ATIC INDUSTRIES LTD. versus H. H. DAVE, ASSTT. COLLECTOR OF CENTRAL EXCISE AND ORS.

Citation: [1975] 3 S.C.R. 563 · Decided: 14-02-1975 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Cited by 5 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
563 
A.TIC INDUSTRIES LTD. 
v. 
H. H. DA VE, ASSTT. COLLECTOR OF CENTRAL EXCfSE AND 
ORS. 
February 14, 1975 
ll 
[P. N. BHAGWATI, A. c. GUPTA AND N. L. UNTWALIA, JJ.] 
c 
D 
E 
F 
G 
H 
Central Excise and Salt Act 1944-s. 3 ( 1) and 4(a)-Ad va/orem assessment 
-How made. 
The appellant, which was. a manufacturer of dye-stuffs, sold its product to 
two wholesale buyers at. a uniform selling price described as "the ba'Sic selling 
price" less trade dis:ount of 18%. The wholesalers in turn sold the product 
to large consumers such as textile mills and distributors. 
One wholesaler sold 
the dye-stuff to the distributors "t a higher price but allow~d 10% discount 
while the other sold at a lower price and allowed 2-l-% discount. 
The price 
charged by both however was so adjusted that the net selling price charged 
to the distributors was almost the same. 
The excise duty chargeable under s. 3 (!) of the Central Excise and Salt 
A:t, 1944 was ad va/orem. 
Section 4 providej .as to how the value of an article 
chargeable with duty at a rate depending on its value shall be determined for 
the purpose of assessment of excise duty. 
Befor.e the excise authorities the appellants claimed that, for the purpose of 
assessing the excise duty the value of the dye--stuffs should be taken to be the 
price at which the a:ppellants sold the same to the two wholesale buyers less 
trade discount allowed to these wholesale buyers. The Superintendent of Central 
Excise nejected this contention and took, for the purpose of assessment, the 
price at which the wholesalers sold the dye-stuffs to the distributors. 
He did 
not, however, allow any deduction in respect of the discount given by the 
whobalers to the distributors since it was not uniform. 
On appeal the Assis-
tant Collector of Central Excise confirmed the assessing authority's order. \Jn 
further ;:;ppeal, the Collector of Central Excise held that in determinin_g the 
ass~ssable value, the lower trade discount of 2t% allowed by one of the whole-
salers to the distribu.tors only should be 
d~ucted. The appellant's revision 
application was rejected bv the Central Government on the ground that since 
th 0 dye-stuffs manufactured by the apjiellant were not avail;:;ble to an ind~pen­
dent buyer in open market conditions at prke at which these were sold by 
them to the wholesalers these prices could not be adopted as the basis -of 
ad va/orem assessment under s. 4 of the Act. 
It was observed that these dye· 
stuffs were ava:ilab!e to any independent buyer in open market conditions at the 
distributors' prices, that is, at the pri,:es charged by the wholesalers 
to 
the 
distributors and, therefore, these prices should form the basis of assessment 
after allowing the discount. 
---Diss_gtisfied with the decision of the Central Government the appellant filed 
a petitioil\mder_iirt. 226 of the Constitution. The High Court held that where 
the entire producfioo--was sold by a mMJ.ufacturer to one or more 
favoured 
distributors there was no whcile"sale market in the senSe of open market at the 
site oi the factory where an independent buyer could purchase the gooqs in 
wholesale and the ·assessable value must therefore be taken to be the price at 
which favoured distributors sell the goods in wholesale ;:;nd if not in whole·sale. 
then, in retail. 
The High Conrt accordingly upheld the view of the Central 
Government. 
Allowing the appeal, 
HELD: (I )(a) The assessable value af the dye-stuffs manufaciured by the 
appellants must be taken to be the price at which they v•ere sold by the 
appellants to the two wholesale dealers less 18% trade discount and not the 
price charged by the wholesale de~lers to the <iistributors. 
[573F-G] 
564 
SUPREME COURT REPORTS 
[1975.1 3 s.c.R. 
(b) Where a manufaclurer sells the goods manufactured by him in wholesale 
to a \\·holesak der.ler at arm's kngth and in the usual course of busin~s·;, the 
wholesale :a·sh price charged by him to the wholesale d~aler less trad~_ disco~ml 
would represent the value uf the goods for the pt•.rpose of assessment oE excise. 
That would be the wholesale cash price for which the goods are sold at the 
faqory gate within the meaning of s. 4(a). The pric,e received )JY the whobaL~ 
dealer who purchases the goods from the .manufac·urer and m his t1.'.111 sells 
the ·;-ame in wholes~le to other dealers would be irrelevant to the deter:~1111atio11 
of the value of the goods and the goods would not be chargeable to exrne o

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