TMI Blog1976 (9) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... raised as to the electric bulbs and fluorescent tubes in their finished form ready for sale. They were the subject of another proceeding in the Allahabad High Court. 3. In the glass-ware unit the company manufactures glass shells and tubes. These are component parts of electric bulbs and fluorescent tubes. Shells and tubes are without flange and exhaust tubings which constitute the stamp of the lamp. Other manufacturers use these glass shells and tubes for the manufacture of electric bulb and fluorescent tube. 4. The company sells their glass shells and tubes to a firm at Calcutta known as Unipro Lamp Components. The company does not sell these commodities to any independent purchaser. Anyone who is interested in the component parts of the company has to purchase them through Unipro. 5. Since March, 1961 all glass and glassware were subjected to excise duty by virtue of Item 23A of the First Schedule to the Central Excises and Salt Act, 1944 (the Act). Therefore, from 1961 these two components manufactured by the company were assessable to excise. The Superintendent of Central Excise is the exciseman. He inspects and rates articles liable to excise and collects and enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the firm of Unipro having a share of 8 annas in a rupee and they are also the shareholder in the company holding 50% shares. On this basis he held that it is not a case of sale to an independent purchaser but a case of sale brought about by special relationship between the parties. 3. That the price charged to M/s. Unipro was not the real value, and therefore did not afford the basis for assessment under section. 4. That the price which was being charged by Unipro at Calcutta from independent pruchasers to whom these goods were sold represents the real value and formed the basis of assessment under section 4. 12. Against the order of the Assistant Collector an appeal was taken to the Collector of Central Excise. He dismissed the appeal on 16th November, 1966. 13. The company filed a revision before the Central Government. By an order dated 11th/18th March, 1968 the Central Government dismissed the revision. But it gave relief to the company to this extent that the demands for differential duty in question shall be waived or modified as per the limitation prescribed under Rule 10 of the Central Excise Rules, 1944 and consequential relief allowed to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper basis of assessment under Section 4 ? The facts are not in dispute. The company Manufactures glass shells and tubes. They sell their entire production to Unipro of Calcutta. Unipro sells it further to independent purchasers. In Unipro, Bajaj Electricals Limited as a partner thereof have a share of 8 annas in rupee. They are also a shareholder of the company to the extent of 50% of the entire share-holding. 18. The excise authorities have adopted the prices charged by Unipro to independent purchasers as the basis of assessment. Is this the correct basis? This the question to be decided. 19. The law on the subject was wrapped in fogs of vague thinking till the decision of the Supreme Court in A.K. Roy and another v. Voltas Limited - AIR 1973 S.C. 225 was given on 1st December, 1972. The High Courts had held that the price of sales to wholesale dealers did not represent the wholesale cash price for the purpose of Section 4(a) of the Act and that in order that sales might be wholesale sales, the purchasers must be independent persons. The Supreme Court held this view to be erroneous. The court said: Even if the articles in question were sold only to wholesale dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the first wholesale dealer at the factory gate that is made decisive under Section 4. The price charged by the Manufacturer to the wholesale dealer at that time and place would represent the real value of the goods for purposes of assessment of excise duty. This is the concept of the factory gate sale. In Atic Industries case (supra) their lordships said : It is the first immediate contact between the manufacturer and the trade that is made decisive for determining the wholesale cash price which is to be the measure of the value of the goods for the purpose of excise. The second of subsequent price, even though on wholesale basis, is not material. If excise were levied on the basis of second or subsequent wholesale price it would load the price with a post-manufacturing element namely, selling cost and selling profit of the wholesale dealer. That would be plainly contrary to the true nature of excise as explained in the Volta s case (supra). Secondly this would also violate the concept of the factory gate sale which is the basis of determination of value of the goods for the purpose of excise. All that has to he seen is : Does the sale price at the factory gate repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. It was not the case of the excise authorities at any time that specially low prices were charged by the company to Unipro because of extra-commercial consideration or that the transactions were anything but fair and reasonable or arrived at purely only on commercial Basis. It was never pleaded in the counter affidavit that the sale to Unipro is not a sale at arms length and not in the usual course of business. All that was said in the affidavit was this: M/s. Unipro Lamp Components, Calcutta had special relationship with petitioner inasmuch as the entire sales of M/s Hind Lamps were to or through M/s. Unipro Lamps components, Calcutta. 26. The excise authorities, think that Unipro is a favoured buyer as apart from it no independent buyer could purchase the articles in wholesale market directly from the manufacturer at the factory gate. This is the basis of their decision. In so thinking the authorities have completely mis-understood the meaning and purpose of Section 4. 27. That there is special relationship is an argument that only fogs the issue in debate. These galls goods are amongst the goods chargeable with duty the amount of duty to be charged being made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertained. As Sir George Rankin said in the Privy Council case of Ford Motor Company v. Secretary of State - AIR 1938 PC 15 that those goods then may be considered as members of their own glass even though at the relevant time there are no other members and the price obtainable for them may correctly represent the price obtainable for goods of a like kind and quality at the relevant time and place. 31. Nor is it necessary for a wholesale market to exist that there should be large number of wholesale sales. Even one sale may in certain circumstances be representative of a wholesale market. As Mathew J. said : The quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. The mere fact that such sales may be few or scanty does not alter the true position. 32. That the entire sales by the company were made through Unipro is the index of a special relationship. There is the logic of the argument of the excise authorities. But the Supreme Court has held that a manufacturer is not prevented by law from making all his sales to a sole selling agent or sole distributor. He can route all his products through one single individual or firm or company. He ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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