1974 (5) TMI 112 - HC - Central Excise

Summary

Issues Involved:
1. Determination of the "wholesale cash price" for excise duty calculation.
2. Validity of the orders passed by the Superintendent of Central Excise.
3. Applicability of the Supreme Court decision in A. K. Roy v. Voltas Ltd.
4. Whether the petitioner company is a dummy or benamidar for the customer companies.
5. Timeliness and acquiescence in challenging the order dated 16th August, 1969.

Detailed Analysis:

1. Determination of the "wholesale cash price" for excise duty calculation:

The petitioner company, M/s. Hind Lamps Ltd., argued that its ex-factory price, which includes manufacturing cost and manufacturers' profit, should be considered the "wholesale cash price" under Section 4 of the Central Excise and Salt Act. The Department, however, insisted that the wholesale cash price should be based on the selling prices of the customer companies, who sell the goods at higher rates.

The judgment referenced the Supreme Court decision in A. K. Roy v. Voltas Ltd., which clarified that a wholesale market does not require a physical market where goods are sold to independent buyers. It can also mean the potentiality of wholesale sales. The Court held that sales to traders, even if based on agreements conferring commercial advantages, are still wholesale sales as long as they are not to retailers. The price charged to wholesale dealers represents the wholesale cash price if the agreements are made at arm's length and in the usual course of business.

2. Validity of the orders passed by the Superintendent of Central Excise:

The Superintendent of Central Excise passed orders on 16th July 1970, and 4th December 1971, adjusting the wholesale cash price based on the increased selling prices of the customer companies. The petitioner company appealed these orders, but the appeals were dismissed by the Appellate Collector, who held that the petitioner was manufacturing goods on account of the customer companies and that no evidence was provided to show that the agreements were made at arm's length.

The High Court found these orders unsustainable, stating that the petitioner company's sales to customer companies were bulk sales at manufacturing cost plus profit, which qualifies as wholesale cash price under Section 4(a) of the Act. The submission of the customer companies' price list under protest did not imply acquiescence.

3. Applicability of the Supreme Court decision in A. K. Roy v. Voltas Ltd.:

The judgment applied the principles from A. K. Roy v. Voltas Ltd., emphasizing that the wholesale cash price includes only manufacturing cost and profit, excluding post-manufacturing costs and profits. The Supreme Court had held that agreements with wholesale dealers, even if they confer commercial advantages, do not negate the price being the wholesale cash price if made in the ordinary course of business.

4. Whether the petitioner company is a dummy or benamidar for the customer companies:

The Department suggested that the petitioner company was under the complete control of the customer companies, implying it might be a dummy or benamidar. The High Court rejected this, noting that the petitioner company was treated as the manufacturer for excise and sales tax purposes, and thus could not be considered a dummy. The burden of proving any extra-commercial considerations in fixing the ex-factory price lay with the Department, which it failed to establish.

5. Timeliness and acquiescence in challenging the order dated 16th August, 1969:

The petitioner did not appeal the order dated 16th August, 1969, within the prescribed time or challenge it under Article 226 of the Constitution. The High Court noted that the writ petition filed on 5th April, 1973, was beyond the usual ninety-day period, indicating acquiescence. Consequently, the petitioner was not entitled to any relief regarding this order.

Conclusion:

The High Court allowed the writ petition, quashing the orders dated 16th July, 1970, and 4th December, 1971, along with the appellate orders dated 22nd March, 1973, and 24th May, 1973. The petitioner was entitled to a refund of the excise duty paid under these orders. The order dated 27th October, 1972, was not set aside as it was still under appeal.