1988 (4) TMI 76 - HC - Central Excise

Court quashes orders on wholesale cash price interpretation under Central Excises Act.

SANKAR ELECTRICAL (P) LTD. Versus UNION OF INDIA

The court quashed the orders of respondents 1 to 3 in a Writ Petition challenging the interpretation of Section 4(a) of the Central Excises and Salt Act ... Valuation - Sales to wholesale dealers Issues:Interpretation of Section 4(a) of the Central Excises and Salt Act 1944 regarding the determination of 'wholesale cash price' for excisable goods.Analysis:The judgment involves a Writ Petition concerning the interpretation of Section 4(a) of the Central Excises and Salt Act 1944. The case revolves around the excisable value of electric fluorescent lighting tubes sold by the petitioner to a company. The first respondent held that the price of sales to the company could not be considered as the 'wholesale cash price' under Section 4(a) of the Act. The petitioner's appeal and revision against this decision were unsuccessful, leading to the filing of the Writ Petition challenging the orders of respondents 1 to 3.The main issue for consideration was whether the prices at which the petitioner sold the tubes to the company should be taken as the 'wholesale cash price' under Section 4(a) of the Act. The respondents argued that the agreement between the petitioner and the company was not at arms length, thereby affecting the determination of the wholesale price. Reference was made to the Supreme Court's decision in A.K. Roy v. Voltas Ltd., which outlined principles regarding arms length agreements between manufacturers and wholesale dealers.The judgment emphasized the importance of determining the 'wholesale cash price' based on transactions at arms length. It highlighted that agreements for wholesale sales should be fair, reasonable, and made on a purely commercial basis to qualify as the wholesale price for excise duty purposes. Special or favored buyers receiving lower prices due to non-commercial considerations would not constitute the 'wholesale cash price.' The judgment stressed that the ultimate test is whether the price stipulated is fair and reasonable, irrespective of any extra-commercial advantages conferred.In conclusion, the court found that respondents 1 to 3 had not appropriately considered whether the prices charged were fair and reasonable based on purely commercial considerations. The orders of the respondents were quashed, and the matter was remitted to the first respondent for re-investigation and re-adjudication in line with the discussed principles. The first respondent was directed to dispose of the matter within three months from the date of the order to ensure expeditious resolution.