1987 (4) TMI 80 - HC - Central Excise

Court Emphasizes Fair Pricing in Wholesale Transactions

The court held that the prices at which goods were sold on a wholesale basis could constitute the wholesale cash price under Section 4(a) of the Central ... Valuation of goods sold under agreement Issues:Interpretation of Section 4(a) of the Central Excises and Salt Act 1944 for determining excisable value based on wholesale cash price. Whether the prices at which goods were sold on a wholesale basis can be considered as wholesale cash price under Section 4(a) of the Act. Application of the principles regarding arms length agreements and fair and reasonable pricing in excise duty determination.Analysis:The judgment concerns the interpretation of Section 4(a) of the Central Excises and Salt Act 1944 to determine the excisable value of goods based on the wholesale cash price. The case involved a dispute where the first-respondent did not consider the prices at which electric fluorescent lighting tubes were sold on a wholesale basis as the wholesale cash price under Section 4(a) of the Act. The petitioner appealed to the second and third-respondents, but the decisions were not in their favor, leading to a Writ Petition challenging the orders of the respondents.The main issue for consideration was whether the prices at which the goods were sold on a wholesale basis should be considered as the wholesale cash price under Section 4(a) of the Act. The respondents relied on an agreement between the petitioner and the company to argue that the prices were not determined at arms length, thus not reflecting the wholesale cash price. The judgment referred to a Supreme Court pronouncement in A.K. Roy v. Voltas Ltd. emphasizing that prices determined through agreements with wholesale dealers could still represent the wholesale cash price if the agreements were made at arms length and in the usual course of business.The judgment highlighted several principles derived from the Supreme Court pronouncement, emphasizing that the determination of wholesale cash price should be based on fair and reasonable pricing on a purely commercial basis. It stressed that prices determined with extra-commercial considerations or special low prices charged to favored buyers would not qualify as the wholesale cash price for excise duty purposes. The judgment further cited another Supreme Court case, Atic Industries Ltd. v. M.H. Dave, underlining the importance of fair and reasonable pricing in determining excisable value.Ultimately, the court held that the respondents had not properly considered whether the prices were fair and reasonable or if specially low prices were charged due to extra-commercial considerations. It concluded that the matter required re-investigation and directed the first-respondent to re-consider and dispose of the case, applying the principles discussed in the judgment. The judgment emphasized the importance of expeditious disposal of the matter and directed the first-respondent to resolve the issue within three months from the date of the order.