TaxTMI 
TaxTMI 
1979 (11) TMI 111
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....removal of the article chargeable with duty. It may happen, as it has happened in the case before us, that sale in wholesale of substantial part of the goods produced may be effected to a customer at a price much less than the price at which the goods are sold to other customers in the usual course of business. That may be for reasons such as that such customer is a standing customer, who takes the bulk of the production or that a long standing agreement is in force in regard to supply to such customer. There may be no extra commercial considerations in effecting the sales to such customer at a lower price. Could it be said that the wholesale price in respect of such sales should be based on the price at which goods were sold to such customer or should the higher price at which the goods were sold to other customers be the basis for determining the duty ? Had the case arisen for decision under Section 4, as it now stands substituted by Central Act 22 of 1973, which conceives of such a situation it would not have been difficult to decide it. The provision envisages taking into account the different normal prices at which the goods are sold in wholesale trade. But the said amendment ....
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....of such prices mentioned in the price list goods were said to have been sold by the petitioner. The excise duty was said to be charged on the goods sold only on the basis of the price lists approved by the proper officer. 4. On 28-6-1972, the Superintendent of Central Excise, Kottayam issued a show cause notice (copy of which is Ext. P 1) to the petitioner pointing out that there was short levy of excise duty in regard to 13918.605 metric tonnes of Calcium Carbide or various sizes as detailed in the work sheet attached thereto. The short levy according to the notice came to Rs. 251,684.85. This concerned the Calcium Carbide cleared from the factory between 1-3-1970 and 31-5-1972. Evidently the stand taken in Ext. P1 was that it was not the price shown in the price lists that had to be adopted for assessment to duty but the highest price shown for each category of the goods mentioned in the price lists. Another similar notice, copy of which is Ext. P2 was issued to the petitioners claiming similar duty for a different period 1-6-1972 to 15-9-1972. This concerned the short levy of excise duty on 896.600 metric tonnes of calcium carbide and the short levy amounted to Rs. 19773.25. ....
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....affidavit has been filed by the petitioner. Many of the averments are of facts not hitherto disclosed in these proceedings. According to the petitioner's counsel this supplementary affidavit has to be looked into to enable a proper approach to be made to the case. A petition is also filed to accept the supplementary affidavit as well as the additional documents. we have by separate orders dismissed those petitions. We \will concern ourselves with the points argued by counsel on both sides on the pleadings before the Court. 7. The genuineness of the sale price realised by the petitioner from M/s. Indian Oxygen Limited to whom nearly 60% of the Calcium Carbide produced by the petitioner company is sold is not in controversy. Possibly because the said customer had been purchasing the goods for long and was one of the main customers of the petitioner purchasing in bulk, favourable terms had been offered to them. It is not the case of either side that the sales effected at wholesale cash prices to others were not genuine prices. There is no case that the prices were inflated. Therefore we have to deal with a situation where, in the usual course of business, nearly 60% of the good....
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....he assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each 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 price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such g....
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....ther taxes, if any, payable on such goods and, subject to such 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 in respect of such goods sold or contracted for sale; (e) "wholesale trade" means sales to dealers, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail. 5. Remission of duty on goods found deficient in quantity. - (1) The Central Government may, by rules made under this section, provide for remission of duty of excise leviable on any excisable goods which due to any natural causes are found to be deficient in quantity. (2) Any rules made under sub-section (1) may, having regard to the nature of the excisable goods or of processing or of curing thereof, the period of their shortage or transit and other relevant considerations fix the limit or limits of percentage beyond which no such remission shall be allowed : Provided that different limit or limits of percentage may be fixed for different varieties of th....
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.... other words, wholesale cash prices are not merely cash prices realised when goods are sold even in bulk to consumers but prices realised when sales are effected to wholesale dealers. The points for determination are therefore : 1. When goods which are the subject of levy to excise duty are sold wholesale and there is no extra-commercial element in fixing the sale price in such sales should the assessment to duty be made on the basis of such sales or whether they should be made only on the basis of sale price of goods of like kind and quality. 2. When evidence establishes that goods of the same quality and kind are sold at different wholesale cash price in the usual course of business should the highest of these be adopted for assessing duty as the price at which the goods are capable of being sold. If not, how is the wholesale cash price to be determined in such a case ? 3. Whether the sales to Indian Oxygen are sales the price realised whereunder represent wholesale cash price within the meaning of that term as used in Section. 4 of the Act as it stood prior to amendment by Act 22 of 1973 ? 9. To appreciate the argument of Counsel Sri. Warrier on the....
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....ly to cases where the price is ascertainable. Section. 4(a) refers to 'wholesale cash price' for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory for delivery at the place of manufacture or production. Construing this section, in Voltas case (A.I.R. 1973 S.C. 325) the Supreme Court had laid down the rule that for a wholesale market to exist, it is not necessary that there should be a market in the physical sense of the term where articles of a like kind or quality are or could be sold or that the articles should be sold to so-called independent buyers. The reference is to the potentiality of the article being sold on a wholesale basis. Therefore reference to cases where goods of like kind and quality "is sold" in Section. 4 (a) is to cases where such sales are actually effected at the place of manufacture. Where such sales are effected elsewhere the price at which such article is 'capable of being' sold at the place of manufacture or production could be determined. In addition to the manufacturing cost and manufacturing profit there would be the element of expens....
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.... by the appellant in that case that the price of 'like kind and quality' of goods would not be ascertainable and so the assessment must be made under clause (b) of Section. 30 of the Sea Customs Act. Dealing with this contention the Privy Council observed at page 19 thus : "The price upon which customs duty has been charged appears there-fore to be a wholesale cash price, less trade discount, for which the goods under assessment were in fact sold at the time and place of importation. On this footing their Lordships must now consider the more general arguments for the appellants against the application of Cl. (a) to the shipment in question. "Goods of the like kind and quality" is a phrase which suggests other goods than those under assessment. Upon this is based the argument that one must either disregard the price fetched by the goods themselves or should look to it only to see what price other similar goods would have realised. Unless that is ascertainable, it is contended, that the conditions of Cl. (a) are not satisfied. If for example, one may assume that there were in Bombay no Ford Motor A vehicles left undisposed of from previous shipments, then on this view th....
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....nt in this context : "We also think that the application of Cl. (a) of Section 4 of the Act does not depend upon any hypothesis to the effect that at the time and place of sale, any further articles of like kind and quality should have been sold. If there is an actual price for the goods themselves at the time and place of sale and if that is a 'wholesale cash price', the clause is not inapplicable for want of sale of other goods of a like kind and quality." The reasoning applies to the case before us. The contention that wholesale cash price shall not be determined on the basis of the price at which the goods subjected to duty are sold or are capable of being sold and that must necessarily depend only upon the price of other goods of like kind and quality does not therefore appeal to us. 11. We now come to a more difficult question. How the wholesale cash price is to be determined when the goods produced are sold at different prices and there are no extra-commercial considerations in such sales is not easy to answer. The Supreme Court in Voltas case dealt with a situation where only a small portion of the goods were sold by the manufacturer at wholesale cash pri....
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....te for such determination. The question is complex and as we have indicated not easy to resolve. Since we propose to dispose of the petition before us on the last of the points urged by the learned Central Government Pleader by way of answer to the petitioner's case, we are leaving this difficult question open. 13. M/s. Indian Oxygen is an industrial consumer and it is not purchasing calcium carbide for the purpose of resale but for its own consumption. The sales to Indian Oxygen is in bulk and if price realised at such bulk sales could be called wholesale price that would be wholesale cash price too since the sales are on cash terms. If on the other hand, the wholesale cash price refers to price at sales to wholesale dealers or sale in wholesale to dealers who purchase the goods for the purpose of trade the price at which goods are sold to Indian Oxygen would be irrelevant. Therefore we are called upon to consider the meaning of the term wholesale cash price" in Section. 4 (a) of the Act. For the present we can leave out the terms 'cash'. We are really concerned with the determination of "wholesale price", for, the term cash indicates that considerations of credit for p....
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....regard had been paid to the setting in which the terms are found. The Privy Council observed thus : "Sections 29 and 30 are sections of a taxing Act not to be pressed against the tax payer beyond their plain intendment, and taken as a whole as their Lordships read them, they seem to disclose on the part of the legislature when describing the price which is to represent the "real value" of the goods to be taxed a definite purpose to define a price-conservative in its every aspect and free in particular from any loading for any post importation charges incurred in relation to the goods. The price is to be a price for goods, as they are both at the 'time" and "place" of importation. It is to be a "cash price" that is to say, a price free from any augmentation for credit or other advantage allowed to a buyer; it is to be a net price, that is to say, it is a price "less trade discount". And this last expression, supplemented by these other indications confirms in their Lordships' view the conclusion that the words "wholesale price" are used in the section in contradistinction to a "retail price" and that not only on the ground that such is a well recognised meaning of the w....