Bhagwati, J. - (1.) This appeal, on certificate of fitness obtained under Article 133 (1) (a) of the Constitution, is directed against a judgment of the High Court of Gujarat dismissing Special Civil Application No. 1278 (sic) (1219 ) of l966 preferred by the appellants challenging the assessment to excise duty of certain dye-stuffs manufactured by them. The facts giving rise to the appeal are few and may be briefly stated as follows.
(2.) The appellants carry on business of manufacturing dye-stuffs in a factory situate in a small township called Atul in Bulsar District in the State of Gujarat. The dye-stuffs manufactured by the appellants were, throughout the period relevant to this appeal, sold by them in wholesale units to two wholesale buyers, namely, ICI (India) Ltd. (hereinafter referred to as ICI) and Atul Products Ltd. (hereinafter referred to as Atul) under respective agreements entered into by them with ICI and Atul. Seventy per cent of the dye-stuffs manufactured by the appellants were sold to ICI, while the remaining 30% to Atul. The price charged by the appellants to ICI and Atul was a uniform price described as "the basic selling price" less trade discount of 18%. ICI and Atul, in their turn, resold the dye stuffs purchased by them from the appellants to two categories of buyers. One was the category of textile mills and other large consumers, while the other was the category of distributors. The sales by ICI and Atul to the textile mills and other large consumers were at the basic selling price without any discount, but so far as the distributors were concerned, the sales to them by ICI and Atul were at a higher price though with trade discount. ICI charged a higher price but allowed 10% trade discount, while Atul charged a slightly lower price and allowed two and a half per cent trade discount. The prices were, however, so adjusted that the net selling prices charged by ICI and Atul to the distributors were almost the same. The distributors, in their turn, resold the dye-stuffs purchased by them from ICI and Atul to the small-consumers at a slightly higher price referred to as "small consumers price". No discount was given by the distributors to the small consumers.
(3.) The position which, therefore, obtained during the relevant period was that the appellants sold the dye stuffs manufactured by them in wholesale units, 70 % to ICI and 30% to Atul, at the basic selling price, less trade discount of 18%:ICI and Atul in their turn resold a part of the dye-stuffs. in retail units to the textile mills and large consumers at the basic selling price and the balance in wholesale units to the distributors at higher selling prices with 10% trade discount in case of ICI and 21/2% trade discount in case of Atul, the net selling prices charged by both of them, however, being the same; and the distributors, in their turn, re-sold the dye-stuffs to small consumers in retail units at the small consumers price. It may be pointed out that though Atul initially charged a lower selling price and gave a trade discount of 21/2%, it fell in line with ICI and adopted the same selling price as ICI with trade discount of 10% from and after 1st May, 1963.;