VOLTAS LIMITED Vs. A.K. ROY

JUDGEMENT

(1.) In this petition under Article 226 of the Constitution, the petitioner Company (hereinafter called the petitioners) has challenged the legality of the appellate order of respondent No. 1 dated May 2, 1967, in respect of the petitioners' liability to pay excise duty for the year 1963 and the orders of the Assistant Collector of Customs relating to the petitioners' liability to pay excise duty for the years 1962, 1964, 1965, and 1966 and the diverse notices of demand calling upon the petitioners to pay for the above years the different assessed amounts aggregating to Bs. 27,57,477.19. The facts leading to the institution of the petition may be shortly summarised as follows: -

(2.) THE petitioner Company carries on business of manufacturing and selling air -conditioners, water coolers and component parts thereof. The petitioners organise sales of the goods of their manufacture from their head office at Bombay and from branches at Calcutta, Delhi, Madras, Bangalore, Cochin and Lucknow. From these offices the petitioners effect direct sales to consumers at 'list prices'. Further, the petitioners have made agreements with certain dealers inter alia agreeing to sell to these dealers for each different area all the different goods manufactured by the petitioners on the terms and conditions which appear in a specimen copy of the agreement annexed as exh. A to the petition. The exh. Al to the petition contains particulars of the dealers with whom agreements were made on the conditions appearing in the specimen copy exh. A and of the dates of their appointments as also the dates of termination of some of such appointments. It appears that between 1962 and 19C6, which is the relevant period, the petitioners had made agreements on the above terms with dealers at Surat, Poona, Rajkot, Nagpur, Dibrugarh, Allahabad, Banaras, Agra, Amritsar, Jaipur, Trichy, Coimbatore, Vijayawada, Mangalore and Calicut. Apparently, these agreements relate to very large areas of local districts roundabout the places mentioned above. The appointed dealers agreed, inter alia, to render servicing to the air -conditioners and water coolers sold. Paragraph 11 of the agreement contains descriptions of the goods and includes the 'list prices' fixed by the petitioners for sale of their goods to consumers. Details of the discounts given to the consumers when price was paid in cash or larger quantities were purchased are contained in these particulars. The agreements provide that the dealers should not sell the goods sold by the petitioners to them except strictly in accordance with the list prices fixed by the petitioners. The relevant provision in this connection is: These prices are to be taken for supply of the mills on the basin of F.O.R. client's nearest railway station, i. e. you are not to charge the clients for freight, insurance and packing charges. Further, freight, insurance, packing charges and sales tax paid by you on the purchase of unit from us are to be borne by you and not to be charged to the customers. As regards the terms for sale of the petitioners' goods to the dealers, the provision is : We agree to sell to you the 'Crystal ' Room Air -conditioners, 'Tushar' Water Coolers and Dehumidifying units at our list prices, less 22% discount. These prices are, at your option, either F.O.R. Bombay (i. e. packed free) or unpacked ex our go dawn in Nets Delhi. The Central or State Sales/General/Purchase Tax or any other local tuxes such as octroi, etc., any further statutory levies, transit insurance, freight charges and packing charges (wherever involved) will be to your account. You will not be entitled to any discount on the prices of the accessories mentioned in the price schedule on pages 8 and 4 of this letter. Similar provision is made for sale of spare parts of the air -conditioners and the water coolers and dehumidifying units and provides for sale at list prices less 20 per cent discount. Apparently, these agreements are made in the ordinary course of business and the prices for sale of the goods of the manufacture of the petitioners to the dealers are fixed in a commercial manner and are not arbitrary. The para. 12 in the agreements provides for forwarding by the petitioners of all inquiries in respect of the territory mentioned in the agreements to the dealers with an option to the petitioners to quote and sell the articles required directly even in the dealers' territory. In that connection, the provision is that in respect of direct sales commission as calculated in that paragraph would always be payable by the petitioners to the dealers.

(3.) EXCISE duty on the basis of ad valorem value was imposed on air -conditioners, water coolers and parts of water coolers from March 1, 1961. The petitioners' case that the list prices less 22 and 20 per cent discount which the petitioners agreed to charge to their dealers was 'wholesale cash price' in respect of all the articles of the manufacture of the petitioners was accepted by the Excise authorities for assessments made up to the end of 1902. Upon special excise duty being imposed from March 1, 1963, the petitioners revised their 'list price' and a copy of the revised 'list price' was furnished to the Excise authorities. In January 1964, the Superintendent of Central Excise made provisional assessment orders on the footing that the price agreed to be charged by the petitioners to their dealers was not applicable for assessment of duty. In April 1964, the Superintendent of Central Excise intimated to the petitioners that as regards the articles sales whereof were not substantial to the dealers, the duty would be assessed not on the footing of 'whole sale cash prices' but on the footing of the prices charged to the consumers, i.e. retail prices. The Superintendent of Excise by his orders passed in September 1964 assessed the petitioners to tax in respect of all sales on the footing of the list prices for sale to consumers in respect of the period January 1, 1903, to December 31, 1963. The petitioners were on the above footing liable to pay additional amount of Rs. 7,31,869.13. A notice of demand dated October 8,1964, was served on the petitioners calling upon them to pay the above sum. The petitioners' representation in that connection was disposed of by the order dated November 1, 1965, made by the Assistant Collector of Central Excise. By this order the assessment made on the above footing was confirmed. The petitioners' appeal against the assessment made on the above footing was dismissed by respondent No. 1 by his appellate order dated May 2, 1967, which is the appellate order that is challenged in this petition. In the appellate order the following findings of the Assistant Collector were first recited: -