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TMI Blog1965 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction for delivery at the place of manufacture or production or if a wholesale market does not exist for such article at such place at the nearest place where such market exists; or (b) Where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production or if such article is not sold or is not capable of being sold at such place, any other place nearest thereto. Explanations. — 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." 3.Being large scale manufacturers of footwears, the petitioners say special arrangement was made for collection of excise duty from them. According to the petitioners, they used to submit price lists of goods manufactured by them to the Central Excise authorities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the account and the redetermination of duty without opportunity to the petitioners to show cause were bad. 7.After service of the above notices the respondent No.4 Deputy Superintendent of Central Excise wrote a letter to the petitioners on September 6, 1958, enquiring whether the petitioners sold footwear directly to any firm other than to Messrs. Santlal Bansidhar. The petitioners replied to the letter on September 15, 1958, in the following language : "Our goods are offered to local dealers on cash payment basis and are open to them at all times, but they are not interested in any purchase on cash payment. As such the parties are not buying from us direct. However to eradicate the trace of doubt from your mind that M/s Santlal Bansidhar is our sole selling agent we now intend to offer our goods to loan dealers even on credit in spite of the facts that some risk is involved in such system. On previous occasions we sold some footwear to some parties. ** ** ** ** (Details of sale omitted). 8.We will not be in a position to supply goods to any customers in other Provinces so long we do not have sales tax Registration certificates in respective Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution, praying that the order to debit the current account of the petitioners in respect of the demands dated January 28, 1958 and March 13, 1958, as contained in the communications dated June, 8, 1959, be quashed and that respondents be prohibited from taking such steps and further that respondents be directed by a mandate not to give effect to any of the 4 notices referred to above. 11.In defending the notices issued under Rule 10A, it was pleaded in the affidavit-in-opposition, dated March 9, 1960, as hereinafter stated. (a) between December 17, 1956 and September 27,1958, the petitioner submitted to the C.E. Authorities not less than 25 price lists, some of which were consolidated lists, of those previously submitted for the purpose of assessment of their products. (b) according to departmental practice, on the receipt of the price lists from time to time, provisional approval was given thereto so that day to day clearance of the products might not be held up to the detriment of business. Final approval of the price lists used, however, to be given after verification of the wholesale cash price of products from the open market. (c) out of 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been liable for any loss that may have arisen therefrom to the said Santlal Bansidhar". 13.When the matter came up for hearing before Sinha J., on August 25,1960, his Lordship granted liberty to the respondents to file a supplementary affidavit in-opposition in further explanation of the stand taken by them. Pursuant to the liberty there was supplementary affidavit filed, on August14, 1961, and therein it was stated that one J. N. Verma, Inspector at first verified the prices of footwear manufactured by the petitioner after inspection of the sale bills of Santlal Bansidhar the sole selling agents of the petitioner and the excise duty charged was on the basis of the difference between the prices at which Santlal Bansidhar sold footwears at the wholesale market and the prices at which the petitioner delivered the goods to Santlal Bansidhar. A subsequent verification of the prices were also made by certain officers of the excise Department from the records of Santlal Bansidhar. The result of the verification purporting to support the excess assessment were annexed to the supplementary affidavit-in-opposition. 14.Respondents also relied upon a bond for Rs. 10,000/- executed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts after verification and in support of that contention rely upon certain endorsements made on the applications in A.R. 1 forms by the excise authorities. Those endorsements are to be found in Annexure B to the affidavit by the petitioners dated May 12, 1964. 16.I need notice to other affidavits filed in this Rule, are filed on behalf of the petitioners in which, it was alleged that Messrs. Santlal Bansidhar were not the selling agent but one of the outright purchasers from the petitioners and that the prices charged by Messrs. Santlal Bansidhar had little relevance in the matter of assessment of duty upon the petitioner. The other affidavit that I need notice is an affidavit supporting the version of the petitioners by an employee of Messrs. Santlal Bansidhar filed in the Court on May 25, 1963. 17.It was urged before me on behalf of the petitioners in the first place that Messrs Santlal Bansidhar were not the sole agents or the sole distributors of the products of the petitioners and the prices charged by Messrs Santlal Bansidhar even if in excess of the petitioners' price list should not be taken into consideration in assessing excise duty upon the petitioners. In respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that all we had to do was to find out at what rate the manufacturer sold or could sell, for wholesale cash price, goods at the location above-named. But the sub-Section lays down a further restriction. It is only when a wholesale market exists at the location, for the particular article in question, that such calculation is permissible. The word 'wholesale market' must mean a place where the article in question is habitually sold to anybody who wishes to make a purchase or sale. It is actually obvious that just because a factory manufactures the articles at a particular place and sells them there to its stockists or dealers, will not by itself convert it to a wholesale market. Whether it is a "wholesale market" at that location would depend upon a variety of questions, namely, as to whether goods were really being sold wholesale, and as to whether anybody wishing to purchase the goods could do so at the location. Doubtlessly, this is what is intended by the Excise Authorities while using the expression "independent buyer". If a manufacturer sells to a restricted number of stockists at the location, subject to special conditions, it does not follow that there exists a wholesale mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be looked into under Section 4(a). To take that view may spell danger to the products, unless the producing factories maintain their own sale centres at that nearest market. But producing factories, which sell their products only ex-factory and do not keep sale centres at the nearest market cannot control the price at re-sales. That must depend upon demand and supply and upon vagaries of market tendencies including inclination to profiteer, by persons who had purchased wholesale from factories. If prices varying with such tendencies and inclinations are to be taken into consideration in computing excise duty producing factories, may always stand at the peril of paying duties on prices higher than what they themselves had charged. If however, a factory appoints an agent or a stockist, and that agent or stockist sells in the nearest market such sale may be treated as sales by the producing factory. But if the factory makes an outright sale-ex-factory to dealers and independent buyers, subject to trade discounts, I wonder how the producing factory, can control the price which such dealers or buyers may charge at the nearest market. I would have been inclined to hold that where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the owner : Provided that before making any such order the proper officer shall require the owner to furnish a bond in the proper form binding the owner to pay the differential duty when final assessment is made. (3) when the duty leviable on such goods is assessed finally in accordance with the provisions of these rules, the duty provisionally assessed shall be adjusted against the duty finally assessed and if the duty provisionally assessed falls short of or is in excess of, the duty finally assessed the owner of the goods shall pay the deficiency or be entitled to a refund as the case may be". 20.Now the provisions of Rule 10B cannot be made applicable to any clearance made prior to May 22, 1958, when the bond was executed. The story of provisional assessment, prior to May 22, 1958 is negatived by the endorsements by the Excise Authorities, made on the application in A.R. 1 form some of which are annexed to the affidavit, dated May 12, 1964. One illustrative endorsement is quoted below :- "Checked with approved price list No.........of 19.... and duty and discount assessed accordingly. "Further the petitioners not having had asked for clearance of the goods and provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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