RALLIWOLF LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE question involved in this writ petition under Article 226 of the Constitution of India relates to the true scope and interpretation of section 4 of the Central Excises and Salt Act, 1944 as duly amended by Act No. 22 of 1973, which came into force with effect from 1st October 1975.

(2.) THE first petitioner is a company registered under the Companies Act, 1956. It carries on business inter alia of manufacturer of portable electrical tools, machines, fractional H. P. Motors etc. At the relevant time, the first petitioner company was a subsidiary company of the holding company by the name Rallis India Ltd. (hereinafter referred to for the sake of brevity as Rallis India ). It is the case of the petitioners that they have been selling the fractional H. P. Motors in course of wholesale trade directly to the consumers. It is pleaded on behalf of the petitioners that the sales of the said H. P. Motors by the petitioners are on principal to principal basis and are at arms length. It is also pleaded that the price charged for the said H. P. motors by the petitioners is the normal price and it is the sole consideration for the sale. It is the case of the petitioners that as far as the said H. P. Motors, they are charging from the buyers prices which not only include the manufacturing costs and manufacturing profits but also post-manufacturing costs, expenses and profits such as (i) marketing and distribution expenses (ii) advertising attributable to selling operation, (iii) packing (secondary packing), and (iv) interest charges incurred on selling and distributing the finished goods. It is the case of the petitioners that as regards other products viz. portable electrical tools, machines, stands and attachments (hereinafter referred to as "the products") the petitioner company is selling the same to Rallis India -who were their distributors for these products at the relevant time. It is the case of the petitioners that as regards the said other products the petitioner company is a subsidiary company of the said Rallis India but the prices which the petitioner company charging are fully commercial prices and the said prices are not concessional prices as the said prices are not affected by extra commercial consideration. In other words, according to the petitioners, in respect of their other products, their transactions with Rallis India are at arms length and the prices charged are the sole consideration for such sales. The said Rallis India, according to the petitioners, at the relevant time sold the said goods to their respective consumers. It is the case of the petitioners company that the prices charged by Rallis India include their post-manufacturing costs, expenses and sales-tax payable on petitioners companys sales to Rallis India and selling profits.

(3.) IT may be mentioned at this stage that on or about 10th July 1990 the petitioner company ceased to be a subsidiary company of Rallis India.