TMI Blog1980 (9) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... glass shells and tubes to a Calcutta firm known as M/s. Unipro Lamp Components which in turn sells these parts to any interested buyer. 3. The excise duty was paid for the period 1961 to 1965 on the basis of the price list maintained by the petitioner which in fact meant the price at which the petitioner company was selling its glass shells and tubes to M/s. Unipro Lamp Components of Calcutta. However, in July, 1965, the Central Excise authorities maintained that the price at which the goods were sold to M/s. Unipro Lamp Components was not the proper wholesale price. In fact, the proper price was the one at which M/s. Unipro Lamp Components sold the goods to other parties. A claim was raised by the Excise authorities for additional duty for the period 1st March, 1961, onwards, and some additional remands were raised for payment of Rs. 2,50,000/- for the back period and further demands for the future. 4. On 1st December, 1965, the Assistant Collector of Central Excise Agra, passed an order holding that there was a special relationship between the petitioner and M/s. Unipro Lamp Components and the price charged was no the real value of the goods. In fact, the price charged by M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the judgment of the Supreme Court in the Voltas's case. It claimed that the ratio of the said case has not been properly applied to the fact of this case. To understand this contention, it is necessary to refer in passing to the circumstances which led to the Voltas's case. M/s. Voltas Limited was engage in the business of manufacturing air-conditioners, water coolers and componer parts which were sold by the company at its own offices in Bombay, Calcutta, Delhi, Madras, Bangalore and elsewhere. Also, some of the products were sol to other dealers at a wholesale price which meant the listed price less 22 per cent discount It was claimed by the company that the `wholesale cash price' was determined by the said discounted price which was being charged from other wholesale dealers and this was the basis on which the excise duty had to be computed. The Central Excise Department did not accept this contention and M/s. Voltas Limited filed a writ petition in the Bombay High Court. The Bombay High Court held that the wholesale cash price was indeed the price which was being charged by M/s. Voltas Ltd., from its independent wholesale dealers and the fact that the goods were sold in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral Electric Co. Ltd., London. These share-holders are all manufacturers of electrical goods or electrical components and most of them are foreign companies having an international reputation. In M/s. Unipro Lamp Components Ltd., there are four partners who are : (1) M/s. Bajaj Electricals Limited (2) M/s. Associated Electricals Industries Pvt. Ltd., (3) M/s. General Electric Co. of India Pvt. Ltd., and (4) M/s. Philips India Ltd. It appears that M/s. Philips India Ltd., is the managing partner. It will be seen that though the partners are all Indian Companies, they are either the same or related companies to the share-holders of M/s. Hind Lamps Ltd. It can thus reasonably be held that there was a special relationship between the buyer and the seller. This could lead to the application of the principle set out in the Voltas's case. However, the existence of the special relationship by itself does not mean that there is a favoured treatment in the sense that a lower price is being charged. 9. In order to make the principle applicable, it has also to be established that an extremely low price is being charged. There is no evidence of this type at all and this is a mere guess as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent appeal. But, for purpose of convenience, some further analysis can be made of the question which has arisen. 11. If we approach the controversy before us on more fundamentals, we must keep in mind the fact that excise duty is a tax charged on the manufacture of goods. We must keep in mind that it is not a tax on the selling price of goods as is the case when a purchase or sales tax is imposed. The charging section which was applicable at that time provided that the tax or duty was to be charged on what is called the `wholesale cash price'. In section 4(a) of the Act, sufficient details appear to describe what is meant by the `wholesale cash price' and section 4(b) refers to another procedure to be followed if the `wholesale stood price' cannot be ascertained. Section 4 as it then stood reads as follows :- "4. Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be...... (a) the 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 or any other premises of man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured by the company and sold with trade marks like `PHILIPS', `OSRAM', `MAZDA', `CROMPTlON', `BAJAJ' and `KLEERTON' by other companies who purchased these goods. It was the case of the Excise Department that these sales were not at arms' length and were not entered into in the ordinary course of business. It was held by the court that the Appellate Collector of Excise had put the onus the wrong way round. It was said : "The petitioner company could not be expected to prove the negative. Its case throughout was that the agreements with the customer companies were commercial transactions entered into in the ordinary course of business. Ever since the company's very inception the Department has been treating the petitioner-company as manufacturer which sell its goods to those customer-companies only..................................................... If the Department's case was that the customer because of extra-commercial considerations, the burden was upon it to establish facts which may lead to that inference. But the appellate order is singularly silent upon this aspect. It does not give any findings which may go to indicate any extra commercial considerations entering i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts are sold directly to the main manufacturers or through an intermediary. The present case deals with exactly this type of case. The glass tubes and shells are completely useless for the ordinary purchaser. No purchaser could possibly want them except if he happens to be a manufacturer of electric bulbs and tubes. There is, therefore, an extremely limited market for such products. This is a case of a manufacturer selling to another manufacturer for incorporation in another product which is eventually to be sold to the retail customer. In such a case, the sale by M/s. Hind Lamps Ltd., to a firm which consists of a partnership of manufacturers of bulbs and tubes seems to be the normal and most natural out-let for selling the product. It is difficult to understand who else could be a whole-seller for the purpose of selling such products. The inevitable conclusion is that in such a case the sale to M/s. Unipro must be described as a sale to a whole seller and in the absence of any material showing that the price is low or M/s. Unipro is a favoured customer, as observed in the judgment of the Allahabad High Court cited above, it cannot be held that the Excise Department is entitled ..... 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