1. The petitioner-firm is a manufacturer of domestic electrical appliances, particularly, water heaters of various sizes. On 1-3-1969, excise duty was introduced on domestic electric appliances. The petitioner submitted a price list on 7-3-1969. as required under the Central Excises and Salt Act, 1944 and the Rule made thereunder for approval of the assessable value to the first respondent. At that time the petitioner was having two sets of prices, one applicable to bulk purchasers and another applicable to retail dealears who purchased small quantities. Messrs Philips India Ltd., is the only concern which was buying in large quantities while others were buying in small quantities The first responded, however, discarded both the sets of prices and gave a provisional approval on 8-3-1969 at the prices at which Messrs Philips India Ltd. sold the water heaters to small dealers who purchased from them in small quantities. On 26-8-1969, however, the first respondent gave a final approval under Section 4(a) accepting the set of prices given by the petitioners applicable to retail dealers. In that letter it was stated that the sale to small retail dealers can be considered as taking place under open market conditions under Section 4(a). As regards the price sold to Philips India Ltd., the first respondent has stated in the said letter that Philips India Ltd., was a favoured buyer and that there cannot be more than one set of prices for excise purposes. Against the said order dated 26-8-1969, of the first respondent, the petitioner preferred an appeal to the second respondent on 26-8-1969.
2. Again on 12-9-1969, the petitioner gave a new price list. The first respondent approved the said price list applicable to retail dealers on 17-8-1969, after rejecting the set of prices applicable to wholesale dealers on the ground that there cannot be more than one set of price for excise purposes. As against the said order also the petitioner filed an appeal to the second respondent on 25-2-1970.
3. Because of the difference in assessable value as per the provisional approval of the prices dated 8-3-1969 and the final approval dated 26-8-1969, the petitioner made a claim for rebate of the excess amount paid for the clearance during the period 8-3-1969 and 28-8-1969, which came to about Rs. 5,000. However, on 3-1-1970, the first respondent suo motu issued an order modifying his own final price approval dated 26-8-1969 refixing the assessable price at the set of prices at which Messrs Philips India Ltd. sold the water heaters to small dealers who purchased from them in small quantities, This modification has been made effective from 8-3-1969, the date of the first provisional approval. The first respondent by another order dated 8-1-1970 stated that order dated 3-1-1970, modified also the earlier order dated 17-8-1969. The petitioner preferred an appeal to the second respondent on 26-2-1970, as against the said two orders dated 3-1-1970 and 8-1-1970.
4. On 17-1-1970, the petitioner wrote to the first respondent pointing out that Messrs Philips India Ltd. had already stopped dealing in water heaters and that the last purchase by them was on 14-11-1969 and requesting for refixation of the assessable value on the prices the petitioner sold to the wholesale dealers who buy from them. On 19-1-1970, the first respondent gave a provisional price approval again on the set of prices to the retail dealers who buy small quantities from the petitioner.
5. Towards the end of April 1970 the petitioner decided to increase the price of water heaters for the first time after the introduction of the excise duty. They offered three sets of prices (1) applicable to small dealers who buy less than 100 pieces in a year or less than 20 pieces at a time; (2) applicable to dealers who buy more than 100 pieces but less than 400 pieces in a year or more than 20 pieces at a time; and (3) applicable to dealers who buy more than 400 pieces in a year or more than 40 pieces at a time. The price list was submitted to the first respondent on 30-1-1970 and the first respondent gave a provisional approval on the set of prices applicable to small dealers only. The first respondent followed it up by a final approval dated 5-9-1970, based on the set of prices applicable to small dealers only. While doing so, he also added the cost of the special wooden packing and freight charges in fixing the assessable value and rejected the prices to the bigger dealers stating the discount given to them should be taken to be a deferred discount. As against the said order of the first respondent the petitioners preferred an appeal on 27-10-1970 to the second respondent.
6. The second respondent passed a common order dated 12-1-1972, in all the said four appeals dated 26-9-1969, 25-2-1970, 26-2-1970 and 27-10-1970. In that order he excluded (1) the cost of special packing and (2) quantitative discounts while fixing the assessable values. He also held that the assessments during the physical clearance period 8-3-1969 to the 30-7-1969, could not be revised as they were time-barred. He however fixed the assessable value of the goods cleared between 30-7-1969 and 14-11-1969, at the price at which Messrs Philips India Ltd. sold to dealers who purchased from them on the ground that during that period most of the sales of the petitioners were to Philips India Ltd. He also held that the quantitative discounts should be allowed only on those clearances made for sales to dealers who actually got the quantitative discounts, that the assessable value should be assessed at the price after deducting the quantitative discounts, and that if at the end of the year a dealer has not purchased the agreed quantity, the difference in duty for the actual quantity supplied should be paid by the petitioners.
7. Against the said order of the second respondent dated 10-1-1972, the petitioner filed a revision petition to the third respondent on 3-7-1972. By an order dated 27-3-1973, the third respondent held that the order dated 3-1-1970 revising his own final orders dated 26-8-1969 was not a valid order and that the revised assessments upto 5-1-1970, were time barred. The third respondent however rejected the other points. As per the orders of the third respondent the present position is that quantitative discounts are accepted after 14-11-1969, when sales to Messrs Philips India Ltd. came to an end, that the quantitative discounts are acceptable only for those clearances for sales to dealers who actually get the quantitative discount and if the dealers do not buy the agreed quantity within the stipulated time, the petitioners must pay the difference in duty between the actual quantity sold and the agreed quantity.
8. The petitioner has questioned the validity of the order of the third respondent mainly on the ground that the respondents have not correctly fixed the assessable value under Section 4(b) for the period upto 14-11-1969 and under Section 4(a) for the period subsequent to that date, that the fixation of assessable value on the basis of the price to retail dealers only, rejecting quantitative discount during the period 8-3-1969 to 3-1-1970 on the basis that Messrs Philips India Ltd. is a favoured buyer and that 90 per cent of the sales are only to Messrs Philips India Ltd. The petitioner also contends that the respondents are in error in accepting the quantitative discount after 3-1-1970 only for those clearances where quantitative discounts were actually given and that the direction given by the respondents to pay the difference in duty if the dealers do not buy the agreed quantity within the agreed period due to any reason is not based on any provision of the Central Excises and Salt Act, 1944 or the Rules framed thereunder.
9. In A.K. Roy v. Voltas Ltd., 1977 ELT 177, the scope of the expression 'wholesale cash price' referred to in Section 4(a) came to be considered. The Supreme Court expressed the view thus --
'There can be no doubt that the 'wholesale cash 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, e.g., because he is relative of the manufacturer, the price charged for those sales would not be 'the wholesale cash price' for levying excise duty under Section 4(a) of the Act. A sole distributor might or might not be a favoured buyer according as terms of the agreement with him are fair and reasonable and were arrived at on purely commercial basis. Once wholesale dealings at arms length are established, the determination of the 'wholesale cash price' for the purpose of Section 4(a) of the Act may not depend upon the number of such wholesale dealings. The fact that the appellant sold 90 to 95 per cent of the articles manufactured to consumers direct would not make the price of the wholesale sales of the rest of the articles any less then the 'wholesale cash price' for the purpose of Section 4(a), even if these sales were made pursuant to agreements stipulating for certain commercial advantages, provided the agreements were entered into at arms length and in the ordinary course of business.'
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10. In Atic Industries v. Assistant Collector, Central Excise, 1978 EL.T. 444 again while dealing with the scope of the expression 'wholesale cash price' the Supreme Court referred to the said earlier decision and atated --
'The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with post-manufacturing cost or profit arising from post manufacturing operation. The price charged by the manufacturer for sale of the goods in wholesale would, therefore, represent the real value of the goods for the purpose of assessment to excise duty. If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken at the value of the goods, it would include not only the manufacturing cost and manufacturing profit of the manufacturer but also the wholesale dealer's selling cost and selling profit that would be wholly incompatiable with the nature of excise. It may be noted that wholesale market in a particular type of goods may be in several tiers and the goods may reach the consumer after a series of wholesale transactions.'
11. Relying on the above two decisions the learned counsel for the petitioner contends that the assessable value of their goods should be fixed at the price sold to Philips India Ltd. prior to 14-11-1969 and that the price at which Philips India Ltd. sold the articles to its customers should not have been taken as the basis. However, on the peculiar facts of this case, I am inclined to agree with the third respondent that the price at which the goods were sold to Philips India Ltd. cannot be taken as the assessable value and it is only the price at which the goods are sold by the petitioner to its retail dealers that should be taken as the basis. It is not the case of the petitioner that Philips India Ltd. were the sole sailing agents. There is in fact no wholesale market for the goods in question. The fact that the goods were given to Philips India Ltd. at a lower price as they were buying large quantities will only lead to the inference that Philips India Ltd. is a favoured buyer getting the goods at a discount. The price at which the goods were sold to Philips India Ltd. cannot therefore be taken as the basis. In this view, the assessable value should be taken to have been determined correctly by the authorities below.
12. Though the third respondent has accepted the petitioner's case that it is entitled to deduct the quantitative discounts given by it, it directed that it should pay the difference in duty if the dealers do not buy the full agreed quantity within the agreed period due to any reason. It is argued that the quantitative discount is an accepted form of trade discount and hence it should be deducted in fixing the assessable value for all clearances. However, it is found that the third respondent has, while allowing the quantitative discounts, stated that the quantitative discount being given on the basis of the quantity purchased, the purchaser cannot be entitled to have the allowance of quantitative discount from the price and therefore directed the collection of the difference in duty in the event of the dealers not purchasing the entire quantity agreed to within the times stipulated. The learned counsel attacks the validity of this direction given by the second respondent in his appellate order. Though in law the purchaser who agreed to purchase a particular quantity and gets a concession in the price of the goods may not be entitled to have the concession if the agreed quantity of goods is not purchased by him during the stipulated period, where a purchaser like the petitioner permits such a purchaser to have the advantage of a concessional price even though he had not cleared the full quantity of the goods within the stipulated period, or permits him to clear the goods beyond the time, the respondents cannot say that the petitioner should not have granted the quantitative concession as the goods have not been cleared within the stipulated time. Therefore the direction given by the second respondent to collect the difference in duty in the event of the purchasers not clearing the goods within the period stipulated has to be modified as one directing the petitioners to pay the difference in duty if the petitioners had collected the price not at the concessional rate but at the full price at which the goods have been sold to the other customers. Except for this modification the petitioners are not entitled to any other relief.
13. The writ petition is ordered accordingly. There will be no order as to costs.