1970 (8) TMI 96 - HC - Central Excise

Summary

Issues Involved:
1. Legality of the appellate order dated May 2, 1967.
2. Legality of the orders of the Assistant Collector of Customs for the years 1962, 1964, 1965, and 1966.
3. Determination of "wholesale cash price" under Section 4(a) of the Central Excises and Salt Act.
4. Validity of the demand notices aggregating to Rs. 27,57,477.19.

Issue-wise Detailed Analysis:

1. Legality of the Appellate Order Dated May 2, 1967:
The petitioner company challenged the appellate order dated May 2, 1967, which confirmed the assessment of excise duty based on retail prices rather than the "wholesale cash price." The appellate authority held that the prices agreed to be charged by the company to their authorized wholesale dealers could not be accepted as "wholesale cash price" under Section 4(a) of the Central Excises and Salt Act. The appellate authority reasoned that the discount of 22% was not available to all independent wholesale purchasers and that the transactions did not represent wholesale transactions in an open market condition.

2. Legality of the Orders of the Assistant Collector of Customs for the Years 1962, 1964, 1965, and 1966:
The assessments for these years were revised based on the same reasoning as the appellate order for 1963. The Assistant Collector assessed the excise duty on the footing that the provisions in Clause (b) of Section 4 were applicable, leading to higher tax liabilities for the petitioner company. The petitioner company argued that the assessments were invalid as they did not consider the "wholesale cash price" as defined under Section 4(a).

3. Determination of "Wholesale Cash Price" Under Section 4(a) of the Central Excises and Salt Act:
The court analyzed the true construction and effect of Section 4(a) of the Central Excises and Salt Act, which defines the "wholesale cash price" as the price at which an article is sold or is capable of being sold at the time of removal from the factory. The court emphasized that the price must be the one charged by the manufacturer and not influenced by post-manufacture expenses or third-party dealer prices. The court referred to the Privy Council's observations in the cases of Vacuum Oil Company v. Secretary of State and Ford Motor Company of India, Limited v. Secretary of State, which clarified that the "wholesale cash price" should be free from any augmentation for post-importation charges and should represent the price at the time of removal from the factory.

4. Validity of the Demand Notices Aggregating to Rs. 27,57,477.19:
The court held that the assessments and the resulting demand notices were based on an incorrect interpretation of the "wholesale cash price." The court found that the prices quoted by the petitioner company to its authorized dealers should be considered the "wholesale cash price" for the purposes of excise duty calculation. The court rejected the contention that the agreements with dealers were restrictive and not representative of open market conditions. The court concluded that the assessments and demand notices were invalid and set them aside.

Conclusion:
The rule in the petition was made absolute, and the impugned order dated May 2, 1967, along with the various notices of demand, were declared invalid and set aside. The respondents were restrained from enforcing the claims based on the invalid assessments and demand notices. The petitioner company was awarded costs fixed at Rs. 3,000.