I T C LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner in all these three applications under Articles 226 and 227 of the Constitution of India is the I.T.C. Limited having its registered office at Calcutta and a factory at amongst other places, Basudeopur in Monghyr in the State of Bihar. The relevant facts for the disposal of these applications are not at all in dispute.

(2.) The petitioner carries on the business of manufacturing and selling cigarettes and smoking tobacco of diverse kinds throughout India and owns and operates five cigarette factories in different States including a cigarette factory at Monghyr in this State. With effect from 1st of April, 1974 the name of the petitioner company was changed from India Tobacco Company Limited to I.T.C. Limited. Such change was effcted under the provisions of Section 21 read with Section 23 of the Companies Act, 1956. For all practical purposes it is only the name which has been changed with the petitioner's rights and liabilities remaining as they were before such change. The petitioner follows a uniform pattern and procedure for selling and marketing its products mentioned hereinbefore, in accordance with which the petitioner's products reach the ultimate consumers of its products through a series of sales and resales in the following manner. The petitioner, which is the manufacturer, sells to the primary wholesale buyers, or dealers otherwise known in the cigarette industry as distributors who in their turn, sell to secondary wholesalers known in common parlance in such industry as wholesalers. These secondary wholesalers, in their turn, sell to the retailers who pass on the products by selling to the consumers at large. The petitioner makes all sales of its products to its distributors otherwise known as wholesale buyers or dealers in large bulk entirely on a principal to principal basis. Such sales are evinced by written contracts which represent normal commercial arrangements and are concluded in the usual course of business. During the relevant periods the petitioner never sold its products to any one in the chain set out above other than the distributors. These writ petitions are in respect of products which were and are sold to such distributors who are primary wholesale buyers of dealers. All the wholesale prices charged by the petitioner from, its distributors are the sole consideration for the said sales and are subject to local taxes uniform throughout India. The petitioner does not extend or derive any extra commercial favour or privilege to or from any wholesale buyer or dealer. The transactions between the petitioner and its wholesale buyers and dealers commonly known as distributors, as already stated above, are at arm's length and in the usual course of business and do not have any consideration other than price of the products as aforesaid. Admittedly, such transactions arc bonafide. Such sales during the relevant periods were completed ex-factory and sometimes outside the said factory. But in any event the products are always capable of being sold on a wholesale basis ex-factory.

(3.) The question that arises for consideration in all these applications is as to what should be the amount of excise duty assessable against the petitioner under the provisions of Section 4(a) of the Central Excises and Salt Act, 1944 (hereinafter to be referred to as the Act) prior to its amendment in 1973. We are not concerned with that amendment which, as we arc informed at the Bar, came into force with effect from October, 1975.