9911796707
TMI Blog1980 (9) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ices of the very same "goods sold as spares for service and replacement differ from the prices charged to original equipment manufacturers and in fact the prices are much higher. With effect from 1st March, 1973 the petitioners have been paying excise duty based on the prices declared by them pending determination of the true assessable value in terms of Sec. 4 of the Central Excises and Salt Act. The petitioners' distributors in the service market are (1) M/s. Lucas Indian Service Ltd., Madras-2 : (2) M/s. India Motor Parts and Accessories, Madras-2; and (3) M/s. T.V.S. and Sons Ltd., Madurai-1. On 7th January, 1974, the first respondent, the Assistant Collector of Central Excise, Madras-34, decided that with effect from 1st March, 1973, the petitioners should pay excess duty in respect of the goods sold even as original equipment to manufacturers on the wholesale cash price at which their distributors sell the goods to dealers. Accordingly, the first respondent called upon the petitioners to file a revised price list and pay the difference in duty on all past clearance of goods from 1st March, 1973, till the date of finalisation of the prices. Admittedly, the petitioners have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners and their distributors were not at arm's length in view of the fact that some of the Directors are common to both the petitioners' manufacturing firm and that of their distributors. In these circumstances, it was decided that the wholesale cash price charged by the distributors to their dealers would constitute assessable value for the assessment of the goods. On this basis, the liability of the petitioner product to excise duty was finalised. It is further stated in the counter affidavit that no excess collection of duty had been made from the petitioners warranting any refund of the same to them. It is further stated that the petition for the issue of a writ of Mandamus is not maintainable in law. 3. According to the petitioners, the price at which they were selling their products as original equipment to manufacturers like Ashok Leylands Ltd., represented the correct wholesale price. The price at which they were selling their products to their distributors could not represent the wholesale price. To take an illustration one of the articles manufactured by the petitioners is starter (Ashok Leyland Ltd.) GBS 524P. 96 222C. The price exclusive of excise duty at which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t capable of being sold at such place, any other place nearest thereto. Explanation. - In determining the price of any article under this Section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid." 5. The question on what basis the assessable value for the purpose of levying excise duty under Section 4(a) of the Central Excises and Salt Act should be determined came up for consideration before the Supreme Court in A.K. Roy v. Voltas Ltd., AIR 1973 S.C. 225 = 1977 E.L.T. (J 177) M/s. Voltas Ltd. carried on, inter alia, business of manufacturing air-conditioners, water coolers and their component parts. It effected direct sales to consumers at list prices and the sales so effected came to about 90% to 95% of its production during the relevant period. It also sold its articles amounting to 5 to 10% of its production to wholesale dealers from different parts of the country in pursuance of agreements entered into with them. The manufacturer had agreed to grant 22% discount to the dealers. M/s. Voltas Ltd. claimed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he articles of a like kind and quality are or could be sold, that would not in any way affect existence of market in the proper sense of the term provided the articles themselves could be sold wholesale to traders, even though the articles are sold to them on the basis of agreements which confer certain commercial advantages upon them. We also think that the application of clause (a) of Section 4 of the Act does not depend upon any hypothesis to the effect that at the time and place of sale, any further articles of like kind and quality should have been sold. If there is an actual price for the goods themselves at the time and place of sale and if that is a wholesale cash price, the clause is not inapplicable for want of sale of other goods of a like kind and quality." Then with reference to the decision of the various High Courts, which had taken a different view, the learned Judge observed :- "We do not think that these decisions, in so far as they hold that the price of sales to wholesale dealers would not represent the wholesale cash price for the purpose of Section 4(a) of the Act merely because the manufacturers had entered into agreement with them stipulating for commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der respective agreements entered into by them with ICI and Atul Products. The price charged by the Atic Industries to ICI and Atul was uniform price described as the basic selling price less trade discount of 18%. ICI and Atul, in their turn, resold the dyestuffs purchased by them from the Atic Industries to two categories of buyers. One was the category of textile mills and other was the category of distributors. The sales by ICI and Atul to the textile mills and other large consumers were at the basic selling price without any discount, but so far as the distributors were concerned, the sales to them by ICI and Atul were at a higher price, though with trade discount. ICI charged a higher price but allowed 10% trade discount, while Atul charged a slightly lower price and allowed two and a half per cent trade discount. The prices were' however, so adjusted that the net selling prices charged by ICI and Atul to the distributors were almost the same. The distributors, in their turn, resold the dyestuffs purchased by them from ICI and Atul to the small consumers at a slightly higher price referred to as small consumers price. No discount was given by the distributors to the small con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken as settled law that where a manufacturer sells his goods manufactured by him in wholesale to a wholesale dealer at arms length and in the usual course of business, the wholesale cash price charged to the wholesale dealer less the trade discount would represent the value of the goods for the purpose of assessment of excise duty. Further, the application of clause (a) of Section 4 does not depend upon any hypothesis to the effect that at the time and place of sale, any further articles of like kind and quality should have been sold. It there is an actual price for the goods themselves at the time and place if sale and of that is a wholesale cash price, the clause is not inapplicable for want of sale of other goods of a like kind and quality. It is also clearly established that wholesale price has to be ascertained only on the basis of transactions at arms length. If there is a special or favoured buyer to whom a specially low price is charged because of extra-commercial considerations, because he is a relative of the manufacturer the price charged for these sales would not be the wholesale cash price for levying excise duty under Section 4(a) of the Act. 7. In this case, a fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... While according to the manufacturers the price at which the goods were sold to M/s. Indian Oxygen Ltd. should be the basis for determination of the duty leviable on such goods, the excise authorities contended that the higher price at which the goods were sold in the wholesale market to others should be taken to be the criterion for determination of the excise duty. In other words, it was contended by the excise authorities before the Full Bench that the wholesale cash prices were not merely cash prices realised when goods were sold even in bulk to consumers but prices realised when sales were effected to wholesale dealers. The Full Bench raised the following points for determination-(1) When goods which are the subject of levy to excise duty are sold wholesale and there is no extra commercial element in fixing the sale price in such sales should the assessment to duty be made on the basis of such sales or whether they should be made only on the basis of sale price of goods of like kind and quality. (2) When evidence establishes that goods of the same quality and kind are sold at different wholesale cash price in the usual course of business should the highest of these be adopted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir distributors is the wholesales price or the price at which the distributors sold the products to the trade is the wholesale price. If the sale by the petitioners to the distributors is at arms length and in the course of usual business, then the price at which the petitioners sold their products to their distributors can be said to be the wholesale price, as laid down in Voltas case. But in this case, the Assistant Collector of Central Excise has come to the conclusion that the transaction between the petitioners and the distributors cannot be considered to be at arms length. The Assistant Collector in his order dated 7th January, 1974 has observed as follows :- "Inasmuch the first sale of goods from the manufacturer to their distributors, some of whose directors are common with those of the manufacturer's own company, is on a principal to principal basis, it cannot be considered as a transaction at arm's length as interpreted by the Supreme Court in its judgment in the case of M/s. Voltas Ltd. v A. K. Roy. Hence the wholesale price which the assessable goods are sold to their distributors cannot be accepted as a wholesale cash price for assessment under Section 4(a) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had decided the Voltas case. As a matter of fact, the Asst. Collector of Central Excise had relied upon the decision in Voltas case for holding that the transaction between the petitioners and the distribution was not at arms length. Consequently, it cannot be said that the Asstt. Collector of Central Excise passed the order dated 7-1-1974, on any mistake of law. The Asstt. Collector as well as the petitioners were clearly aware of the true position of law as on 7-1-1974. Even accepting that the entire contentions of the petitioners are correct viz., that the value of the goods for the purpose of excise duty must take into account only the manufacturing cost and not post-manufacturing profit, the Asst. Collector of Central Excise must be deemed to have committed an error in the application of the law to the facts of the case. It cannot be said that the order dated 7-1-1974, was vitiated by any mistake of law. Nor can it be said that the petitioners paid the duty as per the order dated 7-1-1974, under any mistake of law. At the most, it can be said that the Asst. Collector of Central Excise misapplied the principle of law laid down by the Supreme Court in Voltas case to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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