UNION OF INDIA & ORS.versusMAHINDRA & MAHINDRA LTD.

                       [2014] 7 S.C.R. 504


A                    UNION OF INDIA & ORS.
                                 V.
                 MAHINDRA & MAHINDRA LTD.
                 (Civil Appeal No. 6620 of 2003)
                          MAY 09, 2014.
B
          [SUDHANSU JYOTI MUKHOPADHAYA AND
                 J. CHELAMESWAR, JJ.]

        CENTRAL EXCISE ACT, 1944:
c      s. 4 - Normal price in the course of wholesale trade -
  Determination of - Show cause notices issued for short
  payment of excise duty covering period 1982 to 1985 - High
  Court quashed the same - On appeal, held: Assessee failed
  to bring the ascertainable price of the goods, cost of
D transportation to depot etc., to the notice of the High Court -
  Assessee simply challenged the show cause notices on the          '
  ground that amended s.4 was not applicable - High Court
  without looking into the relevant fact, declared the notices
  illegal only on the ground that sub-clause (iii) to s.4(b) was
E subsequently adde~d by amendment including 'depot',
  'premises of consignment agent' or any other place' or
  'premises' from where the excisable goods were to be sold
  after their clearance from the factory - Matter remitted to the
  competent authority for reconsideration.
F
       s.4 (as amended by Finance Act, 1996) - Applicability
  of.

     . The assessee-respondent was issued two show
  cause notices by lthe appellant-department for short
G payment of excise cluty under Section 11 A of the Central
  Excise Act, 1944. Tlhe High Court quashed the notices.

        The question which arose for consideration in the

H,                              504
 UNION OF INDIA    v. MAHINDRA & MAHINDRA LTD. 505
instant appeal was whether the High Court was justified      A
in in~erfering at the stage of issuance of show cause
notice when the notices were pertaining to under
assessment due to 'incorrect application of Section 4 of
the Act.
                                                             B
   Allowing the appeal and remitting the matter to the
competent authority, the Court

      HELD: 1. By Finance Act, 1996 (33/1996), Section 4
of the Central Excise Act was amended and the
possibility of there being different prices af different C
places of removal was added by inserting Section (ia)
after Section 4(1 )(a)(i). The depots came to be added in
the definition of place of removal by adding sub-clause
(iii) after Section 4 (4)(b)(ii). Then concept of time of
removal came to be added by adding sub-clause (ba) D
after sub-clause (b) in Section 4(4). In view of the fact that
the amendment was made subsequently in the year 1996,
the High Court mainly proceeded on the question
whether the Revenue was justified in demanding excise
duty on the basis of the higher price, at which the tractors E
were sold by the assessee from their depots whether on
wholesale basis or retail under the law as it stood at that
point of time. The said question was answered in negative
in favour of the assessee and the High Court set aside
the show-cause notices. In the instant case as the matter F
related to the years 1982 to 1985, Section 4, as it then
stqod would apply. As per Section 4, any activity ancillary
to but not incidental to the manufacture cannot be
included as part of the activity for the manufacture. Any
income either in the form of interest on deposits, notional G
or real earned on the deposit etc. would not be the price
for the manufacture though they might be profits or gains,
if any, of any ancillary or allied venture. [Paras 4, 13, 14 ·
and 17] [515-G; 516-8, C, E, F; 512-D-E]
    2. In the instantcase the assessee failed to bring the   H.
    506      SUPREME COURT REPORTS            . (2014) 7 S.C.R.
                                                                  I
                                                                  I
A ascertainable price of the tractor, cost of transportation
  to depot, etc. to the notice of the High Court. The
  assessee simply challenged the show-cause notices on
  the ground that the amended Section 4 is not applicable.
  The High Court without looking into the relevant fact, only .
B on the ground that sub-clause (iii) to Section 4(b) was
  subsequently added by amendment including 'depot',
  'prel'l'.lises of. consignment agent' or 'any other place' or
  'premises' from where the excisable goods were to be
  sold after their clearance from the factory, declared the
C notices illegal and set aside the same. Even the matter
  was not remanded back to competent authority allowing
  the assessee to bring to its notice "normal price", in
  course of wholesale trade, place of removal of tractors,
  transportation charges, etc. [Para 18) [521-F-H; 522-A]
D
        Union of India and Ors. v. BomlJay Tyre International Ltd.
  and Ors (1984) 1 SCC 467: 1984 (1) SCR 347; Asstt.
  Collector of Central Excise v. Madras Rubber Factory Ltd.
  1986 Supp. SCC 751; Collector 'of Central Excise v. Mis.
E Indian Oxygen Ltd. A1R 1988 SC 1873: 1988 (1) Suppl. SCR
  761; Union of India v. Bombay Tyne International Ltd. (1984)
  1 SCC 467 1984 (1) SCR 347 - r4~1ied on.

                        Case Law Re1ference :
          1984 (1) SCR 347           Relied on        Para 15
F
          1986 Supp. sec 751         Relied on        Para 15
          1988 (1) Suppl. SCR 761 Relied on           Para 17
          1984 (1) SCR 347           Relied on        Para 17
G                                                 '
         CIVIL APPELLATE JURISDICTION: Civil Appeal No.6620
    of 2003.
        From the Judgment and Order dated 13.09.2002 in WP
    No. 29e6t1986 of the High Court of Judicature at Bombay.
H
 UNION OF INDIA v. MAHINDRA & MAHINDRA LTD.                  507

      R.P. Bhatt, Arijit Prasad, Shalini Kumar, B. Krishna Prasad   ~
for the Appellants .

    .Gaurav Goel (for E.C. Agrawal a) for the Respondent.

     The Judgment of the Court was delivered by .
                                                                    B
,    SUDHANSU JYOTI IYIUKHOPADHAYA, J •. 1. This
rappeal is dir~cte.d against the judgment and order dated 13th
ISru>tembet. ·2qp2 passed by- th,e High Court of Judicature at
+eorribay i~ Writ Petition oN0;2986 of 1986. By the impugned
:iudgment the Division Bench of the High Court set aside two C
 show-cause notices dated 12th August, 1985 and 4th February,
 1986 issued by Superintendent of Central Excise for short
 payment of excise duty under Section 11A of the Central
 Excise and Salt Act, 1944 (hereinafter referred to as, 'the Act').
                                                                    D
      2. The factual matrix of the case is as follows:

      The respondent-Mahindra & Mahindra Limited is a Public
 Limited Company (hereinafter referred to as the "assessee")
 and manufactures agricultural tractors (faUi!'lg Under. Tariff item
 No.34-11}, required engines (Tariff item No.29) and certain E
 components (Tariff item No.68) for the same: at its factory
 situated at Kandivali, Mumbai. The assessee has its sales
 depots at Bombay, Daman, Ludhiana and Lucknow, etc. It had
 been filing classification list and price list periodically under the
 procedure of self-removal of excisable goods which is unfjer F
•control and supervision of lnspectol'S of Excise at the faotory' ·.
 level who in turn are under the control of the Superintendent of
'Excise. Accordingly, the assessee had been paying the e.xcise
.duty on the goods removed at the factory gate regularly.
                                                                    G
     3. The competent authority in exercise of power conferred
 under the Act issued two above referred show-cause notices
 dated 12th August, 1985 and 4th February, 1986. The first
 show-cause notice dated 12fh August, 1985 covered the period
                                                                    H
    508       SUPREME COURT REPORTS                    [2014] 7 S.C.R.


A from 1982 to 1985 and alleged therein:-

          (i) that the asses.see sold the duty paid stocks from their
          sales depots at the higher price;

          (ii) that the sales depots were related persons and that
B         therefore the price at which the goods were sold from the
          depots should be considered as the assessable value;

          (iii) that though the retail price included excise duty, freight
          and dealer's margin, excise duty had been paid at the
c         factory gate without including the aforesaid amounts and
          that this was incorrect in view of Rule 6(a) of Central Excise:
          (Valuation) Rules, 1975;

          (iv) that the assessee had not included in the assessable
D         value (1) after sales services charges (2) dealer's margin
          (3) marketing anid selling expenses and (4) excess freigh~;

          (v) that the assessee had concealed the invoice value.

       4. The notice alleged that there was an under assessment
E due to incorrect application of Section 4 of the said Act for the
  above referred reasons, and therefore, called upon the
  respondent to show cause to the Assistant Collector of Central
  Excise Goregaon (East) Bombay under Section 11A of the
  said Act.
F
       5. The assessee filed a detailed reply to the notice on 30th
  September, 1985, much beyond the period of filing reply. It was
  pointed out that the assessee had been regularly filing its
  monthly returns and maintaining the production registers. It had
G been filing classification list and price list which were checked
  thoroughly by the assessing authority right from the production
  stage. The depots are neither different bodies nor have they
  any separate existence. They are part and parcel of the
  assessee itself. With respect to Rule 6(a), it was submitted that
H the said Rule applies only in those cases where the value is 1
  UNION OF INDIA v. MAHINDRA & MAHlf'4Df'Kttt:r::;, 509                ·~
      [SUDHANSU JYOTI MUKHOPADHAYA, J.] .
  not ascertainable under the main definition of the term normal A
. price in Section 4(1 )(a) of the said Act. It was als<? submitted..
  that the wholesale sales are on principal to principal basis and
  all the services like marketing, selling, servicing etc. thereafter
  are not done by the assessee but by the dealers. It was denied
 .th~t there was suppression of any information pertaining to sale B
I,in~oices and since the department did not seek review of the
 'approved price list, there was no justification In attempting to
  revoke the already approved assessable value.

     6. Another show-cause notice dated 4th February, 1986
.was issued by the competent authority covering the period from
 1st August, 1985 to 31st October, 1985 whereunder the
 competent authority asked to show cause as to why an amount
 of Rs.20,00,754.50 (Rupees Twenty Lakhs Seven Hundred Fifty
 Four and Paise Fifty only) be not assessed.
                                                                       D
       It was alleged that the assessee declared the unit of sale
 of one tractor for sale to individual buyers which includes freight
 and <;leclare margin, besides excise duty, and that it is making
 sales of tractors from Bombay and from its depots at Daman,
 Lucknow and Ludhiana to individual buyers directly through its        E
 declared prices and that it did not declare such fixed retail price
 which could have been assessed by reducing such amounts,
 on account of freight and part of declare margin as is necessary
 and reasonable in the opinion of proper officer to arrive at the
 assessable value. Thus, it was alleged that there has been short      F
·payment of duty of excise for the reasons enumerated in the
 show-cause notice and that such short payment worked out in
 the annexure to this notice amounts to Rs.20,00,754.50
·(Rupees Twenty Lakhs Seven Hundred Fifty Four and Paise
 Fifty only)- Basic excise duty and Rs.1,00,037. 75 (Rupees One        G
 Lakh Thirty Sever:i and Paise Seventy Five only)- Special
 excise duty totaling Rs.21,00,792.25 (Rupees Twenty One
·Lakhs Seven Hundred Ninety Two and Paise Twenty Five only)
"during the period from 1st August, 1985 to 31st October, 1985.
  The assessee was asked to show-cause to the Assistant                H
        510     SUPREME COURT REPORTS                   [2014] 7 S.C.R.
•
    ~ Collector of Central Excise, Goregaon (East) Bombay as to
        why the_ differential duty amount of last five years should not be
        recovered from them under Sectio'!•11-A of the Act.
            The assessee replied to the show-cause notice by its letter
    ,:~ dated'25th March, 1986. The assessee by its earlier letter
        dated 24th February, 1986, also asked for the work sheets
        showing as to how the assessable value had bee~ worked out.

            7. Thereafter,
               \ \
                            the assessee was served with annexure to
      the first show-cause notice on 21st May, 1986. The annexure
    C stated that the list showing the difference in the prices at Daman
      and Ludhiana when compared to those at Bombay which was
      on much higher side upto Rs.5,000/- per tractor and it
      contained the amount beyond the reasonable expenditure on
      account of transportation, insurance etc. In the said annex.ure,
    D it was accepted that few tractors i.e. about 20% were sold at
      the factory gate at l<andivali to show that th~ prices are
      ascertainable at the factory gate under Section 4(1)(a) of the
      said Act. It was further alleged that this was done with an
      ulterior motive to reduce the duty liability. It was cl~imed that
    E there was a short payment to the tune of Rs.3,59,45,487.40
      (Rupees Three Crores Fifty Nine Lakhs Forty Five Thousand
      Four Hundred Eighty Seven and Forty Paise only) and thereby
      asked as to Why a penal action under the Act should not be
      initiated apart from the recovery under Section 11A of the Act.
    F Detailed charts supporting the c;:laim were also enclosed along
      with the annexure ..
            8. Thereafter, the assessee instead of waiting for a
        decision or moving before CEGAT moved before the High
        Court challenging both the notices.
    G
            . 9. The High Court referring to the old and amended
        Section 4 of the Act he1ld that the department was not justified
        in demanding the excise duty on the basis of higher price, at
        which the tractors were sold by the assessee from their Depots
    H
    UNION OF INDIA v.· MAHINDRA & MAHINDRA LTD.                511
        [SUDHANSU JYOTI MUKHOPADHAYA, J.]
whether on wholesale price or retail price under the law in force     A
at that point of time.

1   10. Learned counsel for the petitioners made the following
submissions:

      (a) The High Court was not justified in interfering at the      B
      stage of issuance of show-cause notice when the notices
      were pertaining to under assessment due to incorrect
      application of Section 4 of the Central Excise and Salt
      Act, 1944.
                                                                      c
      (b) The High Court was not justified in holding that the
      ex factory gate price was ascertainable in this case, even
      when it was not disputed that there was over charging at
      the depots in excess over the alleged ex factory price.

      (c) The High Court failed to take into account the fact that    D
      in the case of sale through depots expenses on account
      of cost of transportation including insurance freight only
      is allowed deduction.

      (d) Disputed question of fact being involved, the High          E
      Court should have remitted the matter back to the
      Department asking the parties to lead ·evidence for
      deduction towards transportation and "insurance".

      11. On the other hand, according to the learned counsel         F
for the respondent-assessee it is too late to remand the matter
to the competent authority. According to assessee the
difference in price has been on account of freight, after sale
service charges, dealer's margin, expenses in respect of
marketing, selling etc. Therefore, the Revenue cannot allege that     G
there was short deposit of excise duty by the assessee or that
the assessee has failed to cornply with Section 4 of the Act.

      12. Section 4 of the Act, as it then stood, reads as follows:
       "Section 4. Valuation of excisable goods for                   H
    512       SUPREME COURT REPORTS                  [2014] 7 S.C.R.


A         purposes of charging of duty of excise.-(1) Where
          under this Act, the duty of excise is chargeable on any
          excisable goods with reference to value, such value shall,
          subject to the other provisions of this section, be deemed
          to be-
B
          (a) the normal price thereof, that is to say, the price at
          which such goocis are ordinarily sold by the assessee to
          a buyer in the course of wholesale trade for delivery at
          the time and place of removal, where the buyer is not a ·
          related person and the price is the sole consideration for
c         the sale:

          Provided that:-

          (i) where, in accordance with the normal practice of the
D         wholesale trade in such goods, such goods are sold by
          the assessee at different prices to different classes of
          buyers (not being related persons) each such price shall,
          subject to the existence of the other circumstances
          specified in clause (a), be deemed to be the normal price
          of such goods in relation to. each such class of buyers;
E
            (ii) where such goods are sold by the assessee in the
            course of wholesale trade for delivery at the time and
          . place of removal at a price fixed under any law for the
            time being in force or at a price, being the maximum,
F           fixed under any such law, then, notwithstanding anything
            contained in clause (iii) of this proviso, the price or the
            maximum price, as the case may be, so fixed, shall, in
            relation to the goods so sold, be deemed to be the normal
            price thereof;
G
          (iii) where the assessee so arranges that the goods are
          generally not sold by him in t(le course of wholesale trade
          except to or through a related person, the normal price
          of the goods sold by the -assessee to or through such
          related person shall be deemed to be the price at which
H
. U~ION OF INDIA v. MAHINDRA & MAHINDRA LTD. 513
      [SUDHANSU JYOTI MUKHOPADHAYA, J.]
   they are ordinarily sold by the related person in the         A
 · course of wholesale trade at the time ·of removal, to
   dealers (not being related persons) or where such goods
   are not sold to such dealers, to dealers (being related
   persons) who sell such goods in retail;
                                                                 B
    (b) where the normal price of such goods is not
   ascertainable for the reason that such goods are not sold
   or for any other. reason, the nearest ascertainable
   equivalent thereof determined in such mariner as may
   be prescribed.
                                                                 c
   (2) Where, in relation to a,ny excisable goods the price
   thereof for delivery at the place of removal is not known
   and the value thereof is determined with reference lo the
   price for delivery at a place other than the place of
   removal, the cost of transportation from the place of         D
   removal to the place of delivery shall be excluded from
   such price.

   (3) The provisions of this section shall not apply in
   respect of any excisable goods for which a tariff value has   E
   been fixed under sub-section (2) of Section 3.

   (4) For the purposes of this section,-

    (a)    'assessee' means the person who is liable to pay
           the duty of excise under this Act and includes his    F
           agent;

    (b)    'place of removal' means-.

    (i)    a factory or any other place or premises of·
           production or manufacture of the excisable goods; G
           or

    (ii)   a warehouse or any other place or premises
           wherein the excisable goods have been permitted
           to be deposited without payment of duty,              H
    514      SUPREME COURT REPORTS                 [2014] 7 S.C.R.

A         From where such goods are removed;

          (c) 'related person' means a person who is so associated
          with the assessee that they have interest, directly or
          indirectly, in the bu~"iness of e~ch other and includes a ·
B
          holding company, a :subsidiary company, a relative and a
          distributor of the assessee, and any sub-distributor of such
          distributor.

          Explanation.-ln this clause 'holding company',
          'subsidiary company' and 'relative' have the same
c         meanings as in the Companies Act, 1956;

          (d) 'value' in relation to any excisable goods,-

          (i) where the goods c1re delivered at the time of removal
          in a packed condition, includes the cost of such packing
D         except the cost of the packing which is of a durable
          nature and is returnable by the buyer to the assessee.

          Explanation.-ln this sub-clause "packing" means th'e
          wrapper, container, bobbin, pim, spool, reel or warp beam
E         or any other thing in which or on which the excisable
          goods are wrapped, contained or wound;
                        '
          (ii) does not include the amount of the duty of excise,
          sales tax and other taxes, if any, payable on such goods
          and, subject to such rules as may be made, the trade
F
          discount (such discount not being refundable on any
          account whatsoever) allowed in accordance with the
          normal practice of fht"J wholesale trade at the time of
          removal in respect of such goods sold or contracted for
          sale;
G
          Explanation: For the purposes of this sub clause, the
          amount of the duty of excise payable on any excisable
          goods shall be the sum total of'-

H
 UNION OF INDIA v. MAHINDRA & MAHINDRA LTD.                  515
     [SUDHANSU JYOTI MUKHOPADHAYA, J.]
    (a) the effective duty of excise payable on such goods           A
    under this Act, and

    (b) the aggregate of the effective duties of excise payable
    under other Central Acts, if any, providing for the levY. of
    duties of excise on such goods.
                                                            •
                                                                     B
    And the effective duty of excise on such goods under
    each Act referred to in clause (a) or clause (b) shall be:-

     (i} in a case where a notification or order providing for any
     exemption (not being an exemption for giving credit with        c
     respect to, for reduction of duty of excise under such ac1
     on such goods equal to, any duty of excisable under
     such act, or the ·additional duty under Section 3 of the
     Customs Tariff Act, 1975, already paid) on the raw
     material of component parts used in the production or           0
     manufacture of such goods from the duty"of excise under
    -such act is for the time being in force, the duty of excise
     computed with reference to the rate specified in such Act,
     in respect of such- goods as reduced so· as to give full
     and complete effect to such exemption, and
                                                                     E
    (ii) In any other case, the duty of excise with reference to
    the rate specified in such Act in respect of such goods,

    (c) "wholesale trade" means sales to deals, industrial
    consumers, Government, local authorities and other               F
    buyers, who or which purchase their requirements
    otherwise than in retail."

      13. By Finance Act, 1996 (33/1996), Section 4 of the Act
was amended. and the possibility of there being different prices     G
at different places of removal was added by inserting Section
(ia) after Section 4(1 )(a)(i). The said Section reads as follows:

     "(ia) where the ptice at which such goods are ordinarily
     sold by the assessee is different for different places of
     removal, each such price shall, subject to the existence        H
    516      SUPREME COURT REPORTS                  [2014] 7 S.C.R.


A         of other circumstances specified in clause (a), be
          deemed to be the normal prices of such goods in relation
          to each such place of removal."

        The depots came to be added in the definition of place of
  . removal by adding sub-clause (iii) after Section 4 (4)(b)(ii). The
8
    added sub-clause (iii) reads as follows:

          "(iii) a depot, premises of a consignment agent or any
          other place or premises from where the excisable goods
          are to be sold after their clearance from the factory"
c
        Then concept of time of removal came to be added by
    adding sub-clause (ba) after sub-clause (b) in Section 4(4). This
    sub-clause (ba) reads as follows:-

          "(ba) "time or removal" in respect of goods removed from
D         the place of rnmoval referred to in sub-clause (iii) of
          clause (b) shall be deemed to be the time at which such
          goods are cleared from the factory:"

        14. In view of the fact that the amendment was made
E subsequently in the year 1996, the High Court mainly
  proceeded on the question whether the Revenue was justified
  in demanding excise duty on the basis of the higher price, at
  which the tractors were sold by the assessee from their depots
  whether on wholesale basis or retail under the law as it stood
F at .that point of tim1:i. The said question was answered in
  negative in favour of the assessee and the High Court set aside
  the show-cause notices.

       In the present ca1se as the matter relates to the years 1982
  to 1985 Section 4, as it then stood and quoted above shall
G apply.

         15. The scope of Section 4 has been explained by this
    Court in Union of India and Ors. v. Bombay Tyre International
    Ltd. and Qrs, (1984) 1 SCC 467. The ramifications thereof has
H
 UNION OF INDIA v. MAHINDRA & MAHINDRA LTD. 517
     [SUDHANSU JYOTI MUKHOPADHAYA, J.]
also been discussed in Asstt. Collector of Central Excise v.        A
Madras Rubber Factory Ltd., 1986 Supp. SCC 751.

    16. In Bombay Tyres International Ltd. (supra) this Court
had an elaborate discussion on Section 4 and the changes
brought in by 1973 Amendment Act. In the said case this Court
                                                                    8
observed and held as follows:

    "26. Accordingly, we hold that pursuant to the old Section
    4(a) the value of an excisable article for the purpose of
    the excise levy should be taken to be the price at which
    the excisable article is sold by the assessee to a buyer        C
    at arm's length in the course of wholesale trade at the
    time and place of removal. Where, however, the
    excisable article is not sold by the assessee in wholesale
    trade but, for example, is consumed by the assessee in
    his own industry the case is one where under the old            D
    Section 4(a) the value must be determined as the price
    at which the excisable article or an article of the like kind
    and quality is capable of being sold in wholesale trade
    at the time and place of removal.
                                                                    E
    27. Where the excisable article or an article of the like
    kind and quality is not sold in wholesale trade at the place
    of removal, that is, at the factory gate, but is sold in the
    wholesale trade at a place outside the factory gate, the
    value should be determined as the price at which the
    excisable article is sold in the wholesale trade at such
    place, after deducting therefrom the cost of transportation
    of the excisable article from the factory gate to such
    place. The claim to other deductions will be dealt with
    later.
                                                                    G
    28. Finally, where the wholesale price of the excisable
    article or an article of the like kind and quality is not
    ascertainable, then pursuant to the old Section 4(b) the
    value of the excisable article shall be the price at which
    the excisable article or an article of the like kind and        H
    518       SUPREME COURT REPORTS ·                 [2014) 7 S.C.R.

A         quality is sold or is capable of being sold by the assessee
          at the time and place of removal or if the excisable article
          is not sold or is not capable of being sold at such place,
          then the price at which it is sold or is capable of being
          sold by the assessee at any other place nearest thereto.
B
          29. In every case the fundamental criterion for computing
            the value of an excisable article is the price at which the
          . excisable article or an article of the like kind and quality
            is sold or is capable of being sold by the manufacturer,
            and it is not the bare manufacturing cost and
c           manufacturing profit which constitutes the basis for
            determining such value.

           30. As we have noted, Parliament amended the Central
           Excises and Salt Act by Act XX/I of 1973. In particular,
D          Parliament introduced a new Section 4 which totally
           superseded the old section, and embodied a much more
           comprehensive and clearly enunciated scheme for the
           determination of the real value of an excisable article.
           Clause (a) of the new Se~tion 4 speaks of the "value"
E          being the "normal price, that is to say, the price at which
           such goods are ordinarily sold to a buyer in the course
           of wholesale trade for delivery at the time and place of
           removal, where the buyer is not a related person and the
           price is the sole consideration for the sale".
F          31. Where the normal price of such goods are not
           ascertainable for the reason that such goods are not sold
           or for any other reason, the new Section 4(1)(b} provides
           that the nearest ascertainable equivalent thereof
           determined in such manner as may be prescribed shall
G          be the value of the excisable goods for the purpose of
           charging the excise duty.

           32. It will be noticed that the basic scheme for
           determination of the price in the new Section 4 is
           characterised by the same dichotomy as that observable
UNION OF INDIA v. MAHINDRA & MAHINDRA LTD. 519
    [SUDHANSU JYOTI MUKHOPADHAYA, J.]
  in the old Section 4. It was not the intention of Parliament, A
  when enacting the new Section 4 to create a scheme
  materially different from that embodied in the superseded
  Section 4. The objec( and purpose remained the same,
  and so did the central principle at the heart of the
  scheme. The new scheme was merely more B
  comprehensive and the language employed more
  precise and definite. As in the old Section 4, the terms
  in which the value was defined remained the price
  charged by the assessee in the course of wholesale trade
  for delivery at the time and place of removal. Under the     c
  new Section 4 the phrase "place of removal" was defined
  by Sectipn 4(b) not merely as "the factory or any other
  place or premises of production or manufacture of the
  excisable goods" from where such goods are removed
  but was extended to "a warehouse or any place or D
  premises wherein the excisable goods have been
  permitted to be deposited without payment of duty" and
  from where such goods are removed. The judicial
  construction of the provisions of the old Section 4 had
  already declared that the price envisaged under clauses
  (a) and (b) of that section was the price charge,cJ,by the E
  manufacturer in a transaction at arm's length'. After
  refeffing to several cases, some of which have already
   been mentioned here earlier, this Court pointed out in
   Valtas Limited, (1973) 3 SCC 503:
                                                                F
   "the 'wholesale cash price' has to be ascertained only on
   the basis of transactions at arm's length. If there is a
  special or favoured buyer to whom a specially low price
  is charged because of extra-commercial considerations,
   e.g., because he is a relative of the manufacturer, the G
  price charged for those sales would not be the 'wholesale
   cash price' for levying excise under Section 4 (a) of the
   Act. A sole distributor might or might not be a favoured
   buyer according as terms of the agreement with him are
                                                               H
    520       SUPREME COURT REPORTS                   [2014] 7 S.C.R.


A         fair and reasonable and were arrived at on purely
          commercial basis.''

          34. Both learned counsel for the assessees and the
          learned Solicitor General for the Revenue are agreeo
          that in enacting thi3 new Section 4 Parliament did not
B
          intend to bring into existence a scheme of valuation
          different from that embodied in the old Section 4.
          Reference was made in that connection to the Statement
          of Objects and Reasons. Tbe difference, however, lies in
          this that while learned counsel for the assessee attempted
c         to show by reference to the old Section 4 that the
          legislative intent was to confine the value of an excisable
          article to the manufacturing cost and manufacturing profit
          and that therefore the same /imitations should be read
          into the new Section 4, the learned Solicitor-General
D          approached the problem from the other end and
          contended that since on a plain reading of the new
           Section 4 the price actually charged by the assessee was
           the true criterion and was not limited to the manufacturing
           cost and manufacturing profit, it is that construction which
E          should be put also on the old Section 4. We have earlier
           indicated our ina6ility to accept the proposition that the
           old Section 4 defined the value of an excisable article in
           terms of the manufacturing cost and manufacturing profit
           exclusively. We lind from an examination of the
F          provisions of the new Section 4 that a similar conclusion
           must follow. The normal price mentioned in the new
           Section 4(1)(a) is the price at which the goods are
           ordinarily sold by the assessee in the course of wholesale
           trade. It is the wholesale price charged by him. It is a price
G          which may vaty, according to the first proviso to the new
           Section 4(1)(a) with different classes of buyers. It may
           a/so be, according to the second proviso to the new
           Section 4(1)(a), the price fixed as the wholesale price
           under any law or the maximum price where the law fixes
H          a maximum. The price may also be a different price if
  UNION OF INDIA v. MAHINDRA & MAHINDRA LTD. 521
      [SUDHANSU JYOTI MUKHOPADHAYA, J.]

     the case falls within the third proviso to the new Section         A
     4(1)(a). In that event it will be the price charged by a
     related person in the course of wholesale trade. Clearly,
     it is not possible to conceive of the price under the new
     Section 4(1)(a) being confined to the manufacturing cost
     and the manufacturing profit. Moreover, it is reasonable           B
     to suppose that the central principle for the determination
     of the value of the excisable article should be the same,
     whether the case falls under clause (a) or clause (b) of
     the old Section 4 or under the new Section 4(1). When
     regard is had to the provision of clause (b) in each case,         c
     it is not possible to limit the price to its components
     representing the manufacturing cost and manufacturing
     profit."

      17. In Collector of Central Excise v. Mis. Indian Oxygen
Ltd., AIR 1988 SC 1873, referring to the decision in Union of           D
India v. Bombay Tyre International Ltd. (1984) 1 SCC 467,
this Court held that in the light of the aforesaid principles it has
to be borne in mind that any activity ancillary to but not incidental
to the manufacture cannot. be included as part of the activity for
the manufacture. Any income either in the form of interest on           E
deposits, notional or real earned on the deposit etc. would not
be the price for the manufacture though they might be profits
or gains, if any, of any ancillary or allied venture.

      · 18. In the present case the assessee failed to bring the        F
ascertainable price of the tractor, cost of transportation to depot,
etc. to the notice of the High Court. The assessee simply
challenged the show-cause notices on the ground that the
amended Section 4 is not applicable. The High Court without
looking into the relevant fact, only on the ground thatsub-clause       G
(iii) to Section 4(b) was subsequently added by amendment
including 'depot', 'premises of consignment agent' or'any other
place' or 'premises' from where the excisable goods were to
be sold after their clearance from the factory, declared the
notices illegal and set aside the same. Even the matter was             H
        522      SUPREME COURT REPORTS                [2014) 7 S.C.R.


A       not remanded bac:k to competent authority allowing the
        assessee to bring to its notice "normal price", in course of
        wholesale trade, place of removal of tractors, transportation
        charges, etc.

    .        19. For the reasons aforesaid, we have no option but to
8
        set aside the impugned judgment dated 13th September, 2002
        passed by the High Court. We, accordingly, set aside the said
        judgment.

      20. The case is remitted to the competent authority
C granting liberty to the! assessee to forward a copy of each of
  the show-cause replies already filed within four weeks.
  Assessee is also given liberty to produce relevant evidence in
  support of its claim. The competent authority will pass
  appropriate order(s) in accordance with law.
D
       21. The appeal is allowed.
        Devika Gujral                   Appeal allowed & matter remitted to
                                                       competent Authority.