# 3 S.C.R. 486 COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. MIS. SUPER SYNOTEX (INDIA) LTD. AND OTHERS - **Citation:** [2014] 3 S.C.R. 486 - **Court:** Supreme Court of India - **Decided:** 2014-02-28 - **Case number:** Civil Appeal Nos. 9154-9156 of 2003 - **Bench:** Anil R. Dave, Dipak Misra - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/3-s-c-r-486-commissioner-of-central-excise-jaipur-ii-v-mis-super-synotex-india-29610 - **Pages:** 25 ## Headnote Central Excise Act. 1944· s.4(4)(d) - Transaction value - Inclusion of sales tax in transaction value - Held~ The amount C paid or payable to the State Government towards sales tax, VAT etc. is excludible from the assessable value because it is not an amount paid to the assessee-manufacturer towards the price but an amount paid or payable to the State Government for the sale transaction i.e. transfer of title from D the manufacturer to a third party - However, if a part of sales tax collected is retained by the assessee towards incentive then the amount retained becomes profit or effective cost paid to assesssee by the purchaser and assessee is bound to pay excise duty on the said sum - Therefore, amount of sales tax E retained is includible in transaction value of goods - Rajasthan Sa/es Tax Incentive Scheme, 1989 - CBEC circular no. 3781 11-98-CX dated 12.03.1998. F Circular/government order/Notification: Circulars issued by CBEC - Binding effect of - Discussed. Tax/Taxation: Exemption and incentive - Distinction between - Discussed. The respondent-assessee has been engaged in the G manufacture of yarn. A show cause notice was issued on the assessee alleging that it has not paid the excise duty on the additional consideration collected towards the sales tax. The assessee placed reliance on CBEC circular no. 378/11-98-CX dated 12.03.1998 and claimed that sales H 486 COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. 487 SUPER SYNOTEX (INDIA) LTD. tax collected was not includible in the assessable value A and deduction was admissible under the Central Excise Act, 1944. The claim of assessee was not accepted and the adjudicating authority confirmed demand and penalty. The Tribunal accepted the appeal of the assessee and held that the assessee being entitled to the benefit of the B Sales Tax New Incentive Scheme for Industries, 1989 had availed the same w.e.f. 03.12.1996 and under the scheme itr was entitled to retain with it 75% of the sales tax cotlected and pay only 25% to the Government and that sales tax was deductible from the wholesale price for C determination of assessable value under Section 4 of the Central Excise Act. In the instant appeals, the revenue and the assessee challenged the order of the Tribunal. Disposing of the appeals, the Court D HELD. 1. Rajasthan Sales Tax Incentive Scheme 1989 is a pure and simple incentive scheme, in view of the language employed therein. In fact, by no stretch of imagination, it can be construed as a Scheme pertaining I to exemption. Thus, analysed, though 25% of sales tax E ·is paid to the State Government, the State Government instead of giving certain amount towards industrial incentive, grants incentive in the form of retention of 75% sales tax amount by the assessee. In a case of exemption, sales tax is neither collectable nor payable and if still an F assessee collects any amount on the head of sales tax, • that would become the price of the goods. Therefore, an · incentive scheme of the present nature has to be treated ·on a different footing because the sales tax is collected •and a part of it is retained by the assessee towards G incentive which is subject to assessment under the local sales tax law and, as a matter of fact, assessments have been accordingly framed. In this factual backdrop, it is , held that circular entitles an assessee to claim deduction towards sales tax from the assessable value. [Para 19) H 488 SUPREME COURT REPORTS [2014] 3 S.C.R.. A [503-B-F] Modipon Fibre Company, Modinagar, U. P. v. Commissioner of Central Excise, Meerut. (2007) 10 SCC 3: 2007 (11) SCR 688 - Distinguished. B 2. After the substitution of the old Section 4 of the Act by Act 10 of 2000, the Central Board of Excise and Customs, New Delhi, issued certain circulars and by circular No. 671/62/2000-CX dated 9.10.2002 clarified the circular issued on 1.7 .2000. In the said circular reference C was made to the earlier circular No. 2/94-CX 1 dated 11.1.1994. It was observed in the circular that ## Text _Characters 0–39,784 of 48,661. This is a partial read: ask again with offset=39784 for what follows._ A B (2014] 3 S.C.R. 486 COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. MIS. SUPER SYNOTEX (INDIA) LTD. AND OTHERS (Civil Appeal Nos. 9154-9156 of 2003) FEBRUARY 28, 2014 [ANIL R. DAVE AND DIPAK MISRA, JJ.] Central Excise Act. 1944· s.4(4)(d) - Transaction value - Inclusion of sales tax in transaction value - Held~ The amount C paid or payable to the State Government towards sales tax, VAT etc. is excludible from the assessable value because it is not an amount paid to the assessee-manufacturer towards the price but an amount paid or payable to the State Government for the sale transaction i.e. transfer of title from D the manufacturer to a third party - However, if a part of sales tax collected is retained by the assessee towards incentive then the amount retained becomes profit or effective cost paid to assesssee by the purchaser and assessee is bound to pay excise duty on the said sum - Therefore, amount of sales tax E retained is includible in transaction value of goods - Rajasthan Sa/es Tax Incentive Scheme, 1989 - CBEC circular no. 3781 11-98-CX dated 12.03.1998. F Circular/government order/Notification: Circulars issued by CBEC - Binding effect of - Discussed. Tax/Taxation: Exemption and incentive - Distinction between - Discussed. The respondent-assessee has been engaged in the G manufacture of yarn. A show cause notice was issued on the assessee alleging that it has not paid the excise duty on the additional consideration collected towards the sales tax. The assessee placed reliance on CBEC circular no. 378/11-98-CX dated 12.03.1998 and claimed that sales H 486 COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. 487 SUPER SYNOTEX (INDIA) LTD. tax collected was not includible in the assessable value A and deduction was admissible under the Central Excise Act, 1944. The claim of assessee was not accepted and the adjudicating authority confirmed demand and penalty. The Tribunal accepted the appeal of the assessee and held that the assessee being entitled to the benefit of the B Sales Tax New Incentive Scheme for Industries, 1989 had availed the same w.e.f. 03.12.1996 and under the scheme itr was entitled to retain with it 75% of the sales tax cotlected and pay only 25% to the Government and that sales tax was deductible from the wholesale price for C determination of assessable value under Section 4 of the Central Excise Act. In the instant appeals, the revenue and the assessee challenged the order of the Tribunal. Disposing of the appeals, the Court D HELD. 1. Rajasthan Sales Tax Incentive Scheme 1989 is a pure and simple incentive scheme, in view of the language employed therein. In fact, by no stretch of imagination, it can be construed as a Scheme pertaining I to exemption. Thus, analysed, though 25% of sales tax E ·is paid to the State Government, the State Government instead of giving certain amount towards industrial incentive, grants incentive in the form of retention of 75% sales tax amount by the assessee. In a case of exemption, sales tax is neither collectable nor payable and if still an F assessee collects any amount on the head of sales tax, • that would become the price of the goods. Therefore, an · incentive scheme of the present nature has to be treated ·on a different footing because the sales tax is collected •and a part of it is retained by the assessee towards G incentive which is subject to assessment under the local sales tax law and, as a matter of fact, assessments have been accordingly framed. In this factual backdrop, it is , held that circular entitles an assessee to claim deduction towards sales tax from the assessable value. [Para 19) H 488 SUPREME COURT REPORTS [2014] 3 S.C.R.. A [503-B-F] Modipon Fibre Company, Modinagar, U. P. v. Commissioner of Central Excise, Meerut. (2007) 10 SCC 3: 2007 (11) SCR 688 - Distinguished. B 2. After the substitution of the old Section 4 of the Act by Act 10 of 2000, the Central Board of Excise and Customs, New Delhi, issued certain circulars and by circular No. 671/62/2000-CX dated 9.10.2002 clarified the circular issued on 1.7 .2000. In the said circular reference C was made to the earlier circular No. 2/94-CX 1 dated 11.1.1994. It was observed in the circular that after coming into force of new Section 4 with effect from 1.7.2000 wherein the concept of transaction value has been 1 incorporated and the earlier explanation has been D deleted, the circular had lost its relevance. It is evincible from the language employed in the said circular that set off is to be taken into account for calculating the amount of sales tax permissible for arriving at the "transaction value" under Section 4 of the Act because the set off E does not change the rate of sales tax payable/ chargeable, but a lower amount is in fact paid due to set off of the sales tax paid on the input. Thus, if sales tax was not paid on the input, full amount is payable and has to be excluded for arriving at the "transaction value". F That was not the factual matrix in the instant case. The assessee in the instant case has paid only 25% and retained 75% of the amount which was collected as sales tax. 75% of the amount collected was retained and became the profit or the effective cost paid to the G assessee by the purchaser. The amount payable as sales tax was only 25% of the normal sales tax. Purpose and objective in defining "transaction value" or value in relation to excisable goods is obvious. The price or cost paid to the manufacturer constitutes the assessable value on which excise duty is payable. It is also obvious H 'i COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. 489 ~'-'PER SYNOTEX (INDIA) LTD. that the excise duty payable has to be excluded while A calculating transaction value for levy of excise duty. Sales tax or VAT or turnover tax is payable or paid to the State Government on the transaction, which is regarded as sale, i.e., for transfer of title in the manufactured goods. The amount paid or payable to the State Government B towards sales tax, VAT, etc. is excluded because it is not an amount paid to the manufacturer towards the price, but an amount paid or payable to the State Government for the sale transaction, i.e., transfer of title from the manufacturer to a third party. Accordingly, the amount c paid to the State Government is only excludible from the transaction value. What is not payable or to be paid as sales taxNAT, should not be charged from the third party/ customer, but if it charged and is not payable or paid, it is a part and should not be excludad from the transaction 0 value. This is the position after the amendment, for as per the amended provision' the words "transaction value" mean payment made on actual basis or actually paid by the assessee. The words that gain signification are "actually paid". The situation after 1. 7 .2000 does not E cover a situation which was covered under the circular dated 12.3.1998. The question of "actually payable" did not arise in this case. [Paras 21, 22) [504-E-G; 506-C-H; · 507-A-D] 3. In view of the said legal position, unless the sales F tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of "transaction value" under Section 4(4)(d), for it is not excludible. As is seen from the facts, 25% of the sales tax collected has been paid to the G State exchequer by way of deposit. The rest of the amount has been retained by the assessee. That has to be treated as the price of the goods under the basic fundamental conception of "transaction value" as substituted with effect from 1. 7 .2000. Therefore, the H 490 SUPREME COURT REPORTS [2014] 3 S.C.R. A assessee is bound to pay the excise duty on the said sum after the amended provision had brought on the statute book. [Para 23] [507-D-F] 4. If there are circulars issued by CBEC which placed different interpretation upon a phrase in the statute, the B interpretation suggested in the circular would be binding on., the Revenue, regardless of the interpretation placed by this Court. [Para 24] (508-C] CCE v. Dhiren Chemicals Industries (2002) 2 SCC 127: 2001 (5) Suppl. SCR 607; CCE v. Ratan Melting & Wire C Industries (2008) 13 SCC 1: 2008 (14) SCR 653 - relied on. 5. The assessees in all the appeals are entitled to get the benefit of the circular dated 12.3.1998 which protects the industrial units availing incentive scheme as there is 0 a conceptual book adjustment of the sales tax paid to the Department. But with effect from 1.7.2000 they shall only be entitled to the benefit of the amount "actually paid" to the Department, i.e., 25%. The set off shall operate only in respect of the amount that has been paid on the raw material and inputs on which the sales tax/ purchase tax E has been paid. That being the position the adjudication by the tribunal is not F ..iStainable. Similarly the determination by the original adjudicating authority requiring the assessees to deposit or pay the whole amount and the -:onsequential imposition of penalty also F cannot be held to be defensible. The matters are remitted to the respective tribunals to adjudicate as far as excise duty is concerned. As far as imposition of penalty is concerned, it shall be dealt with in accordance with law governing the field. In any case, proceeding relating to G the period prior to 1.7.2000 would stand closed and if any amount has been paid or deposited as per the direction of any authority in respect of the said period, shall be refunded. [Para 26] (509-B-G] State of Tamil Nadu and Anr. v. India Cement Ltd. (2011) H 13 sec 247: 2011 (7) SCR 395 - relied on. COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II V. 491 SUPER SYNOTEX (INDIA) LTD. 6. Coming to the appeals preferred by the A assessees, the challenge pertains to denial of benefit of the Central Sales Tax Act, the said reasoning will equally apply. The submission that the concession of excise duty is granted by the Excise Department of the Central Government is not acceptable. Circulars dated 12.3.1998 s and 1.7.2002 do not relate to any exemption under the Central Sales Tax imposed on the goods. [Para 27] [509H; 510-A-B] Tata Oil Mills Co. Ltd. v. Union of India 1980 (6) ELT 768 (Born); B.K. Paper Mills Pvt. Ltd. v. Union of India 1984 (18) C ELT 701 (Born); Central India Spinning Weaving and Manufacturing Co. Ltd. v. Union of lndi1 1987 (30) ELT 217 (Born) • referred to. Case Law Reference: 2007 (11) SCR 688 Distinguished Para 8 1980 (6) ELT 768 (Born) Referred to Para t3 1984 (18) ELT 701 (Born) Referred to Para 13 1987 (30) ELT 217 (Born) Referred to Para 14 2001 (5 ) Suppl. SCR 607 Relied on Para 24 2008 (14 ) SCR 653 Relied on Para 24 2011 (7) SCR 395 Relied on Para 25 CIVIL APPELLATE JURISDICITON : Civil Appeal No. 9154-9156 of 2003. - From the Judgment & Order dated 05.07.2011 of the High Court of Jharkhand at Ranchi in LPA No. 466 of 2010. WITH C.A. No. 2912 of 2014, 4621 of 2008, 2008-2009 of 2010, 335-336 of 2005, 4003 of 2009, 4076 of 2007, 5987 of 2010, 6033 of 2011, 778-779 of 2009, 8095-8103 of 2013, &105 of 2013. D E F G H 492 SUPREME COURT REPORTS [2014] 3 S.C.R : A K. Radhakrishnan, Kavin Gulati, Sunita Rani, Shalini Kumar, B. Krishna Prasad, Anil Katiyar, S.N. Terdal, Rashmi Singh, Anupam Mishra, Rohit, Sunaina Kumar, Praveen Kumar, Alok Yadav, Amar Pratap Singh, M.P. Devanath, Kuna! Chatterjee, Maitrayee Banerjee, Ghanshyam Joshi, Partha Sil, B Kartik Kurmy, Anand Jaluka, Praveen Kumar for the appearing parties. The Judgment of the Court was delivered by DIPAK MISRA, J. 1. Leave granted in Special Leave C Petition (C) No. 16248 of 2009. 2. This batch of appeals preferred under Section 35L of the Central Excise Act, 1944 (for brevity, the Act) being inter.- connected and inter-linked was heard together and is disposed 0 of by a common judgment. It is necessary to clarify that the Revenue has preferred the appeals against the decisions rendered by the Customs, Excise & Gold (Control) Appellate Tribunal (for short "the Tribunal") at various Benches whereby the assessee-manufacturers have been extended the benefit E of deduction of excise duty in respect of sales tax imposed by the State Government but not entirely paid to the State exchequer while determining the assessable value for the purpose of central excise, and some of the assesseemanufacturers have preferred appeals being grieved by the rejection for grant of similar relief pertaining to the payment F made under the Central Sales Tax Act. For the sake of convenience, the facts from Civil Appeal Nos. 9154-9156 of 2003 are adumbrated herein as far as appeals by the Revenue are concerned. In respect of the challenge made by the assessee-manufacturers we shall take the facts from Civil G Appeal No. 4621 of 2008. 3. First we shall advert to the issue involving the appeals. preferred by the Revenue. The respondent herein is engaged in the manufacture of yarn of manmade fibers falling under H Chapter 55 of the Schedule to the Central Excise Tariff Act COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. 493 SUPER SYNOTEX (INDIA) LTD. [DIPAK MISRA, J.] 1985, chargeable to duty. A show-cause notice was issued to A the respondent-assessee on the ground that for certain period it had contravened the various provisions of the Act, and the Central Excise Rules, 1944 which had resulted in evasion of Central Excise Duty. The fulcrum of the show-cause notice was that the assessee had not paid the duty on the additional B consideration collected towards the sales tax. The case of the Revenue was that though the assessee was availing exemption from payment of sales tax, it was showing sales tax in the invoices but assessable value was shown separately for payment of Central Excise Duty as a consequence of which the c . net yarn value was invariably higher than the assessable value and excise duty paid thereon. This led to the difference between the two amounts which was almost equal to the amouht of sales tax applicable during the relevant time. The explanation of the assessee was that it was extended the benefit of the incentive D scheme and not granted any exemption and, therefore, the sales tax collected was not includible in the assessable value and deduction was admissible under the Act. 4. The Commissioner of Excise repelled the stand of the assessee, interpreted the benefit granted to the assessee as E partial exemption and, taking certain other facts into . consideration, came to hold that the assessee had deliberately with an intent-to evade payment of duty had suppressed the fact that though it was availing partial sales tax exemption under the Sales Tax Incentive Scheme of 1989 for the relevant period upto F 75% of tax liability, yet it was paying only 25% of the tax leviable despite collecting additional consideration to the extent of the amount of sales tax and, therefore, the additional amount collected under the camouflage of incentive tax had to be taken note of and, accordingly, price was to be declared and formed . G as a part of the value for the levy of excise.duty. 5. Be it noted, in its reply the assessee had placed reliance on C.8.E. & C Circular No. 378/11-98-CX dated 12.3.1998 and claimed that one of the situations as stipulated therein covered H 494 SUPREME COURT REPORTS [2014] 3 S.C.R. A the likes of the assessee and hence, it was not liable to be fastenE!d with any further liability. The Commissioner distinguished the said circular and came to hold that the assessee, with an intention to evade payment of duty, had wilfully suppressed the facts that it was availing partial B exemption of sales tax and collecting additional consideration to the extent of the amount of sales tax not payable by it. In this backdrop, the Commissioner treated it as short payment by the assessee and directed for recpvery of duty and imposed penalty under Sections 11A, 11AC and 11AB of the Act and c further imposed penalty on the persons responsible for the said suppression and evasion. 6. Being grieved by the order passed by the Commissioner of Central Excise, Jaipur, the assessee preferred three appeals, namely, Appeal NO. E/2279-2281 of 2002. The D Tribunal posed the question whether the assessee was entitled to claim deduction under Section 4(4)(d)(ii) of the Act in respect of full amount of sales tax payable at the rate of 2%. The Tribunal took note of the fact that the assessee, being entitled for the benefit under the Sales Tax New Incentive Scheme for E Industries, 1989 (for short "the Scheme"), had availed the same with effect from 3.12.1996 and under the said Scheme it was entitled to retain with it 75% of the sales tax collected and pay only 25% to the Government and, accordingly claimed the deduction for the entire amount of sales tax payable at the rate F of 2% and, accordingly, it did not approve the view adopted by the adjudicating authority that the benefit granted to the assessee in respect of the sales tax was in the nature of arr exemption and not an incentive and, therefore, not deductible under Section 4(4)(d)(ii) of the Act. The Tribunal referred to the G circular dated 12.3.1998 issued by the Central Board of Excise and Customs (CBEC) and came to hold that sales tax was deductible from the wholesale price for determination of assessable value under Section 4 of the Act for levy of Central Excise Duty. Being of this view, it set aside the order passed H by the Commissioner of Excise and directed for refund of the COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. 495 SUPER SYNOTEX (INDIA) LTD. [DIPAK MISRA, J.] deposits made during investigation and the deposit made in A pursuance of the order passed by the Tribunal. 7. We have heard Mr. K. Radhakrishnan, learned senior counsel, appearing for the Revenue and learned counsel appearing for the respondents in the appeals preferred by the 8 Revenue. 8. Mr. Radhakrishnan, learned senior counsel, questioning the legal pregnability of the impugned order, has contended that . the tribunal has clearly erred in applying the circular dated 12.3.1998 as the stipulations in the said circular do not.cover C the cases of the present nature inasmuch as the assessee was extended the benefit of incentive scheme. It is his further stand that in the obtaining circumstances sales tax was collected but not paid to the State exchequer and, therefore, it would be includible in assessable value. Learned senior counsel would D contend that the Tribunal has not dealt with the issue pertaining to "payable", for the issue of "payability" depends oo the language employed in the statute. Mr. Radhakrishnan has urged that, in any case, after the amendment has come into force effecting "transaction value" under Section-4(3)(d) of-the Act E with effect from 1.7.2000 there is a schematic change but unfortunately the same has not been addressed to by the tribunal which makes the order absolutely vulnerable. H'e has commended us to the decision in Modipon Fibre Company, .Modinagar, U.P. v. Commissioner of Central Excise, fireerut. 1 F 9. Learned counsel appearing for the assessee submitted that the order passed by the tribunal is absolutely inexceptionable inasmuch as it has correctly applied the circular issued by the CBEC and the respondent being exempted under the incentive scheme issued by· the State G Government is entitled to avail the benefit. He has commended us to the Scheme issued by the State Government and brought on record the assessment orders passed by th~ sales tax 1. c2001) 10 sec 3. H 496 SUPREME COURT REPORTS [2014] 3 S.C.R A authorities. Learned counsel would further submit that as per the Scheme they are entitled to retain 75% of the sales tax collected and pay only balance 25% to the State Government and despite the same being the admitted position, the adjudicating authority has committed grave illegality by treating B it as an exemption which has been appositely corrected b~the tribunal and hence, the order impugned is impeccable. It is propounded that the amended provision that came on the statute book with effect from 1.7.2000 does not change the situation and, in fact, the earlier circular on principle has been c reiterated by the subsequent circular dated 9.10.2002. 10. Having regard to rivalised submissions raised at the Bar, we deem it appropriate to first refer to the ratio and principle stated in Modipon Fibre Company (supra). In the said case, the show cause notice was dated 19th March, 1999 and D related to the period March, 1994 to March, 1997. Section E F G H 4(4)(d)(ii) as applicable was as under:- "4. Valuation of excisable goods for purposes of charging of duty of excise.-(1) to (3) * * * (4) For the purposes of this section,- (a) to (c) * * * (d) 'value', in relation to any excisable goods,- (i) * * * (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 discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale; COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. 497 SUPER SYNOTEX (INDIA) LTD. [DIPAK MISRA, J.] Explanation.-For the purposes of this sub-clause, the A amount of the duty of excise payable on any excisable goods shall be the sum total of- (a) the effective duty of excise payable on such goods 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 under each Act referred to in Clause (a) or Clause (b) shall be,- (1) in a case where a notification or order providing for any exemption [not being an exemption for giving credit with respect to, or reduction of duty of excise under such Act on .such goods equal to, any duty of excise under such Act, B c or the additional duty under Section 3 of the Customs Tariff o Act, 1975 (51 of 1975), already paid on the raw material or component parts used in the production or 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 E of such goods as reduced so as to give full and complete effect to such exemption; and (i1) in any other case, the duty of excise computed with reference to the rate specified in such Act in respect of such goods." F 11. The contention of the assessee was that they were entitled to deduction in respect of Turnover Tax (TOT) at the rate of 2% though Government of Gujarat by notification dated 19th October, 1993 had exempted sale of yarn under certificate in G Form 26 to the extent of TOT exceeding .5% of the total turnover if the processed yarn was sold in the State of Gujarat. Thus, there was dual rate of 2% and .5% TOT in the State of Gujarat, with the lower rate being applicable to sales in backward area. Relying upon the word/expression "payable" used in Section H 498 SUPREME COURT REPORTS [2014] 3 S.C.R. A 4(4)(d)(ii), it was submitted by the assessee that it refers to the duty payable in the tariff and not any concession or exemption. The contention was rejected by the Court observing that the word "payable" was descriptive and one has to see the context in which the said word finds place and accordingly proceeded B to opine: - c D E F "As can be seen from the abovequoted section, excise duty can be deducted if it had not been included in the invoice price. According to the Explanation, what is deductible is the effective rate of duty. Where any exemption has been granted, that exemption has to be deducted from the ad valorem duty. In other words, it is only the net duty liability of the assessee that can be deducted in computing the assessable value. The said principle stands incorporated in the Explanation. For example, if the assessee recovers duty at the tariff rate but pays duty at concessional rate, then excise duty has to be a part of the assessable value. Similarly, refund of excise duty cannot be treated as net profit and added on to the value of clearances. There is no provision in Section 4 of the 1944 Act to treat refund as part of assessable value. If excise duty paid to the Government is collected at actuals from the customers and if, subsequently, exemption becomes available, such excise duty which is not passed on to the assessee (sic customer), would become part of assessable value under Section 4(4)(d)(ii)." 12. The aforesaid observations were made in the context of TOT which could be deducted, if it had not been included in the invoice price. The excise duty, it was observed, was the G effective rate of duty and where any exemption was granted, the exemption was to be deducted from ad va/orem duty. Only the net duty liability of the assessee was to be reduced from the' invoice price for computing the assessable value. Thus, where an assessee had recovered duty at a higher rate but was paying duty at a concessional rate, then that part of unpaid H COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II v. 499 SUPER SYNOTEX (INDIA) LTD. [DIPAK MISRA, J.] excise duty was to be part of taxable or assessable value. But A refund of excise duty was not to be added to the value of clearances and similarly if subsequently an exemption had become available it could not be reduced to lower to the assessable value. 13. After so stating the bench referred to the decisions of the Bombay High Court in Tata Oil Mills Co. Ltd. v. Union of lndia2 and B.K. Paper Mills Pvt. Ltd. v. Union of lndia3 and · approving the principle laid down therein, observed thus: - B "In our view, the above two judgments of the Bombay High C Court lay down the correct principle underlying the Explanation to Section 4(4)(d)(ii). As held in TOMCO case the exemption was not by way of a windfall for the man~facturer assessee but on account of cotton seed oil used by TOMCO in the manufacture of Pakav. Similarly, D in B.K. Paper Mills the Bombay High Court has correctly analysed Section 4(4)(d)(il) With the Explal)ation to say that only the reduced rate of duty can be excludedjrom the value of the goods and that Explanation explains what was implicit in that section. That, the said Section4(4)(d)(Ji) did E not refer to duty leviable under the relevant Jariff entry without reference to exemption notification that may be in existence at the time of clearance/removal. That, Section 47 of the Finance Act, 1982 which inserted the Explanation expressly sets out what is meant by the expression "the F amount of duty of excise payable on any excisable goods". By the amount of duty of excise what is meant is the effective duty of excise payable on such goods under the Act and, therefore, effective duty of excise is the duty calculated on the b