TMI Blog1972 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... s a company registered under the Companies Act. It carries on, among others, the business of manufacturing air conditioners, water coolers and component parts thereof. It organises the sales of these articles from its head office at Bombay as also from its branch offices at Calcutta, Delhi, Madras, Bangalore, Cochin and Lucknow. From these offices it effects direct sales to consumers at list prices and the sales so effected came to about 90 to 95 per cent of its production of these articles in the factory in question during the relevant period. A part from these sales, it also sells the articles to wholesale dealers from different parts of the country in pursuance of agreement entered into with them. The agreement with the wholesale dealers for the relevant years contained terms and conditions similar to those mentioned in Exhibit A annexed to the writ petition. The agreement provided, among other things, that the dealers should not sell the articles sold to them except in accordance with the list prices fixed by the respondent, that the respondent would sell them the articles at the list prices less 22 per cent discount, that the dealers will not be entitled to any discount on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 or any other premises of manufacture or production, or if a whole the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or (b) Where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at place at any other place nearest thereto. Explanation-In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid." 7. The appellants contended that the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der which certain commercial benefits were conferred upon them is consideration of their undertaking to do service to the articles sold, or because of the fact that no other person could purchase the articles wholesale from the respondent. We also think that the application of clause (a) of s. 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 have been sold. If there is an actual price for the goods themselves at the time and the 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. 10. Ford Motor Company of India Limited v. Secretary of State for India in Council (AIR 1938 P. C. 15) the appellants before the Privy Council, who imported Ford Motor Vehicles from Canada to India, where they had a monopoly of the supply of those vehicles, sold them only to authorised dealers of distributors, each of whom was sole agent for a retail seller of the vehicles in a particular district. The appellants obtained from the distributors information as to their future requirements and placed consolidated o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollector of Central Excise and others (AIR 1961 Cal. 477) a learned single Judge of that court held that the word "wholesale market" must mean a place where articles are habitually sold to any persons who wishes to make a purchase and that, merely because a factory manufacturers the articles at a particular place and sells them there to its stockists or dealers would not, by itself, convert it into a wholesale market and the question whether there is a "wholesale market" at that location would depend upon a variety of questions, namely, whether goods were really being sold wholesale and whether any person wishing to purchase the goods could do so at the location. The Court also said that, in order that the price may be the 'wholesale cash price' it is necessary that the transaction should be between a manufacturer and an independent purchaser. In other words, the Court was of the view that if the transaction was between a manufacturer and a `favoured purchaser' the price paid by him would not be the 'wholesale cash price' within the meaning of s. 4 (a) of the Act. 13. In the Union of lndia v. Vengunta Suryaprakasa Rao and Another (AIR 1967 A.P. 281), the Court said that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket and that in the light of the language of clause (a) to s. 4 of the Act a sale by the manufacturer at the factory, by itself, would not be sufficient to constitute the price of the sale the `wholesale cash price'. 17. We do not think that these decisions in so far as they hold that the price of sales to wholesale dealers would not represent the "wholesale cash price" for the purpose of s. 4 (a) of the Act merely because the manufacturer has entered into agreements with them stipulating for commercial advantages, are correct. If a manufacturer were to enter into agreements with dealers for wholesale sales of the articles manufactured on certain terms and conditions, it would not follow from that alone that the price for those sales would not be the 'wholesale cash price' for the purpose of s. 4 (a) of the Act if the agreements were made at arms length and in the usual course of business. 18. 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 buyers to whom a specially low price is charged because of extra commercial considerations, e. g. because he is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applicable. Their Lordships said that in determining the price which is to represent the real value of the goods to be taxed, "the price must be conservative in every respect and free in particular from any loading for any post importation charges incurred in relation to the goods)". The price is to be of 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". Their Lordships, therefore, held that the words the 'wholesale price' were used in the section in contra-distinction to a 'retail price', and that not only on the ground that such is a well recognised meaning of the words but because their association with the words 'trade discount' indicates that sales to the trade are those in contemplation, and also because only by attaching that meaning to the word is the 'wholesale price' relieved of the loading representing post-importation expenses which, as a matter of business, must always be charged to the consumer, and which are eliminated. 20. Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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