1974 (6) TMI 30 - HC - Central Excise

Valuation - Wholesale cash price - Determination of - Constitution - Articles 226 and 227 - Applicability to Central Excise - Percentage of sale at factory gate

Summary

Issues:
1. Interpretation of trade discount under the Central Excises and Salt Act, 1944.
2. Dispute over determining the wholesale cash price of soap products.
3. Jurisdiction of High Court under Articles 226 and 227 of the Constitution.
4. Applicability of Article 131 of the Constitution in the dispute between State and Central Government.

Analysis:

1. The petition raised the question of determining the trade discount allowable under the Explanation to Section 4 of the Central Excises and Salt Act, 1944. The dispute centered around the percentage of trade discount to be considered in calculating the wholesale cash price of soap manufactured by the petitioner.

2. The judgment outlined the events leading to the petition, where initial assessments were based on a 6% discount for wholesale buyers of soap products. Subsequently, the authorities reduced the allowable discount to 2%, leading to appeals and revisions regarding the determination of the wholesale cash price.

3. The High Court addressed the jurisdictional issue raised by the respondents, emphasizing that the dispute falls under the purview of Articles 226 and 227 of the Constitution, concerning the liability of the petitioner to pay excise duties, rather than a dispute between State and Central Governments under Article 131.

4. The Court rejected the contention that the quantum of goods sold on a wholesale basis was irrelevant in determining the wholesale cash price. It emphasized that the terms of agreements between the petitioner and selling agents should govern the pricing, considering the purpose of entering into those agreements for wholesale distribution.

5. The judgment highlighted the importance of the agreements with selling agents in determining the trade discount, noting that sales made at the factory premises to retail dealers were in accordance with the agreed terms, which provided for a total 6% trade discount. The respondents' insistence on allowing only a 2% discount was deemed erroneous.

6. Ultimately, the Court allowed the petition, quashing the previous orders related to the determination of the wholesale cash price of soap products. The decision was based on the agreements with selling agents and the incorrect application of trade discount percentages by the authorities. No costs were awarded in the circumstances.