Sinha, C.J. - (1.) The facts in this case arc shortly as follows: The respondents carry on business in co-partnership as manufacturers of rubber and canvas goods including shoes, under the name and style of Olympia Rubber Works, at No. 10. Pay-mental Garden Lane in Calcutta. Under the Finance Act 1954 foot-wear is dutiable under the Central Excises and Salt Act, 1944 (hereinafter referred to as the "said Act") at the rate of 10% ad valorem. How the valuation is to be determined for the purpose of calculating duty appears from section 4 of the said Act, the relevant part whereof is set out below: "(4) Determination of value for the purpose of duty (a) Where under this Act any article is chargeable with duty at a rate dependent on the value of the article such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production or if a wholesale market does not exist for such article at such place at the nearest place where such market exists, or (b) Where such price is not ascertain-able, the price at which an article of the like kind and quality is sold or is capable or be-ins sold by the manufacturer or producer or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production or of such article is not sold or is not capable of being sold at such place, any other place nearest thereto. Explanation:-- In determining the price of any article under this section no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid." This section came to be construed by me in the case of National Tobacco Co. of India Ltd. v. Collector of Central Excise, The learned Judge in the court below has relied upon it and Mr. Roy Chou-dhury for the appellant does not dispute its correctness Briefly speaking, the proce-dure should be as follows:- "Wholesale price" means the price which a wholesale dealer and not a retail dealer, charges for his goods, when he sells them in wholesale units, in a wholesale market. These wholesale units may be different for different classes of goods at different places. First, we must determine the location where the wholesale cash price is to be determined. The word "wholesale market", means a place where the article in question is habitually sold to anybody who wishes to make a sale or purchase at wholesale prices. Normally, the wholesale price to be taken into account, would be the wholesale price in the nearest wholesale market. It is not that a factory cannot be a wholesale market, if it can be shown that good.s are habitually sold there at wholesale rates to every one who wishes to sell or purchase But the mere fact that a factory manufactures the articles at a particular place and sells them there to its stoc-kists or dealers will not by itself convert it into a wholesale market. What would be the location of the nearest whole-sale market and the particular wholesale price for a specified class of goods must be determined upon the facts of each case. If the precis goods in question are not sold in the nearest wholesale market, then it might be necessary to consider the price of goods of like kind and quality. Lastly, if no actual sale of those goods is discernible in any market within reasonable proximity, it might be sufficient to establish that such Roods were capable of being sold at such prices in the nearest wholesale market. So far as the time is concerned, the calculation must be made with reference to the time when the goods are removed from the factory or the place of manufacture or production for delivery.
(2.) Before I come to the precise points that have arisen in this case, it will be necessary to state a few more facts. According to the rules, before removing the Roods from the factory, manufacturers have to make a return in a form known as the A1 form. Strictly speaking, goods cannot be removed before assessment is made and the duty paid. Under certain conditions a provisional assessment is permissible. Also, instead of paying in cash on every occasion, the manufacturer may open an account current with the Excise authorities which is credited or debited as the case may be on each occasion, and then the account is periodically adjusted, These provisions will be considered in greater detail on the question of limitation which has been raised. In practice, what happened is that, in order to facilitate the rapid removal of the goods, the respondents in their said business made up a consolidated price list from time to time and the Central Excise authorities approved of the same. Goods were allowed to be removed upon an assessment made on the strength of the consolidated price lists. Unfortunately, these assessments do not conform to the conditions laid down in the rules for a provisional assessment. Even if it was unintended, the result is that the assessments are in a form which cannot but be declared as final assessments. As will appear shortly, this has given rise to a very serious question of limitation. The respondents were served with the following notices of demand purported to be under Rule 10-A of the Central Excise and Salt Rules, 1944 (hereinafter referred to as the "said Rules"): JUDGEMENT_154_AIR(CAL)_1968Html1.htm
(3.) Before we come to the question of limitation, I shall first of all deal with the question of valuation for the purpose of assessment under section 4 of the said Act. I have already stated that the method of calculation is to locate the nearest wholesale market and then to find out the wholesale cash price in such a market, at the time of the removal of the article from the factory, for delivery in this case what happened was that upon an inspection of the books and documents of the respondents it was found that the respondents sold their entire product of footwear to a partnership firm called Messrs Santlal Bansidhar and they in their turn sold the goods to other wholesalers The case for the appellants is that Messrs Santlal Bansidhar are the sole selling agents or distributors of the respondents, and that the sale to them cannot be considered as a sale in the wholesale market. Their case is that Messrs. Santlal Bansidhar sold their goods to other wholesalers selling in the wholesale market and this denotes the real whole sale price On the other hand, the case of the respondents is that Messrs. Santlal Bansidhar were not the agents of the manufacturer, but independent dealers and the sale to them represented a sale in the nearest wholesale market and the price paid by them were the wholesale prices on the basis of which, duty was chargeable. The point in dispute is therefore, a very short one According to the respondents the price to be taken is the price at which the respondents sold the goods to Messrs. Santlal Bansidhar. On the other hand, the case of the appellants is that the price that is to be considered is the price at which Messrs. Santlal Bansidhar sold to other wholesalers. The case of the appellants is that Messrs. Santlal Bansidhar are the sole selling agents or distributors of the respondents. It is pointed out that the respondents are closely related to the partners of Santlal Bansidhar The relationship is as follows: The respondents are the two sons of Bansidhar Agarwalla since deceased, and they constituted a partnership carried on under the name and style of Bansidhar Sankarlal Agarwalla, who are the owners of Olympia Rubber Works, the manufacturer of the goods. Sm. Ganga Debi, widow of Bansidhar Agarwalla, the mother of the respondents, together with another son of Bansidhar, form a partnership carried on under the name and style of Messrs. Santlal Bansidhar. At least they have a major share therein. The suggestion is that the sales to Messrs. Santlal Bansidhar constituted a domestic arrangement, calculated to keep the price down and Messrs. Santlal Bansidhar were nothing but the agents of respondents. Therefore, it is the sales made by them that are to be considered as sales in the open market and not the alleged sale made to them by the manufacturers. Our attention was drawn to Ext A, annexed to the supplementary affidavit of Sunit Narayan Basu, Inspector of Central Excise, Calcutta and Orissa Collectorate affirmed on 14th August, 1961 appearing at pages 60 to 71 in Part I Vol. II of the paper book, where a comparative chart is Riven as to the prices at which goods have been sold to Santlal Bansidhar and the prices at which Santlal Bansidhar sold them to other wholesale dealers. It appears that in all these sales, there is a regular difference of about Rs. 2 in each transaction which does raise a great deal of suspicion in our mind. So far as the learned Judge in the Court below is concerned, he has come to the definite conclusion that it has not been proved that the place where Santlal Bansidhar carried on business and where they are said to have sold the goods was a market by itself, far less the nearest wholesale market. It has been held bv the learned Judge that this fact was not admitted by the petitioners before him and it was not proved. Next the learned Judge proceeds to hold that Messrs. Santlal Bansidhar cannot be treated as a sole selling agent or stockist of the petitioners before him. although they have been purchasing almost the entire output from them, and consequently the prices charged by Messrs. Santlal Bansidhar were irrelevant in considering the computation of duty So far as the location of the wholesale market is concerned, I do not see how the learned Judge has held that there was no admission on the part of the respondents that the place of the business of Messrs. Santlal Bansidhar is the nearest wholesale market. In fact, there is an express admission to that effect contained in paragraph 10 of the affidavit-in-reply affirmed on behalf of the respondents on the 12th day of May, 1960. copy whereof is set out at pages 46 to 50 in Part T Vol. I of the paper book Paragraph 10 is set out below:- "With reference to paragraph 11 of the said affidavit we deny that Messrs. Santlal Bansidhar are the sole selling agents or agents at all or the distributors or stockist of the petitioners. The prices at which the petitioners have sold the goods to the said Santlal Bansidhar are the correct wholesale cash prices envisaged in Section 4 of the Central Excises and Salt Act 1944. The nearest wholesale market from the place of manufacture of the goods is at Chitpur Road where the said goods have been sold in the wholesale market to the said Santlal Bansidhar. The sales in dispute made by the petitioners to the said Santlal Bansidhar were all out and out sales and the petitioners were and are in no way concerned with the prices at which the said Santlal Bansidhar sold to their purchasers. No benefit has ever accrued to the petitioners from sales by Santlal Bansidhar to their retailers nor have the petitioners ever been liable for any loss that may have arisen therefrom to the said Santlal Bansidhar.";