Sardar Ali Khan, J.
1. Messrs Mopeds India Limited, Renigunta Road, Tirupathi Who are the manufacturers of two-wheeler popularly known as Mopeds, is the petitioner herein. The writ hass been filed for the issue of a Writ of Certiorari, to quash the order in C.NO. V/34/17/449/75-B3 in order No. 385/79 dated 25-9-1979 and the consequential demand in D.2 No. 052609 dated 23-10-1979 for sum of Rs. 6,96,177.09 p. towards the differential duty payable by the petitioner company and for a declaration that the approval accorded to excisable goods cleared under Tariff Item No. 34, 34-A and 68 on the price lists submitted on and after 26-5-1979 on which the respondent loaded the commission unilaterally is illegal and ultra vires the authority of the respondent. It is further claimed that the respondent may be directed to redetermine the assessable value of the price lists submittedd by the petitioner as also the earlier approved price lists commencing from 1-10-1975 on the basis of the manufacturing costs and manufacturing profit of the petitioner company and also to grant consequential relief of refund of duty that may accure to the petitioner company.
2. The Mopeds India Limited manufactures Mopeds under the name of Suvega Standard, Suvega Deluxe, Suvega Samrat excisable under the Central Excise Tariff No. 34 as two-wheeler motor vehicles designed for use on the road for which it has granted a Central Excise Licence L. 4 NO.1/65 (M.V.). The company also manufactures 'Motor Vehicle Parts' and 'Accessories of motor vehicles' falling under Tariff Item No.34-A under the L. 4 Licence No. 1/75 and certain other parts of motor vehicles falling under the Tariff Item NO. 68 with effect from 1-3-1979 under Central Excise Licence L.4 NO. 1/78-79. The three items of macufacture viz., Suvega Standard, Suvega Delux and Suvega Samrat are assessable to duty under the Central Excise and Salt Act, 1944. The petitioner Company is giving a commission of Rs. 110/- for Suvega Standard, Rs. 145/- for Suvega Deluxe and Rs. 165/- for Suvega Samrat to its dealers. It is the payment of these commissions to the dealers which are the subject-matter of litigation in this writ petition. The petitioner company is said to be having 179 dealers all over the country to whom 98% of the vehicles are sold. The delivery of vehicles at the factory gates does not generally exceed more than 2% of the slaes in a year. The petitioners company has sales depots at serval places in the country and deliveries of company's two-wheelers are effected to the various dealers and customers in the country through such depots. It is the contention of the petitioner company that the sale of goods to the dealers are outright and the price is the sole consideration for the sales and no direct or indirect commercial, financial or other relationship other than that created by the goods exists between the company and the dealers who are independent unrelated wholesale buyers. It is also contended that no part of the sale proceeds of the excisable goods on their resale from such dealers accrues to the company either directly or indirectly. An agreement is entered into between the company and the various wholesale dealers to whom the company's products are sold under which the company imposes an obligation on the dealers to tender service to every vehicle after its sale, for which purpose the necessary service stations, repair shops, spare parts stores, salesmen etc., apart from the services of a trade mechanic and show room are maintained. Furthermoree, under the agreement every dealer is given a commission ofo Rs.110/- on Suvega Standard, Rs. 145/- on Suvega Deluxe and Rs. 165/- on Suvega Samarat, the mopeds, sold by the dealer. A commission of 20% on ex-factory price on the sppare parts is also provided in respect of the sales to wholesale ddealers. The contention of the petitioner company is that these commissions are paid out of selling price/profits of the company and not out of manufacturing cost profit.
3. The Assistant Collector of Central Excise, Nellore issued a notice in C.No. V/24/17/448/75, B3 dated 15-5-1979 to the petitioner company demanding and amount of Rs.6,96,177.09 p. being the differential duty between the duty actually due to be paid and the amount acturally paid on the motor vehicles produced and cleared from their factory from 1- 10-1975 onwards upto 30-4-1979, under Rule 10 (1) (a) and (b) of the Central Excise Rules, 1944. It is stated in the noticed dated 15-5- 1979 that M/s. Mopeds India Limited, Tirupathi, manufacturers of motor vehicles i.e.,motor ocycles, have been filing price lists from 1-10- 1975 onwards for determinnation of normal price under Section 4 (1) (a) of the Central Excises and Salt Act, 1944 and the values so declared by them were approved by the Competent Authority from time to time. While approving the said assessable value, a dealer's commission of Rs.110/-, Rs.145/- and Rs. 165/- in respect of each type of vehicle i.e., Sevega Standard, Suvega Deluxe and Suvega Samrat respectively were considered as trade discount and allowed to its dealers and deducted from the pricie lists shown under column (3) of the price lists for arriving at the price on which the Central Excises duty is leviable. But on a perusal of the terms and conditions of the dealerships allowed by the petitioner company, it is seen that the sales to the dealers under the above conditions cannot form sales to independent buyers in the open market conditions and it appeared that the sales are only sales through distributors, who are called as authorised dealers. These distributors are related persons within the meaning of Sec.4 of the Central Excises and Salt Act, 1944. The distributors have no wholesale markets for the said vehicles and have only retail sales in accordance with Sec.4 ofo othe Central Excises and Salt Act, 1944 read with Rule 10 (1) (a) and (b) of the Rules made thereunder, and that the normal pprice would be the sale price ofo the said vehicles by the said distributors to othe consumers in retail sales. Therefore, the dealers'commission deducted from the price lists of the vehicles shown in column (3) of the price listiis for arriving at the normal price, is not a normal trade discount and it is not qualified for such a deduction while arriving at the normal price at which the Central Excise duty is leviable and ppaid. It is further stated in the notice thaat in respect of the sales of such motor vehicles direct to the consumers by the assessee factory the commission as indicated above are not passed ovoer to the consumers, but retained by the assee itself i.e., the petitioner company, and therefore, it appears that the normal price in respect of such sales is the actural price charged to the consumers, which, on the other hand, is equal to the price shown in column (3) of the price lists filed from time to time from 25-10-1975 onwards on which the proper duty is leviable and to be paid. Furthermore, the case of othe Revenue is that M/s.Mopeds India Limited, Tirupathi have by wilful mis- statements and suppression of facts caused the escape of oproper levy of duty otherwise leviable on the motor vehicles produced and cleared from their factory through the distributors and direct sales through dealers from their factory from 1-10-1975 and 25-10-1975 onwards. It is, thereforee, clear that it is alleged in the notice that sales to the dealers under the conditions stipulated in the agreements entered into between them and their dealers cannot form sales to independent buyers in the open market conditions and are in fact sales through distributors, though they are called authorised are related ppersons within the meaning of Sec.4 of the Central Excises and Salt Act, 1944. Since these distributors have no wholesale sales, the price at which they are selling in retail should form the normal price and the commissions thereby allowed opreviously i.e.the amount of ocommission of Rs.110/- and Rs. 165/- given to the distributors and deducted from the price quoted in column (3) of the pprice lists, would not be liable to be deducted as such. It is on this ground that the differential duty at the appropriate rates on the commission amount has been demanded from the petitioner company.
4. Before embrking upon a detailed consideration of the respective claims of the parties herein, it would be appropriate to consider the conditions stipulated in the agreements entered into between the petitioner company and their dealers. The relevant conditions stipulated in the said agreements are in the following terms :-
5. (a) Unless otherwise agreed specifically to, all deliveries to the dealer shall be ex-factory in unpacked conodition and the bills/RR/LR/PQB shall be sent through their bankers and all bank charges theron shall be borne by the dealer. In case the dealer does not honour the Bills sent through bank immediately on opresentation by Bankers, the dealer shall be liable to the company for all damages/Iosses and expenses incurred in this connection and the same will be recovered from the deposit lying with the company.
(b) The despatches boy the company will be insured by the dealer against all risks, pilferage, non-delivery and SRCC including breakage, wherever applicable from the time of leaving of the Company's factory or stockyard until arrival at dealer's premises, and all such expenditure incidental to transit shall be to the account of the dealer.
6. The dealer shall at his own expenditure maintain such organisation for the sale and service of the said vehicles, inclnding show rooms, service stations, repir shops, parts, store rooms, salesmen, etc. The dealer shall train mechanics at their own cost with the company. The dealer shall give three free services to every vehicle sold by him and the company shall reimburse to the dealer at Rs.4/- per each free service rendered by him.
7. The dealer shall purchase the spare-parts, tools, accessories, etc., from the company and the dealer will get a commission of o20% on the ex-factory price of the spare parts, tools, accessories, etc.'
It is on the fulfilment of theese conditions that the dealer is entitled to the said commission.
5. Sri.Y.G.Ramamurthy, the learned counsel appearing for the petitioner in this case, has argued that M/s.Mopeds India Limited sell most of their goods through dealers numbering about 179 spread all over India and a few items are sold directly to the consumers from their factory. It is further contended by him that none of these dealers is a holding company, subsidiary companoy or a relative of the Mopeds India Limited as defined under the Companies Act and that the sales to these deaalers are eoutright sales on principal to principal basis. The price is the sole criteria and there are no direct or indirect, commercial, financial or other relationships between the petitioner company and the dealers who are all independent buyers in wholesale trade as defined in Section 4(4) of the Central Excises and Salt Act, 1944 and that no part ofo othe proceeds of the subsequent sales accrue either directly or indirectly to them. It is further contended by the learned counsel for the petitioner that the word `distributor' has not been defined in the section or the Act and the dealers of the company cannot be termed as `distributors' as their are no territorial restrictions and no over-right commission paid to them. The normal trade discount for organising sales and providing facilities are paid to the distributors and the deposits takeen from them are towards the guarantee for organising sales and rendering service facilities. The re-inbursement of Rs.4/- is for actual free servicing to obe reendered by the dealer to the owners of the mopeds. The restrictions imposoed on the dealers on exhibiting their products is not with a view to curtail their activity but only to ensure their reputation and to maintain brand name and quality. In any case it is not a blanket restriction as only prior approval is required so that a good piece can be exhibited without affecting their brand name. The clause relating to the company's obligation arising out of the contracts prior to the termination ofo the dealership is explained as a normal contractual obligation which does not create any financial or commercial relationship and the clause restricting the dealers from entering into agreements with any other party which may prevent him from carrying out the terms of the agreement is also explained as a normal contractural clause not involving any financial or commercial obligation other than those normally imposed in the sale of goods.
6. The learned couonsel, hwever, has submitted that the nature of the transactions, in a given case, should be the determining factor to establish whether a particular dealer or distributor is a related person within the meaning of SEc.4 ofo the Central Excises and Salt Act, 1944. It would be pertinent to reproduce the Sec.4 of the Central Excises and Salt Act, 1944 which is in the following terms :-
'4. Valuation of Excisable goods for opurpose of charging of duty of Excise-(1)Whereunder this Act, the duty of excise is chargeable on any excisable goods with reference to ovalue, such value shall, subject to the other provisions of this section, be deemed to be-
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for odelivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale :
(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of othe other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to eeach such class of buyers;
(ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a place, being the maximum, fixed under any such law, then, notwithstanding anything contained in cluse (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation too the goods so sold, be deemed to be the normal price therof;
(iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to oro through a related operson, the normal price of the goods sold by the assessee to or through such related person shall be deemed to obe the price at which they are ordinarily sold by the relateed person in the course of wholesale trade at the time of removal, too dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail;
(b) where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manners may be prescribed.
(2) Where, in relation to any excisable goods the pprice thereof for delivery at the place of oremoval is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cose of otransportation from the place of removal to the place of delivery shall be excluded from such place.
(3) The provisions of this section shall not apply in respect of oany excisable goods for which a tariff value has been fixed under sub- section (2) of Section 3.
(4) For the purposes of this section,-
(a) 'Assessee' means the person who is liable to pay the duty of excise under the Act and includes his agent;
(b) 'place of oremoval' means :-
(i) a factory or any other place or premises of oproduction or manufacture of othe excisable goods; or
(ii) a warehouse or any other place or other place or premises wherein the exciisable goods have been permitted to be deposited without paypment of duty, from where such goods are removed;
(c) 'related person' means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub- distributor of osuoch distributor.
Explanation-In this cluse 'holding company', 'subsidiary company' and 'relative' have the same meaning as in the Companies Act, 1956.
(d) 'Value' in relation to any excisable goods,-
(i) where the goods are delivered at the time of removal in a packed condition, includes the cost of the packing which is of a durable nature and is returnable by the buyer to the asseessee.
Explanation-In this sub-clase 'packing' means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which or an which the excisablee goods are wrapped, contained or wound;
(ii) does not ooinclude the amount of the duty ofo oeoxocise, sales tax and other taxes, if any, payable on such goods and, subject too such reles as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the noraml practice of the wholesale trade at the time of removal in respect ofo such goods sold or contracteed for sale;
(e) 'wholesale trade' means sales to dealer, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail.'
7. It is clear from a reading of Section 4 of the Central Excises and Salt Act that the duty of excise is chargeable with reference to the value of such goods. The value of the goods is deemed to be the normal price at which the goods are ordinarily sold by the assesseee to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyer is not a related person and the price is the sole consideration for the sale. Then the section proceeds to deal with different situations arising in commercial transactions under the provisos mentioned therein. The other aspect of Section 4 of the Central Excises and Salt Act, 1944 which is relevant for the pupose of this case is Section 4(1)(c) of the Act which gives the definition of a 'related person'. A `related person' within the meaning of Section 4(1)(c) is one who is so associated withi the assessee that they have interest diriiectly or indirectly in the business of each other and includes a holding company, a subsidiary company, a reelative and a distributor of the assessee and any sub- disbutor of such distributor. In the explanation it has been provided that the clause holding company, subsidiary company and relative have the same meaning as in the Company's Act, 1956. It is evident that the duty of excise is chargeable on excisable goods with reference to its value and is deemed to be the normal price as mentioned above. The term `value' itself has been explained in Section 4, sub-section (4) (d) of othe Central Excises and Sale Act, 1944. The concept of the term `value' as given in Sec.4(4) (d) (ii) of the Act is apt to be considered for the pursposes of this case. Under the said provision the concept ofo value in relation to oany excisable goods does not oinclude the amount of duty of excise, sales tax and other taxes, if any, paypable on such goods and subject to suoch Rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal inrespect of osuch goods sold or contracted for sale.
8. The central issue between the parties in this case is whether the trade discount of Rs.110/-, Rs.165/- given on Suvega Standard, Suvega Deluxe and Suvega Samarat respectively shall be included in the normal price of the excisable goods for the purposes of charging the duty of excise on such goods, or, the trade discount should not be included in the normal price over which the excise duty is leviable. As provided in Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944, the value in relation to any excisable gooods does not include trade discount provided such trade discount is not refunddable on any saccoujt whatsoever and is allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of osuch goods sold or contracted for sale. Furthermore, the term `wholesale trade' in accordance with Section 4(4)(e) of the Central Excises and Salt Act, 1944 means the sales to dealers, industrial consumers, Government, Local authorities and other buyers who or which purchases their requirments otherwise than in retail.
9. The controversy arising in this case will have to be viewed in the light of othe decision of Supreme Court in Union of India v. Bombay Tyree International Ltd., 1984 (1) SCC p., 467= E.L.T. 1896 (S,C,) wwherein the provisions of Section 4 of the Central Excises and Salt ACt, 1944 have been considered in detail. The conclusions arrived at by the Supreme Court in that case are applicable in the matter arising before us. It would be pertinent too reporoduce here the conclusions given by the Supreme Court in the judgment referred to above.
'From what has gone before, we consider that the true position under the Central Excises and Salt Act, 1944 as amended by Act XXII ofo 1973 can be set forth as follows :-
(i) the price at which the excisable goodsare ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place ofo removal as defined in sub-section 4(b) of Section 4 is the basis for determination of excisable value provided of course, the buyer is not a related person within the meaning of sub-section (4) (c) of Section 4 and the price is the sole considersation for othe sale. This proposition is subject to the terms of the three provisos to sub-section (1) of Section 4.
(ii) where the price of excisable goods in the course of wholesale trade of odelivery at the time oand place ofo removal cannot be ascertained for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in the manner prescribed by the Central Excise (Valuation) Rules, 1975 should be taken as representing the excisable value of the goods.
(iii) where wholesale price of any excisable goods for delivery at the place of removal is not known and the value thereof is determined with reference to the wholesale price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the pplace of delivery should be exclude from such price;
(iv) of course, these principles cannot apply where the tariff value has been fixed in respect of any excisable goods under sub-section (2) of Section 3;
(v) On a proper interpretation of the definition of 'related person' in sub-section (4) (c) of Section 4, the words 'relative and a distributor of the assessee' do not refer to any distributor but they are limited only to a distributor who is a relative of the assessee within the ted only to a distributor who is a relative of the assessee within the meaning of the Companiies Act, 1956. So read, the defnintion of 'related person' is not unduly wide and does not suffer from any constitutional infirmity. It is within the legislative competence ofo Parliament. It is only when an assesseee so arranges that the goods are geneerally not sold by him in the course of wholesale trade except to or through such a related person that the price at which the gooods are ordinarily sold by the related operson in the course of wholesale trade at the time of removal to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who soell such goods in retail is liable to be taken as the excisable value of the goods under proviso (iii) to sub-section (1) (a) of Section 4.
Applying the pprinciples laid down by the Supreme Court in the decision cited above it will have to be seen whether the demand of Rs.6,96,177.09 p. towards the differential oduty from the petitioner company is justified or not. It is obvious that the nature of the transaction should be the determining factor to establish whether a particular dealer or distributor is a related person within the meaning of Seec.4 of the Act. If a person is so associated with the assessee that they hzave interest directly or indirectly with the business of each other, then that person shall be deemed to be a related pperson within the meaning of the Act. In this case the dealers have to enter into an agreement and to establish a bond between themselves and the petitioner company which is not common in similar trade transactions. The terms and conditions ofo the agreement which have been extracted elsewhere in this judgment, clearly show that the dealer is entitled to the commission only on fulfilment of the conditions laid down in the agreement. It is apparent that the payment of the commission to the dealers is subjet to the fulfilment of the conditions and is not made independently on sale or pruchase of goods. The term `related person' has been considered by the Supreme Court in the decision in Union of India v. Bombay Tyre International Ltd., suopra, and it was held that the definition of related person should be so read that the words a relative and distributor of a assessee should be understood to mean a distributor who is a relative of the assessee. It will be noticed that the explanation provides that the expression `reative' has the same meaning as in the Companies Act of 1956. As regards the other provisions of the swdinirion odo `related person' that is to say 'a person who is soo associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding companoy, a subsidiary company, etc.' It was held that the expression holding company and subisidary company have the same meaning as the Companies Act, 1956. Moreover, the principle of `lifting the veil of incorporation' was held to beo applicable in terms of the decision in Tata Engineering and Locomotive Co. Ltd.v.State of Bihar : 6SCR885 and Juggilal Kamlapat v. Commissioner of Income Tax, U.P. : 73ITR702(SC) . Therefore, the veil of corporate entity could be lifted to pay regard to the economic realities behand the legal facade, for example, where the corporate entity was used for tax evasion or to circumvent tax obligation. In other words, the question, whether a particular dealer or distriibutor is a related person within the meaning of Sec.4 of the Act is a question of fact with will have to oobe determined in the light of oany agreement or special relationship existing between the assessee and such dealer or distributor. In the matter before us on a odetailed consideration of the terms of the agreement entered into between the petitioner company and its dealers, it is not difficult to osee that the trade discount on sales oro purchases is in fact an amount which is paid for fulfilling the terms and conditions of the agreement. In reply to the show cause notice issued to the petitioner company it was stateed that 'that the discount of Rs.110/- Rs.145/- and Rs.165/- for odifferent varieties of mipeeds are normal trade discounts paid for organising sales and providing facilities.' Thus commission which is being given to the dealers is not a normal trade discount but is only a remuneration for oragnising sales and providing facilities.' The dealers in fact function as limbs of the petitioner company through whom the sales are organised and facilities provided. Furthermore, the dealers get a further remuneration of Rs.4/- for the additional work for attending to the servicing of the vehicles free of cost. Yet another restriction imposed on the socalled dealers is by preventing them from dealing with the goods in whatever manner they like. The dealers cannoto enter into agreemrnts with other parties which may prevent them from carrying out any business which they had entered into with the petitioner company. All this clearly shows that the sales are not on a principal to principal basis and the price is not the sole consideration fo the transactions and there is more direct and indirect financial or commercial relationships between the petitioner company and the dealers. Therefore, applyig the test as laid down by the Supreme Court in Union of India v. Bombay Tyre International Co.Ltd. (1) (supra) the only conclusion to be drawn is that thouhg the dealers may not be holding companies, subsidiary companies or relatives as defined in the Companiies Act, 1956, but in pith and substance they are related persons in the sense that they have substantial mutual interest in each others' business. In Union of India & others v.Atic Industries Ltd.-1984 (17) E.L.T. 323 (S.C.)=1984 ECR, 1437 (S.C.) it has been held that the assesseee has an interest, direct or indirect, in the business of thee person alleged to obeo orelated person nor is it enough that the person alleged to be a related person has an interest, direct or indirect, in the business of the assessee. It is essential to attract the applicability of the first part of the definition that the assessee and the person alleged to be a related pperson must have interest, direct or indirect, in the business ofo oeach othoer. In this case it is clear that the discount of Rs.110/-. Rs.145/- and Rs.165/- for the different varities ofo mopeds are being given for organising sales and providing facilities. This is clearly an example of the mutual interest with the related persons and the assessees that are having in the business of each other.
10. In the case of Union of India v.Bombay Tyre International ltd. (supra) another question that came upfor consideration before the Supreme Court was whether the value of an article for the purposes of levy of excise must be determined by reference exclusively to the manufacturing cose and the manufacturing profit of the manufacturer or should be represented by the entire wholesale price charged by the manufacturer. The wholesale price acturally charged by the manufacturer conoosists of not merely his manufacturing cost and his manufacturing profit includes in addition a whole rate of expenses and an element of profit referred to oas pose-manufacturing exppenses and pose-manufacturing profit arising between the completion of the manufacturing process and the point of sale by the manufacturer. o In suppport of the contention that only the manufacturing cost and manufcturing profit can be taken into account for arriving the value of excisable article reliance was placed upon two decisions of the Supreme Court reported in A.K.Roy v.Voltas Ltd. : 1973ECR60(SC) and Atic Industries Ltd.v.H.H.Dave, Assistant Collector of Central Excise, : 1978(2)ELT444(SC) . In the decision in Union of India v. Bombay Tyre International Ltd. (supra) the true scope of the decisions in A.K.Roy v.Voltas Ltd. and Atic Industries Ltd.v.H.H.Dave, Assistant Collector of Central Excise (5) was explained by the Supreme Court and it was held that the normal price mentioned in the new Section 4(1)(a) is the price at which the goods ae ordinarile sold by the assessee in the course of wholesale trade. It is the wholesale pprice charged by him. It is a price which may vary, according to the first proviso according to the new Section 4(1)(a) with different classess of obuyers. It may also be, the whlesale price under any law or the madimum price whiere the law fixes a miximum. The price may alsooo be a different price if the case falls within the thirf proviso to the new Section 4(1)(a). In that event it will be the price charged by a related person in the course of wholesale trade. Clearly,it is not possible to conceive ofo the price under the new Section 4(1)(a) being confined to the manufacturing cost and the manufacturing profit. Moreover, it is reasonable to suppose that the centrual principle for the determination of the value of excisable aricle should be the same, whether the case falls under clause (a) or clause (b) of the old Section 4 or under the new Section 4(1). When regard is had to the provision of clause (b)in each case, it is not possible to limit the price to its components representing the manufacturing profit. Therefore, the law is well settled on the point that tahe price mentioned under Section (4)(1)(a) of the Excises and Salt Act, 1944 cannot be confined to the manufacturing cost and the manufacturing profit only. In other words, the normal price is deemed to be the price at which the goods are sold by the assessee in the course of the wholesale trade. In the matter before us also, Sri Y.G. Rama, Murthy, learned counsel for the petitioner, placed great reliance on the principal that the value of the goods for the purpose of levy of excise must be determined by reference exclusively to the manufacturing cost and manufactauring profit of the manufacturer. However, as stated above, the normal price mentioned in Section 4(1)(a) of the Central Excises and Salt Act, 1944 is deemed to be the price at which the goods are ordinarily sold by the assessee in the course of wholesale trade. It is in fact the wholesale price charged by the manufacturer which is deemed to be the normal price. In this view of the matter the cocept of normal price cannot be confined to the manufacturing cost and the manufacturing profit alone.
11. Sri Y.G. Ramamurthy, the learned counsel appearing for the petitioner company in this case has further argued that the term `wholesale trade' means the sales to the dealers etc., who purchase their requirements otherwise than in retail. Therefore, the price should be for purchase in wholesale lots and not in retail quantities. However, he argues, the retail price envisaged to a customer who buys individual single moped is being taken into consideration and not the price obtained in wholesale lots, and the same is contrary to and in violation of the law as laid in Section 4 of the Central Excises and Salt Act, 1944 which says that the value shall be the price at which the goods are sold to a buyer in wholesale trade who is not a related person. But in this case it is clear that the price as shown in the price-lists is the same either for one piece or for vehicles sold in lots. Therefore, there is no distinction made for wholesale trade or retail trade except that when the goods are sold to the so-called dealers, the commission is deducted from the normal pricce and if it is sold to customers direct form the factory no such commission is deducted from the price at which they are sold. It is, therefore, obvious that there is no difference in the price when the goods are sold in wholesale lots and when sold in single pieces. The highest price obtained for the goods is to be the normal price. In other words, the price of the vehicles without the abatement of the commission would be the normal price as there is only one type of price for wholesale and retail sales.
12. Sri Y. G. Ramamurthy, learned counsel appearing for the petitioner has also argued that the trade discount is in fact only a post- manufacturing expense uniformly allowed to all the dealers who are buyers in wholesale trade. The denial of the tradea discount is contrary to the provisions of Section 4(4)(2) of the Central Excises and Salt Act, 1944 which lays down that the value does not include the trade discount allowed in accordance with the normal pracaticea of trade at the time of removal in respect of such goods sold or contracted for sale. However, it is seen that the commission which the petitioner is paying to their dealers is only a remuneration towards the services performed by them for organising sales and providing facilities. The original price of the vehicle is not exhibited separately and the expenditure incurred on the payment of trade discount is not strictly accounted for or verified. In fact the payment of trade discount in this case is not by way of addition to a certain price of the goods but it is subtracted from the price holding. The wholesale cash price has to be ascertained only on the basis of the transactions at arms length if there is a special or favoured buyer to whom a special low price is charged, because of extra commercial considerations, for example because he is a relative of the manufacturer, the price charged for those sales would not be the wholesale cash price for levying excise under Section 4 of the Central Excises and Salt Act, 1944.
13. It is evident that the price quoted by the petitioner company in column (3) of the price lists are for one piece at which they are selling the goods in retail sales. According to the terms of the agreemnt between the petitioner company and their dealers the commission which the manufacturer is paying to its dealers is only towards the services doen by them for organising sales and providing facilities. It is not a transaction on principal to principal basis. Moreover, a persual of the terms and conditions of the agreement clearly reveals that it is not a normal trade discount entitling it for abatement from the price quoted under column (3) of the price lists. The price for a wholesale dealer and a retail dealer is one and the same. Therefore, there is no necessity to arrive at a price at which they could be sold in accordance with a wholesale trade to an unrelated person.
14. The learned counsel for the petitioner company Sri Y.G.Ramamurthy has further contended that the agreements were examined by the competent authorities earlier before the approval of the price-lists and there is no case of Suppressio Veri Suggestio Falsi and therefore the demand of differential duty is barred by limitation of six months specified under Rule 10 of the Central Excise Rules, 1944. Rule 10 of the Central Excise Rules,1944 reads as follows :-
'10. Recovery of duties not levied or not paid, or short-levied ore not paid in full or erroneously refunded :(1) Where any duty has not been levied or paid or has short-levied or erroneously refunded or any duty assessed has not been paid in full, the proper officer may, within six months from the relevant date, serve notice on the person chargeable with the duty, which has not been levied or paid, or which has been short-levied, or to whom the refund has erroneously been made, or which has not been paid in full, requiring him to show cause why he should not pay the amount specified in the notice :
Provided that -
(a) where any duty has not been levied or paid or has been short- levied or has not been paid in full, by reason of fraud, cllusion, or any wilful mis-statement or suppression of facts by such person or his agent, or
(b) where any person or his agent contravenes any of the provisions of these rules with intent to evade payment of duty and has not paid the duty in full, or
(c) where any duty has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by such person or his agent, the provisions of this sub-rule shall, in any , of the cases referred to above have effect as if for the words 'six months', the words 'five years' were substitued.'
The allegation against the petaitioner company is not that it has not furnished the agreements before the competent authorities or had removed the goods surruptitiously. The allegation is that they have given wrong description of their related distributors as dealers to pass them off as persons who do not come within the category of related persons. To this extent it is clear that the petitioner company has voluntarily and wilfully suppressed the fact of their being aa mutual interest in business between the related distributors and the petitioner company. The dealers are being given a commission for organising the sales and providing facilities. In such a situation the time-limit prescribed under Rule 10(a) of the Central Excise Rules, 1944 is five years from the relevant date to serve a notice on the person chargeable with duty which has not been levied or paid or which has been short-levied, as such. Therefore, there is no substance in the argument of the learned counsel for the petitioner that the demand now raised is barred byt time.
15. In view of the foregoing discussion, this writ petition is dismissed, but in the circumstances of the case, there will be no order as to costs.
16. Mr. Y. G. Rama Murthy learned counsel for the petitioner, has made an oral application for leave to appeal to the Supreme Court.
17. In view of the fact that a substantial question of law of general importance is involved in this matter we grant leave to the petitioner to appeal to the Supreme Court.
18. It is stated by the learned counsel for the petitioner that bank guarantee has been furnished by the petitioner company towards the differential duty demanded in the impugned notice. The bank guarantee shalll not be enforced during the time available to the petitioner to move the Supreme Court (Office is directed to furnish copy of the Judgment within two weeks).