TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD. Vs. THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES AND OTHERS

JUDGEMENT

(1.) The petitioner (in both the applications) is a public limited company registered under the Indian Companies Act, 1913, and is engaged in the business of manufacturing automobiles, such as Tata Mercedes Benz trucks and buses, chassis, spare parts and accessories thereof, at Jamshedpur in Bihar. The manufactured products arc supplied for use to various types of customers such as Government of India, State Transport Corporations, commercial and industrial undertakings and also private individuals. The machinery adopted for the supply of the vehicles is to appoint dealers in various parts of India who resale the vehicles to the consumers within the limits of the territories allotted to the dealers. The dealers, no doubt, are supposed to supply the vehicles to the various customers within their area as a rule, but they have not got any exclusive selling rights so that the petitioner also has reserved the right according to the terms of the agreement to supply direct to the consumers the vehicles according to convenience. The dealers maintain an efficient sales and service establishment in the region assigned to them. The agreements entered into with the dealers contain the rights and liabilities of both the parties. The sales to the dealers are on a principal to principal basis. Annexure 10 to the petition, modifying Annexure 1, is copy of the specimen of the dealer's agreement. The initial practice followed by the petitioner in view of the uncertainty of the demand for the vehicles was that the actual demand in the market was generally ascertained and firm orders were obtained by the dealers for the vehicles which were forwarded to the petitioner. The petitioner was thus able to form an exact idea of the requirement of the vehicles manufactured for the consumers, but the petitioner was not bound to supply the exact number of vehicles according to the firm order but it was free to sell any vehicles to the dealer keeping in view the quantum of production in the factory.

(2.) By the year 1958, however, the vehicles manufactured by the petitioner acquired considerable reputation in the market for their strength and durability and, accordingly, demand for these vehicles went up a good deal so that it came to the unexpected figure of six thousand vehicles per year. As a consequence, the petitioner did not restrict the manufacture to the initial necessity of producing only as many vehicles as were covered by firm orders placed with it by the dealers but that the process of production went on unimpeded in the expectation of a ready market for the vehicles. It may be stated that from the year 1958 onwards the demand for trucks and buses went up a good deal in the country which made it necessary to introduce certain measures to eliminate the possible objectionable tendencies on the part of the dealers to take undue advantage of the anxiety of the consumers to purchase the vehicles. Accordingly, a circular was issued by the petitioner, being Circular No. ADT/8890, dated the 30th of June, 1958 The circular contained the procedure to be followed by the dealers in resale of the vehicles, Annexure 2 is a copy of the said circular.

(3.) Being apprised of the position of shortage in respect of the trucks and buses, the Government of India adopted some measures for proper and equitable distribution of the vehicles and issued a directive to the petitioner along with other manufacturers, being Directive No. DA/6 (59)/58 of 1st August, 1958, which directive contained the procedure for distribution of the vehicles. The object of the Government was to facilitate equitable distribution of the vehicles to serve the interest of several regions. This directive was consistent with the circular issued by the petitioner. The dealers were requited in terms of the directive of the Government of India as also of the circular issued by the petitioner to maintain a register in the prescribed form and to forward to the petitioner at the end of each week full particulars of the entries in the order register during the week. The policy in instituting this procedure was to enable the petitioner to verify whether the dealers adhered to the specified procedure for the distribution of the vehicles as also to enable the petitioner to submit to the Development Officer of Automobiles a monthly statement containing particulars of the orders booked by the dealers in the preceding month. Such a statement was necessary to be filed in view of Paragraph (VI) in the Government directive. The statement furnished by the petitioner is Annexure 4 to the petition.