1980 (9) TMI 88 - HC - Central Excise

Valuation - Wholesale cash price - Assessable value - Connotation of - Favoured Buyer - Burden of proof - Excise duty - Nature and Scope

Issues Involved:
1. Validity of the excise authorities' alteration of the basis of assessment for excise duty.
2. Determination of the correct "wholesale cash price" for the purpose of excise duty.
3. Examination of the special relationship between the petitioner and the buyer.
4. Applicability of the Supreme Court's judgment in Voltas's case to the present case.

Detailed Analysis:

1. Validity of the Excise Authorities' Alteration of the Basis of Assessment for Excise Duty:

The appeal challenges the judgment quashing the orders of the Excise authorities that directed additional payment of excise duty on the manufacture of glass shells and glass tubes. The Excise authorities had altered the basis of assessment, claiming that the price at which the goods were sold to M/s. Unipro Lamp Components was not the proper wholesale price. Instead, they asserted that the price at which M/s. Unipro Lamp Components sold the goods to other parties should be the basis. The learned single Judge held that the excise duty had to be paid on the wholesale cash price, which is the price at the factory gate, not the price at which M/s. Unipro Lamp Components sold the goods.

2. Determination of the Correct "Wholesale Cash Price" for the Purpose of Excise Duty:

The learned single Judge, referencing Supreme Court judgments in A.K. Roy and Another v. Voltas Ltd. and Atic Industries Ltd. v. H.H. Dave, concluded that the right basis for computing the excise duty was the price charged by the company from M/s. Unipro Lamp Components at the company's factory gate. It was emphasized that the duty had to be charged on the manufacturing cost plus the manufacturing profit. Charging duty based on M/s. Unipro Lamp Component's price would mean charging on the selling cost plus the selling profit, which was incorrect.

3. Examination of the Special Relationship Between the Petitioner and the Buyer:

The Excise authorities argued that there was a special relationship between M/s. Hind Lamps Ltd. and M/s. Unipro Lamp Components, suggesting that the price charged was not the real value of the goods. The court noted that the shareholders of M/s. Hind Lamps Ltd. and the partners of M/s. Unipro Lamp Components were closely related entities. However, it was held that the mere existence of a special relationship does not imply favoured treatment unless it is established that an extremely low price is being charged. The court found no evidence to suggest that the price charged was unreasonably low.

4. Applicability of the Supreme Court's Judgment in Voltas's Case to the Present Case:

The appellant contended that the present case was covered by the Supreme Court's judgment in Voltas's case, which dealt with determining the "wholesale cash price" based on transactions at arm's length. The court distinguished the present case by noting that M/s. Hind Lamps Ltd. was manufacturing specialized glassware that could only be sold to other manufacturers of electric bulbs and tubes, making M/s. Unipro Lamp Components the wholesaler. The court concluded that the sale to M/s. Unipro Lamp Components was a wholesale sale and that the price charged was not unreasonably low. Therefore, the Voltas's case was not applicable.

Conclusion:

The court upheld the judgment of the learned single Judge, affirming that the excise duty should be based on the price at the factory gate charged by M/s. Hind Lamps Ltd. to M/s. Unipro Lamp Components. The appeal was dismissed with costs, emphasizing that the price charged was the proper "wholesale cash price" and that there was no evidence of favoured treatment due to a special relationship.

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