Holding

The value for determining exemption under the Notification must be computed in accordance with Section 4 of the Central Excise and Salt Act, which allows deduction of trade discount and duty, rendering the footwear’s value Rs 4.94 per pair and qualifying it for exemption.

Summary

Bata Shoe Co. Ltd. manufactured footwear sold at a wholesale price of Rs 6.25 per pair. A 1967 notification exempted footwear under Item 36 of the Central Excise and Salt Act, 1944 if its "value" did not exceed Rs 5 per pair. The company argued that, under Section 4 of the Act, the value—after deducting trade discount and the duty payable—was Rs 4.94, thus qualifying for exemption, while the Department contended that duty could not be deducted, making the value exceed Rs 5. Different High Courts gave conflicting rulings. The Supreme Court held that Section 4 governs the computation of "value" for the purpose of the exemption and permits deduction of duty, so the footwear was exempt and the company was entitled to a refund of illegally collected duty. The Court allowed the company’s appeals and dismissed the State’s appeal.

Issues considered

Whether Section 4 of the Central Excise and Salt Act, 1944 applies to determine the "value" of footwear for the purpose of the exemption under Notification G.S.R. 171/67 dated 24 July 1967.
Whether the duty element may be deducted from the wholesale price when computing the "value" for exemption.
Interpretation of the term "value" in the Notification – whether it refers to the deemed value under Section 4 or the actual post‑duty value.

Legislation cited

Central Excise and Salt Act, 1944s. 3(1), s. 4
Central Excise Rules, 1944s. Rule 8 (sub‑rule 1)

Subjects

excise dutyvaluationSection 4exemptionfootwearCentral Excise Actinterpretation of notificationtrade discountduty deduction

Judgment

960

·A
BATA SHOE CO. (P) LTD. & OTHERS

v.
f:B THE COLLECTOR OF CENTRAL EXCISE & ORS.

25th April, 1985

[D.A. DESAI, A.P. SEN AND V. BALAKRISHNA ERWI, JJ.]
;C
Central Excise and Salt Act, 1944 Section 4, scope of-Detern1ination of ;.
value for the purpose of excise duty-Exigibility to eXcise duty of "footwear and / ·
accessories" under Entry 36 of the First Schedule to The Act in terms of the Noli·
fication 1Vo. G.S.R. 171{67 dated 24th July, 1967-lnterpretation of the Noli·
fication.

·By virtue of Entry 36 of the First Schedule in the Ceatra1 Excises an·d Salt
Act, 1944 "footwear and parts thereof" in or in relation to the manufacture of
which any process is ordinarily carried on with the aid of power, is chargeable to
excise duty, the rate of duty being 10% ad valorem in respect of ''footwear" and
.15% ad valorem in resp.!ct of"partsoffootw.!ar". Bya NJtification dated
J~ly 24, .196?, issus:d tn exercise of the pow.!rs conferred by sub-rule (I) of rule 8
of the Central Excise Rules, 19~4. the Central Government exempted, with effect
from the 26th May, 1967, footwear1 falling under item -No. 36 of the· First
Schedule to the Central Exci'ies and Salt Act, 1944, of which the value did not
exceed Rs. 5 per pair from the w:tole of the duty of exci~e leviable thereon.

During the year 1967 and 1968, Bata Shoe C.ompany was manufdcturing
,,certain item> Of footw.:ar of which the wholesale price'was Rs. 6.25 per pair.
The contention of the company that since the assessable value of such items of
footwear calculated in terms of section 4 of the Act, as it stood at the relevant
time was only Rs. 4.94 and thus less than Rs. 5 per pair were qualified for exem-
ption under the Notification was negatived by the department on the ground that
while computing the value of the articles for the purpose of judging the appli-
cability of the exemption, the duty element of the cost structure could not be
deducted from the wholesale price and on such calculation the value of such
footwear would exceed Rs. 5 per pair.

Three Writ Petitions were, therefore, filed in the High Courts of Patna,
Calcutta and the Punjab & Haryana, since the company had three manufac-
turing establishments attracting the jurisdictions of these Courts. The Patna
High Court allowed the writ petition accepting the contention of the company
and granted c~rtificlte of .ipp~1I to tlu: dep.trtment. The Jligh Court of Calcutta
ilATA siloil co. v. CENTRAt llXciSE '961
dismissed the petition and accepted the stand of the Department that the I, A
e:icpression "va·lue" occurring in the Notification dated July 24, 1967 is not the
deemed "value" ca.Jculati:d according to the provisions of section 4 of the Act,
but h the real and a:tu1l "valu~" of the goods after the payment of the duty,
The High Court of Punjab & Haryana dismissed the petition in llmini on the
ground of Jaches. Both these two High Courts, however, granted certificate of
appeal to the company. Hence the three appeals by certificates.
B
Allowing the appeals pf the company and dismissing the State appeal,
1he Court,

HELD: J.J While-computing the "value" of the articles of footwear ·for
the purposes of testing the avalability of the exemption granted under the
Notification dated July 24, 1967 section 4 of the Central J?xcises and Salt Act,
19tt gets attracted. Section 4 is comprche:ic;ive in its coverage and it lays down
· th;;: procedure to be follOw.;:d for ·d~termbation of "value" of any article in every
case where the articfo is chargeable with duty at a rate depende11t on the value of
: the article. (966H, 967A]

1.2 While the notification makes it clear that the effect of the Notification
is to render the chargeability or otherwise to duty of excise of footwear falling
under item 36.of the 'First Schedule is made wholly depeaderit upon the "value"
of the article of footwear ; in ca5e sucll "value" exceeds Rs. 5 per pair, duty
will. be chargeable at the rate of 10% whereas if th.e value does not execed Rs.5
per pair, no duty will be chargeable on such item.s of footwear. that is the rate
of duty will be nil, Thus entry 36 read alorig with thC 'Notification dated July 24,
1967 clearly shows that the chargeab1Jity to duty in respect of any article of foot-
wear is made dep.:ndent upon its value in the sense that the chargeabJility to
duty of excise will arise only if t11e ''v41Ui:" of the article does not exceed Rs. 5 E
\
per pair. [9 :6D·E, 967/\-B)
· 1.3 Before determining the question of availability of the exemption under
the Notification dated July·24, 1967; the first essential step, therefore, i.s to deter..
mirle the "vaiue" ~f tlle article in tbe manner prescobed in section 4 'Of the Act,
a
The fact that on such computation .thi: artic'ie may ultimately be' found to be
exempted from excise duty does not have any bearing on the question of applia ,•F
'cibility Ot '.seCli'on 4 Of the A6t· for detetri:tining ·the ''va~Ui" for 'putpose of duty.
(9//B•D)

h4 fb.e e.tpression ·'f1Jr the "pLlrpo:ie of duty" occurring in section 4 has a
wide import. For all purposes connected with the de'termination of charg"eability
and levy of duty the provisions of the section are to be applied for computation
of the "value" of the article. Under the .Explanation to section 4, it is mandatory
that in determining the Priec: Of an article both trade discount as well as the
G
amount of duty calculated as payable on the wholesale cash price payable at the
time of removal of the article based on the wholesale cash price referred to in
,clause (a) are to be deducted from such wholesale price. L967D-E]

In ihe in·stant case, iri as much as the value of the articles of footwear in H

·-r --
~62 SUPRBME COURT ll.EPciars (1985] 3 s.c.a.
·A question calculated in accordance with the provisions of section 4 of the Act did
not exceed Rs. 5 per pair, the articles in question were exempted from the
charge to duty of excise under the Notification dated July 24, 1967 and the
company is entitled; forthwith, to a refund of the a1nounts of duty illegally
realised by the Department. [967G-H]

:· •.B The Collector of Central Excise, Patna & Ors. v. The Bala Shoe Company
(P) Ltd. AIR Patna--approvtd.

The Bata Shoe Company (P) Ltd. v. The Collector of Central Excise &
Ors., Calcutta, AIR Calcutta--; The Bata Shoe Company (P) Ltd. v. The
Collector of Central Excise & Ors., AIR Pur,jab & Haryana-reversed.

c CiVIL APPBLLATB JURISDlCTION : Civil Appeal No. 353 (N) of
1971.
From the Judgment and Order dated 29.7. 1970 of the Punjab
and Haryana High Court in C.W. No. 2331/70.

Civil Appeal No. 1469 (N) of 1972.

From the judgment and order dated 28. 6. 1971 of the Patna
High Court in C.W. No. 1330/70).

AND

Civil Appeal No. 1470 of 1972.

From the judgment and order dated 24. 12. 1971 of the
Calcutta High Court in F.M.A. No. 201 of 1971)

F Dr. Y. S. Chitale, Anil Sharma and Praveen Kumar for the
Apppellants.

M. S. Gujaral, V. K. Punjwani, C. V. Subba Rao and Ms. A.
Subhashini for the Respondents.

The Judgment of the Court was delivered by

BALARKISHNA ERA DI, J. In these three appeals the parties
involved are the same and the point arising for determination is
identical. Hence they were heard together and are being disposed of
by this judgment.
Ill
_DATA Sfl)E C.J. v. CBNTR~L 8XCIS8 {Balalcrishna Eradi, J.) 963 .
-~
The Bata Shoe Company Ltd. (hereinafter called 'the
company') is an existing company within the meaning of The
Companies Act, 1956; with its head office at No. 30, Shakespoare
Sarani, Calcutta-17. The company is engaged in the business of
manufacturing and dealing in articles of footwear and accessories.
!
For the purposes of the said business, the company has three manu·
facturing establishments namely, a factory a Batanagar in the dis-
trict of 24- Parganas, West Bengal, another factory at Bataganr-
' near Patna in the State of Bihar and a third manufacturing esta·
blishment at Faridabad in the State of Haryana. By virtue of Entry
36 of the First Schedule in the Central Exci.ses and Salt Act, 1944
(hereinafter called the 'Act'), footwear and parts thereof in or in
relation to the manufacture of which any process is ordinarily
carried on with the aid of power, is chargeable to excise duty, the
rate of duty being ten per cent ad valorem in respect. of 'footwear
and fifeen per cent ad valorem in respectof 'parts of footwear'.
By a Notification G. S. R. 360, dated February 28, 1965 issued
by the Central Government ·in exercise of the powers conferred
by Suh-rule (1) of Rule 8 of the Central Excise Rules, 1944 for
short "the Rules" footwear and parts thereof were complely exemp-
ted from levy of excise duty. However, shortly thereafter, by
other Notification dated May 26, 1967, the exemption from duty
granted in respect of footwear and parts thereof by the preceding
Notification dated February 28, 1965 was withdrawn. Thereafter. ·E
followed yet another Notification dated July 24, 1967 which was in
the following terms:-

"NOTIFICATION
CENTRAL EXCISES

G. S. R. In exercises of the powers conferred by
Sub-rule (I) of rule 8 of the Central· Excise Rule, . 1944
the Central Government hereby exempts, with effect froin
. the 26th may, 1967, footwear falling under Jtem No. 36 of
the First Schedule to the Central Excises and Salt Act,
G
1944 (I of 1944) of which the value does not exceed
Rs. 5.00 per pair, from the whole of the duty of excise levi-
able thereon.

(No. 171/67)"
ff
964 SUPREME COURT RBPORTS [1985] 3 S.C.R.

A The sole question raised in these appeals concerns the inter-
pretation of this Notification.

During the year 1967 and 1968, the company was manufac;
luring certain items of footwear of which the wholesale price was
B Rs. 6.25 per. pair. The company contended that since'the assess-.
able value of such items of footwear calculated in accordance with
the provisions of Section 4 of the Act, as they stood at the relevant
time was only Rs. 4.94 and hence less than Rs. 5 per pair, such
items qualified for exemption from duty under the Notification.
dated July 26, 1967. Though originally the Department appears
cto have been inclined to accept the correctness of the stand taken
by the company, later on they changed their stand and informed
the company that the articles of footwear manufactured by it, of ·
which the wholesale price was Rs. 6 .25 per pair were chargeable .
to excise duty since while computing the "value" of the articles for
the purp"e of judging the applic1bility of the. exempiion, the duty
D element of the cost structure could not be deducted from the whole _
sale price and on such calculation the value of such footwear would
exceed Rs. 5 per pair.

The company took up the matter with the respective
E Collectors of Central Excise in West Bengal, Bihar and Haryana
but without success. ·In the meantime the Department continued
to levy and collected from the company substantial amounts by
way of duty on such articles of footwear. The company, therefore, .
instituted separte Writ Petition in the High Courts of Calcutta, Patna
and Punjab and Haryana. The Patna High Court allowed Writ Peti-
F tion of the company and upheld its contention that the articles of
footwear in question were not exigible to.duty since they fell within
the scope of exemption granted the Notification of July 26, 1'967.
.I
Accordingly, a mandamus refund of_the duty illegally collected from
the Company was issued by the Patna High Court. The High Court
of Calcutta however, took a different view and accepted the stand of
G the Department that the expression "value" occurring in the Noti-
fication dated July 26, 1967 is not the deemed 'value' calculated
according to the provisions of Section 4 of the Act but is the real
and actual 'value' of the goods after payment of duty. The High
Court of Punjab and Haryana was moved by the company only
after short interval of time during which it had been pursuing its
p remedies before the hi~hest Departmenal a A11th9rities &s . well
BATA SHOB co v. CBNTRAL EXCISE (Balakrishna Eradi, J.) 965

as before the Patna and Calcutta High Courts. A Division Bench
donsisting of two learned Judges of the Punjab and Haryana High
Courtdismissed the company's Writ Petition in limini on the ground
that the company had approached the High Court at a very be-
lated stage. The Division Bench however, certified the case to be fit
one to this Court under Article 133 of the Constitution oflndia. 11.
Similar certificates were granted to the company and to the Un.ion
of India respectively by the High Courts of Calcutta and Patna .
• That is how these appeals have come to be "filed in this Court.

After hearing Counsel appearing on both sides and giving our
anxious consideration to the matter in all its aspects, we are clearly
of the opinion that the view taken by lhe High Court of Patna is the e
correct one and the contrary view taken by the High Court of
Calcutt a cannot be sustained. We are also o( opinion [that on the
facts and cricumstances of the High Court of .Punjab and Haryana ·
was not justified in dismissing the Writ Petition of the company in·
/imini on the gronud of delay especially having regard to the fact that D
the matter was throughout being actively pursued by the company
before the Departmental Authorities as well as before the two
other High Courts.

Section 3 · of the Act is the charging section and Sub-section
E
(1 l thereof lays down that there shall be levied and collected in .
such manner as may be prescribed duties of excise on all excisable
goods other than salt which are produced or manufactured in
India and a duty ·on salt manufactured in, or imported by land into
any part of India as, and at the rates, set forth in the First Schedule
Section 4 deals with the subject of valuation of excisable goods
·ror purposes of charging of duty of excise. We shall reproduce
that section as it sto~d at the relevant time, omitting portions there-
of w!1ich are unnece:iqary for our present purpose :

"4. Determination of value for the purposes of duty-
where under \his Act, any article is chargeable with duty at
a rate dependent on the value of the article, such value
shall be deemed to be-

(a) the wholesale cash price for which an article
of the like kind and quality is sold or is capable of being
$Ol\I at tbe time of the re01oval of the articles char\leable
966 SUPREME COURT REPORTS ( 1985] 3 S.C.R.
Al
A with duty from the factory or any other premises of manu-
facture or prodcution for delivery at the place of manu·
•
facture of production, or if a wholesale market does not
exist for such article at such place, at the nearest place
where market exists.

B (b) (Not relevant)

Explanation-In determining the price of any article under •
this section no abatement or deduction shall be allowed
except in respect of trade discount and amount of duty
payable at the time of removal of the article chargeable
·C with duty from the factory or other premises aforesaid."

Under this Section, in all cases where any article is charge-
able with duty at a rate 'dependent upon its value' such 'value' is
to be computed by deducting from the wholesale cash price referred
to in clause (a) two components of the price structure namely (l)
D
trade discount and (2) the amount of duty payable on the article
a.t the time of its removal from the factory or other premises of
manufacture or production.

The short question for consideration is whether. the mode of
E determination of "value" prescribed by Section 4 is not attracted· I

while computing the "value' of the articles of footwear for the
purposes of testing the availability of the exemption granted under
the Notification dated July 26, 1967: To our mind the answer to
the question is perfectly simple. Section 4 is compreheusive in its
coverage and it lays down the procedure to be followed for
F determination of "value" of any article in every case where the
article is chargeable with duty at rate dependent on the value of the
article. On a careful reading of the Notification dated July 26,
1967, it also become clear that the effect of the Notification is tci
render the chargeability or otherwise to duty of excise of footwear
G
falling under Item 36 of the First Schedule is made wholly depen-
dent upon the 'value' of the article of footwear; in case such 'value'
exceeds Rs. 5 per pair, duty will be chargeable at the rate of 10%
whereas ifthe value does not exceed Rs. 5 per pair, no 'uty will
be chargeable on such items of footwear, that is the rate of duty will
be 'nil'. It is precisely to such a situation that the provision of Sec-
H tion 4 gets attracte<\ because as expressly stated in the opening part
DATA SflOE°CO. v. CBNTRAL EXCISB (8alakrishna Eradi, J.) 967

pari of the said section the mode of determination of 'value' speci· A
q ed ·in. the section will be applicable to all cases where any article
is charge1ble with duty at a rate dependent upon the value of the
article. In the case of a total exemption, the rate will be 'nil'.
Thus Ent~y 36 read along with the Notification dated July 24, 1967
clearly shows that the chargeability to duty in respect of any article
of footwear is made dependent upon its value in the sense that the B
. chargeability to duty of excise will arise only if the 'value' of the
article does ,not,.exceed Rs. 5 per pair. It is therefore, plain that
before determining the question of . availability of the exemption
under the Notification dated July 24, 1967, the first essential step
is to determine the 'value' of the article in the manner prescribed in
-.......,, Section 4 of the Act. The fact that on such a computation the c
'article may ultimately be found to be exempted from excise duty
does not have any bearing on the question of applicability of
Section 4 .of the Act for determining tlie 'value, for purpose of
duty. The expression ··ro.r the purposes of duty' occurring in Section
4 has a wide import. For all purposes connected with the deter-
D
mination of chargeability and levy of duty the provisions of the
section are to .be applied for comuptation of the ·value' of the
article. Under the Explanation to Section 4, it is mandatory that
in determining the price of an article both trade discount as well as
the amount of duty calculated as payable on the wholesale cash
price payable at the time of removal of the article based on the E
wholesale cash price referred to in clause (a) are to be deducted
from such wholesale pric~. This is the view taken by .the High
Court of Patna in the judgment appealed against C. A. No. 1469 of
of 1972 and we have no hesitation to agree with the said view.
The High Court of Calcutta was of opinion that Section 4 only lays
down the formula or the principle for determination of "value for F
the purpose of duty" and it has not laid down any principle or
formula for the determination of value for exemption from duty as
already indicated. In our opinion this is not a correct interpre-
tation of the scope and ambit of Section 4 of the Act.

In the result, we hold that inasmuch as the value of the articles G
of footwear in question calculated in accordance with the provisions
of Section 4 of the Act did not exceed Rs. 5 per pair, the articles in
question were exempt from the charge to duty of excise under the
Notification dated July 24, !967.
H
968 SUPREME COURT REPORTS (1985] 3 S.C.R.

A In the result, C. A. No, 1470 of 1972 arising out of the judg·
ment of the High Court of Calcutta, C. A. No. 353 of 1971 filed
against the order of the High Court of Punjab and Haryana and
the Writ Petitions filed by the. company in the High Courts will
stand allowed with the direction that the amounts of duty ille-
gally realised by the Department from the company should be
B forthwith refilnded to it. C.A. No. 1469 of 1972 filed by .the
Collector of Central Excise, Patna against the decision of the Patna
High Court will stand dismissed. In C. A. No. 1470 of i972 and
C, A. No. 353 of 1971 the appellants will get their costs from the·
respondents. There will be no order as to costs in C.A. No. 1469
of 1972.
c

S.-R. Cfril Appeal Nos. 353/ 191 J and 1470/2 allowed.
D Civil Appeal No. 1469/72 dismissed.