SNOW WHITE INDUSTRIAL CORPORATION, MADRAS versus COLLECTOR OF CENTRAL EXCISE, MADRAS

Citation: [1989] 2 S.C.R. 782 · Decided: 28-04-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 1 judgment(s) · cites 6 · see the full citation network in Lexace

Judgment (excerpt)

A 
SNOW WHITE INDUSTRIAL CORPORATION, MADRAS 
v. 
COLLECTOR OF CENTRAL EXCISE, MADRAS 
APRIL 28, 1989 
B 
[SABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ.] 
c 
Central Excises and Salt Act, 1944: ss. 4( l)(a) & 35-L(b)-
Assessee-Excisable. goods sold through 'selling agents'~Asc<essable 
value-Determination of-New plea on permissible deductions not 
raised even before Tribunal-Validity of. 
Indian Contract Act, 1872: s. 182-Contract entered into with 
'selling agents'-Nature of-Whether contract of agency.or contract of 
sale-Determination of. 
' 
The assessee-appellants, a partnership tirm carrying on manu-
D factoring business in Madras entered into an agreement with a com-
pany based in Calcutta for sale of their product through the latter's sales 
organisation in all the States of India. In the said agreement the assessee 
was referred to as the 'manufacturer' and the company as the 'sole 
l 
selling agents' of the product. The agreement itself was described as an 
!'
'agreement of sale'. It provided inter alia that the stocks left over unsold 
E beyond two years from their receipt with the selling agents could be 
returned to the appellants who were bound to replace them, that the 
appellants Should take all suitable action for recovery of damages from 
the carriers, that they would supply the selling agents with all the 
necessary publicity material and also advertise at their cost through the 
media, that the selling prices and transfer prices of the product would 
)> 
F 
be mutually agreed from time to time between them and the selling 
agents, that any reduction in price during the currency of the agree-
;..._ 
ment was to be duly renected in the price of stock lying unsold with the 
selling agents, and that on termination of the contract either by the 
assessee or by the selling agents, the unused stock lying with the latter 
G 
was to be returned to the former. 
The appellants were assessed to excise duty under the Central 
Excises and Salt Act, 1944 for the period July, 1977 to March, 1979 on 
the basis of the price at which the selling agents had sold the goods to 
their customers in the course of the wholesale trade. They however, 
claimed that the assessable value should be the price at which the excis-
H able goods were sold by them to the selling agents and sought refund of 
782 
SNOW WHITE CORPN. v. C.C.E. 
783 
the excess excise duty thus paid. The Assistant Collector of Excise and 
A 
the Collector rejected the said claim. 
The Tribunal took the view that a sine qua non of a sale was that 
the title to the goo'ds should pass from the seller to the purchaser. When 
once that were not so, then it could not be said that it was an agreement 
'v 
for sale. On an analysis of the conditions of the agreement in the instant 
{ 
·~. case it found that the title to and the ownership in the goods consigned 
. to the selling agents continued with the appellants. It, therefore, 
concluded that the true character of the agreement was that it was an 
agreement for sole selling agency and not an agreement for sale. It 
further held that the selling agents were 'a related person' as under· 
stood under s. 4(4)(c) of the Act aud, therefore, the assessable value of 
~ 
the goods for !evy of excise duty must be ob the basis of price at which 
the selling agents ordinarily sold these in the course of wholesale trade 
less the transportation cost and other permissible deductions such as 
' 
duty of excise and sales tax, if any, subject to proof. 
In this appeal under s. 35-L(b) of the Act it was contended for the 
~ppellants, that there were two prices--'transfer price; and 'selling 
price' and there was good deal of difference between these prices which 
was suggestive of an outright sale, that the terms referred to by the 
Tribunal were merely indicative of the fact that it was an agreement 
whereby the purchaser upon terms was described as 'sole selling 
agents', that the appellants were manufacturing a product which was 
liable to lose its efficacy and quality after lapse of time and as such a 
replacement clause was inserted to ensure that the bad quality goods 
did not go to the market and damage their reputation, that the selling 
agents were not 'related persons' in terms of s. 4(4)(c) of the Act as 
there was nothing in common between them and the appellants, and 
that claims like cost of transportation and other permissible deductions 
such as duty of excise and sales tax t~ which they Were otherwise entitled 
to sh

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