A
v.
TATA ENGINEERING AND LOCOMOTIVE CO.
JAMSHEDPUR ETC.

MAY 7, 1997
B
[S.P. BHARUCHA AND M. JAGANNADHA RAO, JJ.)

Industries (Development and Regulation) Act 1951, s. 9(1) r/w.
Automobile Cess Rules 1984, Rule 2-Value of motor vehicle for pwposes of
f
levy of ces~~Held, to be calculated applying provisions of Central Excises C
and Salt Act, 1944 and not as set out in Explanation to s. 9( 1).

S. 9 of the Industries (Development and Regulation) Act, 1951, ('IDR
Act') provided for imposition of cess on scheduled industries. Under the
proviso to sub-section (1) thereof, the rate of cess could not exceed two D
annas per cent of value of the goods. The Explanation thereunder stated
that the "value" would be deemed to be the wholesale cash price for which
goods of like kind were sold for delivery at the place of manufacture and
at the time of their removal therefrom without any abatement or deduction
whatever except trade discount and the amount of duty payable thereon.
Under a notification issued under s. 9(1) of the IDR Act, the rate of excise E
duty, to be collected as a cess, was fixed at 118 per cent ad valorem for
motor cars and all other automobiles.

The respondent assessee contended that the assessable value was to
be calculated according to Rule 3 of the Automobile Cess Rules, 1984 which F
provided that in relation to levy and collection of cess, the Central Excises
and Salt Act, 1944 would apply. The Tribunal accepted this contention.
Revenue appealed to this Court.

Dismissing the appeal, this Court
G
HELD : In calculating 1/8 per cent ad valorem, the value of the goods
was not be determined as set out in the Explanation to s. 9(1) of Industries
(Development and Regulation) Act. The provision relevant was Rule 3 of
the Automobile Cess Rules, 1984, which stated that the provisions of the
Central Excise and Salt Act shall apply so far as may he in relation to the H
229
230 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.

A levy and collection of the cess. The opening words of the Explanation to
s.9(1) made it clear that it defined "value" only for the purposes of that
sub-section. (232-G-11]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3596-97
of 1989 Etc.
B
From the Judgment and Order dated 4.6.87 of the Customs, Excise
& Gold (Control) Appellate Tribunal, New Delhi in A. No. 2094 and 2749
of 1986-A (Order No. 432-433/87-A).

C.V.S. Rao, S.D. Sharma and Sushma Suri for the Appellant.
c t

V. Lakshmikumaran for M/s. J.B.D. & Co. for the Respondents.

The following Judgment/Order of the Court was delivered :

D S.P. BHARUCHA, J. The Revenue assails the correctness of the
judgment and order of the Customs, Excise and Gold (Control) Appellate
Tribunal. The appeals involve the interpretation of Section 9 of the In-
dustries (Development and Regulation) Act, 1951, the notification dated
28th December, 1983, issued thereunder and Rules 2 and 3 of the I
E
Automobile Cess Rules, 1984. The relevant provisions are reproduced :

The l11dustries (Developme11t & Regulatio11) Act, 1951 :
{
"S. 9. - Imposition of cess on scheduled industries in certain cases:
(1) There may be levied and collected as a cess for the purposes
of this Act on all goods manufactured or produced in any such
F scheduled industry as may be specified in this behalf by the Central
Government by notified order a duty of excise at such rate as may
be specified in the notified order, and different rates may be
specified for different goods or different classes of goods :

Provided that no such rate shall in any case exceed two annas
G per cent of value of the goods.

Expla11atio11 : In this sub-section, the expression "value" in relation
to any goods shall be deemed to be the wholesale cash price for
which such goods of the like kind and quality are sold or are
H capable of being sold for delivery at the place of manufacture and
C.C.E.,PATNA v. TATAENGG.&LOCOMOTIVECO.[S.P.BHARUCHA,J.] 231

at the time of their removal therefrom, without any abatement or A
deduction whatever except trade discount and the amount of duty
then payable.

(2) The cess shall be payable at intervals, within such time and in
such manner as may be prescribed, and any rules made in this
behalf may provide for the grant of a rebate for prompt payment B
of the cess.

(3) The said cess may be recovered in the same manner as an
arrear of land revenue.

( 4) The Central Government may handover the proceeds of the C
cess collected under this section in respect to the goods manufac-
tured or produced by any scheduled industry or group of scheduled
industries to the Development council established for that industry
or group of industries, and where it does so, the Development
Council shall utilise the said proceeds :-
D
(a) to promote scientific and industrial research with reference to
the scheduled industry or group of scheduled industries in respect
of which the Development Council is established;

(b) to promote improvements in design and quality with reference E
to the products of such industry or group of industries;

(c) to provide for the training of technicians and labour in such
industry or group of industries;

(d) to meet such expenses in the exercise of its functions and its
administrative expenses as may be prescribed." F

Notification No. S.O. 932 (E) dated 28.12.1983.

"In exercise of the powers conferred by sub-section ( 1) of Section
9 of the Industries (Development and Regulation) Act, 1951 (65
of 1951), the. Central Government hereby specifies the classes of G
goods manufactured ·or produced in the schedule industry of
transportation as mentioned in column (1) of the Table below on
which a duty of excise shall be levied and collected as a cess for
the purpose of the said Act, with effect from 1st January, 1984 at
the rate specified in the corresponding entry in column (2) of the H
232 SUPREME COURT REPORTS [1997) SUPP. 1 S.C.R.

A said Table.

TABLE
Description of Rate of duty of excise
class of goods

B (1) (2)
Motor cars, buses, trucks, jeep- 1/8 per cent ad valorem
type vehicles, vans, scooters,
Motor-cycles, mopeds and all
other automobiles.
c The Automobile Cess Rules, 1984 :

"R.2 - Definitions. - In these rules, unless the context otherwise
reqmres, -

(c) "Cess" means the cess levied and collected in terms of Notifica-
D tion No. S.O. 932(E), dated 28.12.1983 of Department of Heavy
Industry issued under sub-section (1) of Section 9 of the Act;

(t) Words and expression used herein and not defined but defined
in the Central Excises and Salt Act, 1944 (1 of 1944) or the rules
E made thereunder, shall ha\ie the meaning respectively assigned to
them in the Act or the Rules.

R. 3. - Application of Central Excise and Salt Act and the Rules
made thereunder : Save as otherwise provided in these Rules, the
provisions of Central Excises and Salt Act, 1944 (1 of 1944) and
F the rules made thereunder including those relating to refund of
duty, shall so far as may, apply in relation to the levy and collection
of the cess as they apply in relation to the levy and collection of
the duty of excise on manufacture of automobiles under the Act
and the Rules."
G It is contended by learned counsel for the Revenue that the cess must
be levied at 1/8 per cent of the value of the motor vehicle, the value being
computed as explained in Section 9(1). In other words, the value of the
motor vehicle for this purpose must be deemed to be the wholesale cash
price for which it is or is capable of being sold for delivery at the place of
H its manufacture and at the time of its removal therefrom "without any
C.C.E., PA1NA v. TATA ENGG. & LOCOMOTIVE CO. [S.P. BHARUCHA, J.] 233

abatement or deduction whatever except trade discount and the amount of A
duty then payable".

Learned counsel for the assessee submits that the value of the motor
vehicle for the purposes of the levy of the cess has to be calculated in the
manner laid down in the Central Excises and Salt Act, 1944, for which
purpose he places reliance upon Rule 3 of the Automobile Cess Rules. B
The Tribunal in the order under appeal accepted the contention of
the assessee and we are inclined to agree.

Section 9(1) of the Industries (pevelopment & Regulation) Act, C
1951, empowers the levy and collection of a cess on goods manufactured
or produced in a scheduled industry at such rate as may be specified by
the Central Government, different rates being permissible for different
goods or different classes of goods. The provision contemplates the exer-
cise by the Central Government of the function of fixing the rate of the
cess. The legislature, by the proviso to Section 9(1), has laid down the limits D
of the Central Government discretion in fixing such rate, namely, that such
rate shall not exceed two annas per cent of the value of the goods. It is for 1
this purpose that the Explanation in Section 9(1) defines the expression
"value" and states that it shall be deemed to be the wholesale cash price
for which such goods of the like kind and quality are sold or are capable E
of being sold for delivery a.t the place of manufacture and at the time of
their removal therefrom without any abatement or deduction whatever,
except trade discount and the amount of duty then payable. The opening
words of the Explanation make it clear that it defines the expression "value"
thus only for the purposes of Section 9(1).
F
The definition of the expression "value" for the specific purpose of
Section 9(1) does not, therefore, apply to the valuation of goods to be made
for the purposes of computation of the cess under the said notification. In
other words, in calculating 1/8 per cent ad valorem, the value of the goods
is not to be determined as set out in the Explanation to Section 9(1). For
this purpose, what is relevant is Rule 3 of the Automobile Cess Rules, 1984, G
which states that the provisions of the Central Excises and Salt Act shall
apply so far as may be in relation to the levy and collection of the cess.
The calculation of 118 per cent ad valorem of the motor vehicle for the
purposes of the levy and collection of the cess must, therefore, be made as
if it was excise duty that was being calculated and applying the provisions H
234 SUPREME COURT REPORTS (1997) SUPP.1 S.C.R.

A ofthe Central Excises and Salt Act for the purpose.
Accordingly, the appeals fail and are dismissed, with no order as to
costs.

The principle laid down in the judgment delivered by us today in
B Civil Appeal Nos. 3596-97 of 1989 - Collector of Central Excise, Patna v.
Tata Engineering & Locomotive Co., lamshedpur, being applicable, these
appeals are also dismissed, with no order as to costs.

S.M. Appeals dismissed.

0

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