YOGESHWAR DAYAL - (1.) THIS Civilarises from the order dated 27/11/1980 passed by the division bench of the Madhya Pradesh High court in proceedings under Article 226 of the Constitution of India. The proceedings under Article 226 of the Constitution were directed against an order dated 19/01/1977 passed by the Government of India in exercise of the powers conferred upon them under Section 36 of the central Excises and Salt Act, 1944 (hereinafter called 'the Act').
(2.) THE proceedings before the central government arose out of the review of an order in appeal passed by the Appellate Collector of Central Excise, New Delhi dated 14/07/1975. The Appellate Collector by the aforesaid order had accepted various appeals filed by M/s Kirloskar Brothers Limited, appellant before us against various orders passed by the Assistant Collector, central Excise, Indore. The material facts giving rise to this litigation are as follows: 660 The appellant carries on business of manufacturing power-driven pumps and mono block pumps at Dewas. For manufacturing mono block type P.D. pump sets and power driven pumps, the appellant purchases electric motors from another company M/s Kirloskar Electric Co. Ltd. The Superintendent central Excise issued eight show cause notices to the appellant calling upon them to show cause why the short levy as mentioned in the notices should not be recovered from the appellant. The period to which the alleged short levy related was from 17/03/1972 to Ma 31/03/1973. The grounds on which the amount referred to in the notices issued was proposed to be recovered were - (i) less determination of the assessable value of pumps due to non-inclusion of central Excise duly paid on electric motors used in the manufacture of pumps and (ii) deduction of irregular trade discount on wholesale cash price while determining the assessable value of the articles in question.
(3.) THE Assistant Collector of central Excise held that the excise duty paid by the appellant on electric motors fitted to the pumps could not be deducted while computing the assessable value of the pump sets for purposes of assessment under the Act. With regard to the question of trade discount the Assistant Col- lector held that in terms of explanation to S. 4 of the Act deduction in respect of trade discount on wholesale cash price of the articles to be removed from the factory has to be allowed; the trade discount allowed has to be at uniform rate as held by the Supreme court; once the wholesale price is fixed and the quantum of trade discount is decided it must be given uniformly to all wholesalers irrespective of their relations with the manufacturers. The Assistant Collector observed: "The party had admitted that they have three types of wholesale dealers and each of them allowed trade discount at different rate. The first category of wholesale dealers numbering about 15 got the maximum trade discount. A perusal of the list of these 15 wholesale dealers reveal that most of them are merely selling depots of the party who get the maximum trade discount in comparison to other types of wholesale dealers of the party. The Hon'ble Supreme Court has held that the wholesale price has to be ascertained only on the basis of transactions at 'arms length'. Their Lordships have further opined that if there is a relative of the manufacturer and if he is charged specially low price, the price charged would not constitute the wholesale cash price for levying the excise duty. The maximum trade discount allowed to a particular class of wholesale dealers which is mostly consisted of their own selling depots, therefore, does not represent the trade discount in its true sense in terms 661 of S. 4 according to which the trade discount has to be allowed at a uniform rate and not arbitrarily. Therefore, the fixation of wholesale cash price after allowing the maximum trade discount to particular type of wholesale dealers cannot be treated as a transaction made at arms length in an ordinary course of business and, therefore, not in keeping with provisions of S. 4 of the Act and consequently cannot represent the correct wholesale cash price in terms of S. 4 of the Act for assessment purposes." ;