TMI Blog1988 (4) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the products, including the said products, manufactured by the petitioners are sold through another private limited company called Franco Indian Pharmaceuticals Private Limited, hereinafter referred to as "Franco Limited". This latter company has been treated, at least for the purpose of the proceedings culminating in this writ petition, as a related person within the meaning of Section 4(4)(c) of the Central Act. Approximately 4 per cent of the annual production of the medicinal preparations of the petitioners are distributed free of charge as samples to medical practitioners. 2. Though excise duty is normally leviable under the Central Act, in view of the fact that some of the products of the petitioners contain alcohol, they are als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding on the basis that they are liable to excise duty. However, they insist that the prices of their products which are distributed as free samples to the physicians should not be higher than the prices at which Franco Limited is selling such products to the wholesale dealers. In other words, the basis for the levy of excise duty by the respondents on the products distributed by the petitioners as free samples to the medical practitioners cannot be higher than the one at which excise duty is levied on the sales made by Franco Limited. 4. On or about 23rd August, 1979, a notice was received from a Prohibition and Excise Officer who demanded excise duty from the petitioners on the basis that the samples given to the medical practitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the point involved in this petition is a narrow one. Mr. Korde has pointed out that since Franco Limited is treated as a related person, the price at which the said related person is selling the products to the wholesale traders alone could be the basis on which excise duty could be levied by the respondents. It is so provided in Section 4(l)(a) read with the third proviso to sub-clause (a) of the Central Act. I will shortly refer to the said provision and point out how the contention of Mr. Korde is well-founded. 7. Mr. Chogle, the learned Government Pleader appearing for the respondents, however, has contended that the free samples which are given to the medical practitioners cannot be assessed on the basis of the price at which Franc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, these judgments are not relevant to the determination of the question which is clearly and in a straight-forward manner arising in this case. Incidentally I may mention at this stage that both the petition and the affidavit in reply have clearly mentioned that a trade discount of 8 per cent is allowed by the department in the wholesale price which Franco Limited uses as the basis for selling the products. In the light of this I do not see how Mr. Chogle can contend that in view of the judgment of the Supreme court in Bombay Tyres International's case trade discount could not be permitted. 8. Be that as it may, I will proceed on the basis that it is the contention of Mr. Chogle, and probably it is the basis of the order of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts to Franco Company as the basis for levy of excise duty. This is for the obvious reason that Franco Limited has been treated as a related person and in view of the provisions contained in Section 4(1)(a)(iii) of the Central Act, the price at which the related person sells the products to the wholesalers is to be treated as the normal price on which excise duty is leviable under Section 4 of the said Act. Unfortunately, the respondents have missed this elementary principle which can be easily gathered by a careful reading of the provisions of the said Section. It has thus become necessary for me to reproduce the relevant part of Section 4 of the Central Act. Sub-section (1) of Section 4 is as follows :- "Where under this Act, the duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners to the wholesalers would be the value on which excise duty can be levied by the respondents. The question whether trade discount is allowable in the case of free samples to the physicians or in the case of other samples is wholly irrelevant. What is the cost of manufacture and what are the other post-manufacturing expenses which are to be added to the price to be determined for the purpose of levy of excise duty on the facts of this case are wholly irrelevant, because the respondents themselves have accepted the price at which Franco Limited is selling the products in the course of wholesale trade as the correct price by excluding 8 per cent of the discount allowed to them for levying excise duty under Section 4 of the Central Act. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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