ZAFFAR HUSSASN MIRZA, J.-The dispute in this appeal relates to the determination of the value of goods sold by Atlas Battery Limited, the appellants herein, for the purpose of excise duty in accordance with the provisions of section 4(2) of the Central Excises and Salt Act, 1944 (hereinafter to be referred to as the 'Act'). Leave to appeal was granted by this Court to examine the following questions :
(i) That under subsection (2) of section 4 of the Act, which was introduced by the Finance Act of 1969, the petitioner had been even the right to fix the retail price of the goods sold by them to Gandhara Industries Limited and the Ministry of Defence Government of Pakistan, and so the respondents had no jurisdiction to question their decision in that behalf-especially when on the said goods the retail price had been legibly, prominently and indelibly printed by them, as required by Item No, 53(1) of the First Schedule to the Act ;
(ii) That since the petitioners had printed on their goods the retail price in the said manner, the same were chargeable to excise duty at 25 per cent and not on the contract price at which they had sold the goods to the aforesaid two incumbents ;
(iii) That the retail price is evidently different from the wholesale price of a price which may be fixed by the terms and conditions of a special contract, but the duty chargeable thereon would be on the retail price as fixed by the manufacturer, provided the said price had been legibly, prominently and indelibly printed on the goods, as required by Item No, 53(1) of the First Schedule to the Act. The fact, however, is that the petitioners had complied with all the said requirements, and so their decision could not be questioned by the respondents nor could the respondents have charged from them duty on the basis of the contract price
(iv) That the High Court was in error to uphold the orders passed by the respondents not realizing that the contract price at which the petitioners had sold their goods to the aboversaid two incumbents had to be a special price because (al the goods in question had to be specially marked and packed by them, (b) the same had to be delivered at places specified by the said purchasers ; and (c) if the goods in question were found to be defective for any reason during the period of 15 months they were to be replaced free of cost. If allowance to the petitioners had been given on this account, as the same involved extra expenditure and which conditions are not normally applicable in the case of sales to wholesellers and retailers generally, the High Court would have felt no difficulty to hold that stand taken by the petitioners was wholly tenable, and the contrary findings recorded against them by the respondents were based on considerations other thaw the spirity of section 4(2) of the Act read with Item No, 53(1) of the First Schedule attached thereto ;
(v) That having conceded the position that when "the price fixed in a concessional price because there is a special business relations between the parties who are not dealing at great length, then a notional retail price has to be determined as the price at which the particular brand or variety of such article should be sold to the general body of consumer", the High Court fell in error in the application of the said principle to the facts of the present case, in that it equated the contract price at which the goods were sold to the above-said two incumbents as with the retail price in disregard of the fact of the special conditions of contract at which the said goods had been sold."
2. Brief facts necessary for the disposal of this appeal are that the appellants are the manufacturers and suppliers of storage batteries of various types and specifications. It is their case that apart from the general body of the consumers they supplied storage batteries to the Ministry of Defence of the Government of Pakistan, and to the Ghandhara Industries Limited, now called the National Motors, Karachi, under special terms and conditions. During the period between 15-5-1970 and 10-3-1973 the appellants supplied a total number of 6287 batteries to the Ghandhara industries Limited and 24157 batteries to the Defence Department. The appellants paid on the aforesaid supplies excise duty at the rate of 25 per coat of the retail price as prescribed in Entry No, 53(1) of the First Schedule of the Act, which reads as follows : {{TABLE TEXT}} "53. Electric batteries and parts thereof.-(1) Storage batteries-
(a) If retail price is legibly prominentiy and indelibly 25 per cent. Of printed on each battery. The retail price.
(b) If not covered by clause (a). 200 per cent ad valorem."
' For the purpose of excise duty, the value of any article which is chargeable with duty at a rate dependent on the retail price of the article, is determined in terms of section 4(2) of the Act as under "4(2) Where under this Act any article is chargeable with duty at a rate dependent on the retail price of the article the retail price shall be the price fixed by the manufacturer inclusive of all charges and taxes, at which any particular brand or variety of such article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the biggest such price." .- 3. In the events that happened, the Excise Department in consequence of investigation and scrutiny of the A. R. I. Forms submitted by the appellants at the time of the removal of the said goods from their factory, it was discovered that the appellants bad said the said goods on the basis of contract which provided for higher price than the retail price printed on each item of the goods. The Collector of Central Excise and Land Customs, Karachi, therefore, served on the appellants a notice on 1-6-1973 stating that there was a shortfall in the duty paid amounting to Rs, 5,58,553.25 and further asked them to show-cause why the same should not be recovered from them, as they had contravened the provisions of section 4(2) of the Act. In response to the show- cause notice. The appellants appeared before the Collector and contended that they had sold the goods to Ghandhara Industries Limited and the Ministry of Defence, Government of Pakistan, on the basis of a special contract, and, therefore, for the purpose of assessment they were entitled to deduct from the retail price (a) the cost of packing and special marking (b) money value of the special warranty for replacement of returned defective batteries, and (c) cost of transport and conveyance all of which deductions were non-exciseable goods and services. The Collector of Central Excise and Land Customs by his order dated 304-1974 rejected the contention of the appellants and held that the definition of 'retail price' in section 4(2) of the Act was "inclusive of all charges and taxes". He, therefore, ordered the appellants to pay the amount of the short fall in duty and also imposed a penalty of Rs, 6,00,000, under 226 and 210 of the Central Excise Rules. The appellants, therefore, went in appeal before the Central Board of Revenue, but their appeal was dismissed although the penalty was reduced to Rs, 3,00,000. Their revision before the Government of Pakistan was also dismissed on 30-1-1975 but the penalty was remitted in full. The concluding part of the revisional order may with advantage be reproduced as under : "The petitioner had contracted to supply batteries to Defence and to Gandhara Industries. He was printing on the batteries a price supposed to be retail price which was lower than the contracted price and the same price was being entered in A. R. 1, E. B. 4 etc. The petitioner claimed that he was deducting (a) cost of marking on the packages, (b) cost of warranty and (c) cost of transport etc. From the contracted price. The Excise staff posted at the factory did not apparently point out to the petitioner that the retail price covered all conceivable expenses and charges incurred by the manufacturer, distributor or retailer as it represented the price at which the article was to be sold to the general body of consumers. In fact, if the manufacturer fixed more than one retail price for the same brand or variety, the highest retail price would form the basis of assessment. The Collector would have been within his rights if he had capered the printed retail prices of the same variety of batteries during a given period and assessed the petitioner on the highest such price. As it is, the Collector has based his assessm ent on the contracted price to which no objection can be taken..
But there can be no question of any expenses, real or notional, being deducted from the retail price.
The petitioner's plea on this score must be rejected. The Collector has rightly demand the differential duty."
4. Having thus failed to get relief from the Departmental Authorities the appellants challenged the demand for the payment of the differential duty in a writ petition before the High Court of Sind, Karachi, which was dismissed by the impugned judgment dated 26-11-1978.
5. Now the main contention raised before the High Court on behalf of the appellants was that since excise is a tax on the production and manufacture of goods, the real value of the goods for the purposes of excise duty should be found at the time of their production or manufacture, so that extra costs and expenses as claimed by the appellants in this case, are to be excluded in determining the retail value. The learned Judges of the High Court were not inclined to accept this argument and rejected it on the following grounds :- "The language used in section 4(2) of the Act is clear and unambiguous. It provides that "toe retail price inclusive of all charges and tam", ' It is clear to us that the contract price at which the batteries were to be sold to the two customers in question, is the price 'fixed' by the manufacturer. That price is to be inclusive of all charges and taxes, and in fact, it is not disputed that the price quoted by the petitioner included these charges as also the rate of duty. The actual price fixed under the purchase orders is, therefore, the retail price under section 4(2) of the Act. It is only in a case where no price is fixed, or when the price fixed, is a concessional price because there is a special business relationship between the parties, who are not dealing at arms length that a notional retail price has to be determined, as the price at which the particular brand or variety' of such article should be sold to the general body of consumers. No such question arises in the present case. In fact, there was in most cases a retail price to general body of consumers and a special concessional price for the two customers in question. The Collector would have been within the law to levy duty at the higher retail price for consumers generally, but be levied duty at the lower contract price. Therefore, no prejudice could be said to have been caused to the petitioner."
6. Sardar Muhammad Iqbal, learned counsel appearing for the appellants, questioned the correctness of the view taken by the High Court and contended that the provisions of section 4(2) of the Act have not been correctly interpreted with reference to Entry No, 53 of the Schedule thereto. He maintained that section 4(2) clearly makes it the prerogative of the manufacturer of goods to determine the "retail price" and if he legibly, prominently and indelibly prints this price on each item of batteries, the matter will lie outside the power of the assessing authority to fix any other price, so as to furnish a foundation for determining the value of the goods for the purpose of excise duty. According to the learned counsel, the mechanics of the economic forces at work in the market will itself take care of any element of arbitrariness or unfair operation of law to the detriment of the revenue. He submitted that once the retail price is printed on the goods, which by law would be inclusive of all charges and taxes, no one from the general body of consumers would be prepared to pay a price in excess of such printed retail price. Thus it would be an effective check on the manufacturer not to put a fanciful price on his goods. Another submission made to fortify the contention that the fixation of the retail price is by law within the sole discretion of the manufacturer and is not subject to regulation by the Excise authorities is that Entry No, 53(1) contemplates two situations, only, namely, either the retail price is fixed and printed, or it is not so printed. In the former case the value of the goods is determined ipso facto by the price so printed and in the latter case it is to be determined by the competent authority as its real value. It was pointed out that the great difference in the rate of duty between the two, itself operates an incentive to print the retail price.
7. Now the concept of retail price as the basis for determination of the excise duty as against the original basis of 'value' as incorporated in section 4 of the Central Excises and Salt Act, 1944 was introduced under a scheme, by means of the insertion of a new provision in subsection (2) in the original section 4 of the said Act, by the Finance Ordinance, 1969, which also substituted the Schedule making consequential changes, whereby the scheme was applied to goods of every day use having a direct bearing on the cost of living, such as tea, cigarettes, vegetable products, beverages, petroleum, lubricating oils, paints, soaps fabricated yarn, batteries and bulbs, etc. The object underlying the scheme was no doubt to stabilize prices and to do away with unwarranted price hike and to simplify the matter of the payment of excise duty so as to obviate the cumbersome procedure for the determination of the value for the purpose of duty. The two concepts are apparently distinct and operate entirely on different basis as observed in the order of the learned Secretary to Government of Pakistan dated 31-1-1975: "where such duty is levied at ad valorem basis, the basis of assessm ent would be value as defined in subsection (1) of section 4, where such duty is levied on retail price, the basis of assessment would be the retail price as defined in subsection (2) of section 4". The plain reading of the subsection shows that the retail price of the article chargeable with duty at a rate dependent on the retail price of the same, is to be fixed by the manufacturer himself if he wishes to take advantage of the scheme. But if he does so, the equally plain requirement of law for him is to include all charges and taxes while fixing such retail price and further such retail price should be the one at which the article is intended by the manufacturer to be sold to the general body of consumers. Upon a proper analysis of the provisions of the subsection it would appear that for the assessment of excise duty "retail price" has been defined to constitute the following ingredients :
(1) It shall be the price fixed by the manufacturer.
(ii) It shall be inclusive of all charges and taxes.
(iii)It shall be the price at which the particular brand or variety of such article should be sold to the general body of consumers.
(iv) If more than one such price is so fixed for the same brand or variety, it shall be the highest of such price. Item No, 53 of the First Schedule to the Act prescribes the rate at which duty is payable in regard to storage batteries as under :
(a) If retail price is legibly, prominently ... 25 per cent. Of the retail and indelibly printed on each battery price.
(b) If not covered by clause (a) ... 200 per cent. Ad valorem.
' Reading Item No, 53 with section 4(2) of the Central Excises and Salt Act, 1944, it would appear that if the retail price is printed on each battery the duty is to be asserted at the reduced rate of 25 per cent. Of such retail price, otherwise the duty would be assessed at 200 per cent. Ad valorem. The argument of the learned counsel looks at merely the provisions of Item No, 53 of the Schedule and does not take into consideration the basic statutory requirements for attracting clause (a) of Item No, 53 to his case. While it is correct to say that it is for the manufacturer to determine the retail price in order to print the same on his goods, it will not be entirely correct to contend that he can do so arbitrarily at his discretion without any fetters of law upon his discretion. This is because Item No, 53(1), which provides for the chargeability of duty in respect of storage batteries at a rate dependent on the retail price has a nexus with section 4(2) of the Central Excises and Salt Act, as that provision of law defines "retail price" which is referred to in Item No,
53. In other words before the price printed on each item of batteries of a particular brand or variety, can become the basis for the assessm ent of the duty it has to constitute "retail price" in terms of section 4(2). Clearly, therefore, it is for the assessing officer to determine the question whether such retail price has been printed on each items of battery, so as to attract the beneficial provisions of clause (a) of Item No,
53. It is only when the retail price is fixed by the manufacturer in conformity with the requirement of this subsection as analyzed above, that the mechanics of the economic forces at work in the market will itself take care of the arbitrariness of the manufacturer. Otherwise by merely printing the retail price on the goods the manufacturer would be entitled to determine the assessment of duty on his goods, even if the printed price does not constitute the retail price within the meaning of section 4(2) of the Central Excises and Salt Act. To my mind such could not be the intention of the Legislature nor indeed is the meaning of the plain language employed, in a fiscal statute of the nature under consideration. In view of the aforesaid if the assesses officer finds that the price printed by the manufacturer on his goods caned constitute retail price within the meaning of the said provision of section 4(2) the case would not then fall under the category of articles chargeable wit duty at a rate dependent on the retail price, but would fall under subsea in (1) of section 4 and would be assessed on the value of the article.
8. The clear import of the language of Item No, 53(a) of the Schedule to the Act, is that storage batteries shall be chargeable at 25 per cent. Of the retail price "provided such retail price is printed on each item of goods" But what can constitute retail price in relation to the goods of a particular brand or variety is to be determined by the standard laid down in section 4(2). The dominant element at the foundation of the concept of retail price is the price at which the goods are offered to the general body of consumers. Therefore fixation of the price of an article by the manufacturer implies that the article is of such a nature as to be capable of being offered to the general bode of consumers, which means it is open to a general offer to all persons willing to purchase the article at the price fixed thereon. It is in this context that availability of the article at such price is an essential ingredient of retail price to be fixed by the manufacturer. This would also clearly stipulate to exclude any artificial or arbitrary price fixation by the manufacturer, having no reference to the general body of consumers, as in the case of a contract based on special business relationship between the parties.
9. In the present case, however, the controversy between the parties was confined to the question whether the appellants were entitled to deduct from the retail price the cost of packing and special markings, money value of special warranty for replacement of returned defective batteries and cost of transportation. Admittedly for the purpose of excise duty the appellants fixed the price after deducting the aforesaid charges from the contract price. However, even if the manufacturer is held to have the absolute discretion to fix any price of kis products, the clear import of section 4(2) of the Central Excises and Salt Act is that in fixing retail price "all charges and taxes are to be taken into account and included". Therefore, if sale by special contract is considered as a sale to the general body of consumers, since admittedly all charges were not included in the retail price fixed and printed, the appellant were not entitled to be assessed at the reduced level and would have properly assessed on the ad valorem basis under Item No, 53(b) read with section 4(1).
10. There is another aspect of this case which may be taken note of at this stage. In paragraph 2 of the counter-affidavit Sled on behalf of the department before the High Court it has been pointed out that batteries of type 2HN were sold to Gandhara Industries as 2HNG but in all respects they are of the same standard and specifications. The retail price of such batteries fixed by the manufacturer, at the relevant time was Rs, 252 for general public but they supplied these batteries to the aforesaid purchasers at Rs, 130 and disclosed the price as Rs, 80 for purposes of excise duty.
Similarly the 3P4-2710 Were supplied to the same purchasers as although they are of the same type and category. The retail price fixed for this type was Rs, 460 which was subsequently raised to Rs, 488, but price declared to the department was Rs, 120 per unit for the purpose of duty. Similarly as regards the supplies made to the Defence Department it was stated that type 2HNA batteries were supplied by changing the description marks. These averments made in the counter-affidavit of the department were not specifically controverted in the rejoinder-affidavit filed on behalf of the appellants. It, therefore, appears that the appellants were offering the same type of goods to the general body of consumers at much higher prices than the contracted prices to the two buyers under special terms of contract, but were further fixing notionally the price for the purpose of excise duty still at lower rates by deducting charges as stated above. Since the two retail prices were fixed for the same variety of goods, the assessing authority would have been within the legitimate bounds of law to fix the retail price at the higher rate for the assessment of duty. However, the authorities assessed the appellants at the contract prices to the advantage of the appellants. It is this context that the High Court expressed the view "that the Collector would have been within the law to levy duty at the higher retail price for consumers generally".
11. In view of the above we are unable to accept the contention that the retail price fixed and printed on the goods in this case constituted the "retail price" for purposes of levy of duty within the meaning of Entry No, 53(1)(a) of the Schedule to the Central Excises and Salt Act, 1944. This being so the assessing authority would have been justified in levying the duty in accordance with clause (b) of the Entry No, 53 (1) read with section 4(1) of the said Act, but since the department has not adopted this basis of assessm ent, we agree with the High Court the action of the department did not call for interference.
12. In view of the foregoing reasons there is no merit in this appeal which is dismissed with costs.