A. K. Roy v. Voltas Ltd.

i A **B** 1089 A. K. ROY & ANR. _v._ VOLTAS LIMITED _December_ l, 1972 (A. N. GROVER, K. K. MATHEW AND A. K. MUKHERJEA, JJ.J _Central Exdses_ & _Salt_ _Act_ 1944, _S._ _4(a)-Bulk_ _of_ _sales_ _to_ _consumers_ _direct-Some goods sold_ _also_ _to_ _wholesalers at_ 22 _per_ _cent_ _trade_ _dis-_ _count-Duty_ _whether_ _to_ _be_ _levied_ _on_ _'wholesale_ _cash_ _price'_ _or_ _on_ _list_ _price_ _of •ale_ _to_ _consumers-Wholesale market,_ _what_ _is-Ingredients of secll'on-_ < _Components of 'wholesale_ _cash_ _price',_ c D E F ### • G The respondent was a limited company and carried on, among others, the business of manufacturing air-conditioners, water coolers and component parts thereof. Most of its sales-to the extent of 90 to _95_ per centwere made by it directly to consumers at list prices. It, however, also sold the articles to wholesale dealers from different parts of the country in pursuance of agreements entered into with them. The agreements provided among other things, that the dealers should not sell the articles sold to them except in accordance with the list prices fixed by the ·respondent, that the respondent would sell them the articles at the list prices less 22 per ce1.t discount, that the dealers will not be entitled to any discount on the prices of accessories mentioned in the price. schedule and that the dealers should give service to the units sold in their territory. **Excise** **duty** **on** **the** **basis** **of** _**ad**_ _**valorem**_ **va]ue** **was** **imposed** **on** **air-** conditioners and parts of water coolers with effect from March 1, 1961. The respcndent claimed, in accordance with s.4(a) of the Central Excises and Salt Act 1944, that the list price after deducting the discount of 22 per cent allowed to the wholesale dealers would constitute the 'wholesale cash price' for ascertaining the real value _dl_ the articles. This **case** **was** **accepted** **by** **the excise** **authorities** **and** **assessments** **were** **made** **up** to the end of 1962 on that basis. Later however the Superintendent of Central Excise intimated the respondent that excise duty would be assessed and levied not on the basis of wholesale cash price but on the basis of retail price under s.4(b ) of the Act .. Assessments for the period January 1, 1963 to December 31, 1963 were made on the basis of list prices, for sales to consumers. The respondent's appeal having been dismissed by the first appellant, the respondent filed a writ petition in the High Court. The High Court allowed the petition holding that the price for which the articles were sold to the wholesale dealers less the discount allowed to them under the agreements represented ' the 'wholesale cash price' and !hat excise duty was chargeable under s.4(a) of the Act. Appeal to this Court was filed by certificate. Dismissing the appeal, HELD: (i) For a wholesale market to exist it is not necessary that there ~houl~ be a mark~! in the physical sense of the term where articles of a hke kind and quality are or could be sold or that the articles should be sold to so-called independent buyers. [109J Gl . Even if there was no market in the physical sense of the term at or .. **H** near the place of manufacture where the articles _df_ a like kind and quality ., are or cou.ld be sold, that would not in any way affect the existence of market m . the proper sense of the term provided the articles themselves could be sold wh?lesale to traders, even though the articles are sold to them on the baS1S of agreements which confer certain advantages upon 1090 SUPREME COURT REPORTS [1973] 2 s.c.R. them. The applica<ion of s.4(.-.) does not depend upon any hypothesis to the effect that at the time or place of sale, any further articles of like kind and quality should have been sold. If there is an actual price for the go<>Qs themselves at the time and place of sl>le and if that is - 'wholesale cash price', the clause is not inapplicable for want of sale of other goods of like i.ind and quality. [1093 HJ (ii) There can be no doubt that the 'wholesale cash price' boo to be a9Certained only on the basis _df_ transactions at arms length. Once that is established the determination of the wholesale cash price for the purpose of s.4(a) of the Act may not depend upon the number of such wholesal~. dealings. The fact that the respondent sold 90 to _95_ per cent of the articles manufactured to consumers direct wottld not make the price of the wholesale sales of the rest of the articles anytheless the 'wholesale cash price' for the purpose of s.4(a) even if those sales were made pursuwt to agreements stipulating for certain commercial advantages, provided the agreements were entered into at arms length and in the ordinary course of business. [1097 BJ A l" B c ' **4** ,.. (i;i) The Privy Council held in the case of _Vacuum Oil Company_ that tile words 'wholesale price' were used in contra-distinction to a 'retail price'. The term 'cash price' was held to mean price from any augmentation for credit or other advantages to the buyer; it is to be not price t.'lat is to say 'less trade discount'. (1098 B-CJ **D** Excise is a tax on the production and manufacture of goods. Section 4 of the Act therefore provides that the real value should be found :rfter deducting the selling cost and selling profit and that the real value can include only the manufacturing cost &nd the manufacturing profit. Tbe section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which gives credit to the wholesale buyer for a period of time and E that the price has to be fixed for delivery 2>t the factory gate, thereby diminating freight, octroi and other charges involved in the transport of the articles. [1098 El (iv) The appellant's contention that 22 per cent discount allowed to **the wholt:salers** **was** **not** **'trade** **discount'** **was** **not** **raised** **before** **the** **High** Court and therefore would not be considered. _Ford Motor Company_ _of_ _111dia_ _Limited_ v. _Secretary_ _of State for India_ F i11 _Council,_ 65 Indian Appeal, 32 _Vacuum Oil Company_ v, _Secmary_ _of_ _State for India in Council_ _59_ Indian Appeals 258, applied. _NatiOlla/ Tobacco Co._ _of_ _India Ltd._ v. _Collector_ _of Central Excise and_ _others,_ A.I.R. 1961 Calcutt .. 477, _Union_ _of India_ _v._ _Vengunta Survaprakasa_ _Rao_ _and_ _Anothu,_ A.LR. 1967 Andhra Pradesh 281, _Amco_ _Batteries_ _(P)_ _**Ltd. HanRalore**_ **v.** _**Assistant Collector,**_ _**Cent1·al**_ _**Exci-;e,**_ _**Bangalore**_ _**and**_ _Another,_ A.J.R. 1963 Mysore 216, _Collector_ _of Central Excise and O:hers_ v. _Shankarlal Agarwal/a,_ A.l.R. 1968 Calcutta 154 and _Frizai Corpora-_ _tion_ v. _The Collector_ _of Central Excise,_ 1969 II Andhra Weekly Reporter 57, disapproved. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 47 of 1972. Appeal by certificate from the judgment and order dated August 14, 17, 1970 of the Bombay High Court in Misc. Petition No. 324 of 1967. G **H** I;.. i~ A B c D E F G ~ H A. K. ROY _v._ YOLTAS LTD. _(Mathew,_ _J.)_ I 091 _V._ _S._ _Desai,_ _Govind_ _Das,_ _B._ _H._ _Antia_ and _B._ _D._ _Sharma,_ for the appellants. _Soli_ _J._ _Sorabji,_ _K._ _D._ _Mehta,_ _P._ C. _Bhartari,_ and _Ravinder_ _Narain,_ for tb.e respondent. _Soli_ _J._ _Sorabji,_ _D._ _B._ _Engineer,_ _P._ C. _Bhartari_ and _Ravinder._ _Narain,_ for the intervener (Altice Industries Ltd.) _Soli_ _J._ _Sorabji_ and _H._ _K._ _Puri._ for the intervener (Bhavsar Chemical Works). _Soil_ _J._ _Sorabji,_ _P._ C. _Bhartari_ and _Ravinder_ _Narain,_ for the Intervener (Delhi Cloth & General Mills Ltd.). MATHEW, J.-Vo!tas Ltd., the respondent here, filed a writ petition before the High Court of Bombay, challenging the validity of the appellate order passed by the !st appellant on May 2, 1967, in respect of the liability of the respondent to pay excise duty for the year 1963 and the orders of the Assistant Collector of Central Excise relating to !he liability of the respondent to pay excise duty for the years 1962, 1964, 1965 and 1966, as also the notice demanding the assessed amount of Rs. 27,57,177.19. The High Court allowed the petition. This appeal, by certificate, is against that order. Voltas Ltd. is a company registered under the Companies Act. It carries on, among others, the business of · manufacturing air conditioners, water coolers and component parts thereof. It organises the sales of these articles from its head office at Bombay as also from its branch offices at Calcutta, Delhi, Madras, Bangalore, Cochin and Lucknow. From these offices it. effects direct sales to consumers at list prices and the sales so effected come to about 90 to 95 per cent of its production of these articles in the factory in question during the relevant period. Apart from these sales, it also sells the articles to wholesale dealers from different parts of the country in pursuance of agreements entered into with them. The agreements with the wholesale dealers for the relevant Fars ~o~tained terms and conditions similar to those mentioned m Exh1blit A annex_ed to the writ petition. The agreements provided, among other thmgs, that the dealers should not sell the articles sold to them except in accordance with the list priGes fixed by the r~spon.dent, that the responden1 would.sell them the articles at the lJSt. pnces less 2? per cent discou.nt, that the dealers will not be entJtle~ to any discount on the pnces of accessories mentioned in th~ pnce s~hed1J!e and that the dealers should give service to the umts sold m their territory. . Exci~e. duty on the basis of _ad_ _va/orem_ value was imposed on air cond11Joners, water coolers and parts of water coolers from March 1, 1961. The respondent's case was that the list price after 1092 SUPREME COURT REPORTS [1973) 2 S.C.ll. deducting the discount of 22 per cent allowed ~o. the wholes.ale dealers would constitute the ·wholesale cash pnce for ascemunmg me real value of the. articles. This case was accepted by the excise authorities and assessments were made upto the end of 1962 on that basis. ' _l.n_ April, 1964, the Superintendent of Central Excise int•mated the respondent that excise duty would be assessed and levied . not on the footing of the 'wholesale cash pnce' but on the basis of me retail price and, by his three orders dated September 5, 1964 and one dated September 10, 1964, he assessed tne respondent to excise duty in respect of the sales on the footing of list prices for sale to consumers for the period from January 1, 1963, to December 31, 196J, :md a 110IJce of demand dated October 8, 1964, was served on the respondent calling upon i•t to pay the above sum. The respondent filed an appeal against the oruers but that was dismissed by the 1st appellant by his order d~ted May 2, 1967 and this was the main order that was challenge_J in the writ petition. The question that was canvassed before the High Court was whether the respondent was liable to be charged with excise duty on the basis ot ·the price of retail sales made by it directly to the consumers frum its head office and branch offices under clause (b) of s. 4 or whether It was liable to be charged on the basis of the price payable by the wholesale dealers; after deducting the 22 per cent discount, under clause (a) of s. 4 of the Central Excises and Salt' Act 1944 (hereinafter reterred to as the 'Acf) '? The High C0urt held that the price for which the articles were sold to the whlllesale dealers less the discount allowed to them under the agreements represented the ·wholesale cash price' and that exise duty was chargeable under s. 4(a) of the Act. Section 4 of the Act provides : "4. Where upder this Act, any article is chargeable wrth duty at a rate dependent on the value of the article, such value shall be deemed to be- (a) 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 o.ther premises of manufacture or production for delivery at the place of manufacture or producllon, or if a wholesale market does not exist for such ai1icle at such place, at the nearest place where such market exists, or t _A_ B c fJ E F G H _r_ A B c D E F G H A. K. ROY _v._ VOLTAS LTP. _(Mathew,_ _J.)_ 10 93 (b) where such price is not ascertainable, the price at which an article of th6 like kind and quality is sold or is capable of being 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 if such article is not sold or is no~ capable of being sold at such place, at any other place nearest these to _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 chargeab.Je with duty from the factory or other premises. aforesaid." The appellants contended that the agreements with the wholesale dealers conferred certain extra-conimercial advantages upon them, and so, the sales to them were not sales to independent purchasers bvt to favoured ones, and, therefore, the price charged would not represent the "wholesale cash price" as mentioned in s. 4(a) of the Act. They argued thats. 4(a) visualizes a wholesale market at the place of manufacture where. articles of like kind and quality are sold or could be sold and that it also postu lates a market where any wholesale purchaser can purchase the articles, and, as no articles of a ilke kind and quality were sold, at or near the place of manufacture, and as the wholesitle sales were confined to the favoured buyers, there· was no wholesale market at the place of manufacture. It was further argued that "articles of a like kind and quality" is a phrase which suggests goods other than those under assessment and that one must dis· regard the price fetched by the sale of the goods themselves. We do not think that for a wholesale market to exist, it is necessary that there should be a market in the physical sense of the term where articles of a like kind or quality are or could be sold or that the articles should be sold to so-called independent buyers. Even if it is assumed that the la!ter .part of s. 4 (a) proceeds on the assumption that the former part will apply only if 'there is a wholesale market at the place of manufacture for articles of a like kind and quality, the question is what exactly is the con.;ept of wholesale mark:et in the context. A wholesale market does r,ot always mean that there should be an actual place where articles are sold and bought on a wholesale basis. These words can also mean the potentiality of the articles being sold on a wholesale basis: So, even ii there was no· market in the physical sense of 1094 SUPREME COURT REPORTS [1973) 2 S.C.R. the term at or near the place of manufacture where the articles of a like kind and quality are or could bie sold, 'that. would not in any way affect the existence of market in the proper sense of the term provided the articles themselves coulcI be sold wholesale to traders, even though the articles are sold to 'them on the basis of .agre>~ments w\lich confer certain commercial advantages upon them. In other words, the sale to the wholesale dealers did not cease to be wholesale sales merely because the wholesale dealers had entered into agreement with the respondent under which cer tain commercial benefits w~re conferred upon them in consideration of their undertakin.~ to do service to the articles sold, or be cause of the fact that no other person could purchase the articles :wholesale from the respondent. We also think that the application of clause (a) of s.4 of the Act docs not depend upon any' hypothesis to the effect that at the time and place of sale, any further articles of like kind and quality should have been sold. If there is an actual price for tfic goods themselves at the time and place of sale and if. that is a 'wholesale cash price', the clause is not inapplicable for want of sale of other goods of a like kind and quality. In _Ford Motor Company of India Limited_ v. _Secretary of State·_ _for India in Counci/(1)_ the appellants before the Privy Council, who imported Ford Motor vehicles from Canada to India. where they had a monopoly of the supply of those vehicles, sold them only to authorised dealers or' distributors, each of whom was sole agent for a retail seller of the vehicles in a particular district. The appellants obt.aincd from the distributors j,1formation as to their future. requirements and placed consolidated orders acrordingly with the manufacturers in Canada. The retail price charged by the distributors to th·~ public was that stated in a price list issued by the appellants and current at the time of the arrival of vehicles in India, and the price payable by the distributors to :he appellants was the snme price k5s a discount of 20 per cent. The distributors had to pay that price before obtaining delivery, which was given "free on rail". On arrival in India the vehicles were not completely assembled, and wet>~ so delivered to the distributors, an a.greed allowance against the price being made by the appellants. On the question whether s. 30(a) or 30(b) of the Sea Customs Act 1878, applied: for the purpose of finding out the re~l value of the .goods for levy _of customs duty, the Privy Council held that the price charged by the appellants to the dis tributors ·~xcluding the assembling allowance was the "wholesale cash price, less trade discount" for which the vehicles were sold "at t)1e time and place of importation" within ·the meanin<> of s. 30(a) of that Act. the terms of which are more or less shnilar to thQse of s. 4(a) of the Act. This case is an authority for the' A B c D E F G H (I) _65_ Indian Appeots J2, A •. K. ROY _v._ VOLTAS LTD. _(Mathew,_ _J,)_ 1095 proposition that mere existc1icc of the agreemenits between the respondeni' and the wholesale dealers under which &ertain obligations were undertaken by them like service to the articles, would not render the price any the less the 'wholesale cash prio~'. To put it in otlier words, even if the articles in question were sold only to wholesale dealers on the basis of agreements and not to independept persons, that would not make the price for the sales anything oth·~r than the 'wholesale cash price'. The argument that what was relevant to determine the 'wholesale cash price' under cl. (a) of s. 30 of the Sea Customs Act, 1878, was the price of goods of a like kind! and quality was negatived by the Privy Council by sayin~ that' goods under assessment may, under cl. (a) be considered as members of their own class even though at the time and place of importation there are no other members and that the price obtained for them may correctly represent ~he price obtainable for goods of a like kind and quality at the time and place qf importation. Counsel for the appellants submitted that the preponderance of authority in the various High Courts is in favour of the vi.ew that in order that sales might be wholesale sales, the purchasers must be independent persons. In _National Tobacco Co. of India Ltd._ v. _Collector_ _of Central'_ _Excise and others(')_ a learned single Judge of that Court held that the word 'wholesale market' must mean a place where articles are habitually sold to any person who wishes to . make a purchase and that, merely because a factory manufactures the articles at a particular place and sells them there to its stockists or dealers would not.. by itself, convert it irrto a wholesale market and the question whether there is a 'wholesale market' at that location would depend upon a variety of questions, namely, whether goods were really being sold wholesale and whether any person wishing 1 to purchase the goods could do so at the location. The Court also said that, in order that the price may be the 'wholesale cash price' it is necessary that the transaction should be between a manufacturer and an independent purchaser. In other words, the Couvt was -0f the view that if the transaction was between a manufacturer and a 'favoured purchaser', the price paid by him would not be the 'wholesale cash price' within the meanincr of s. 4 (a) of the Act. ~ In [1] the _Union of India_ v. _Vengunta Swyaprakasa Rao and_ _Another('),_ the Court said that the sale to wholesale distributors with whom the company in question had entered into aQrcements for sale of the articles stipubiting for certain commercial advantages would not constitute the price of those sales "wholesale cash price" as mentioned ins. 4(a). The Court further said that (tl A.I.R. 1961 Calcutta 477. (2) A.T.R. 1967 Andhra Pradesh "81. ##### .. A B c D E F . ###### ' G H 1096 SUPREME COURT REPORTS t;.~ [1973] 2 S.C.R, A _'.r-_ since the manufacturer· was not free to sell the article to others by virtue of the agreement and, as in fact, no independent sales were proved to have been made to anyone other than the authorised distributors, the sales were not sales in the wholesale market. The Court referred to the decision of the Privy Council ht _Ford_ _Motor_ _Company_ _of_ _India_ _Ltd._ v. _Secretary_ _of_ _State_ _for_ _India_ _in_ _Council_ \ #### f '"' (supra) but did not seem to have appreciated the real rntio of the case. In _Amco_ _Batteries_ (P) _Ltd._ _Bangalore_ v, _Assistant_ _Collector,_ _Central_ _Excise,_ _Bangalore_ _and_ _Another(_ _[1]_ _),_ the Court said that wholesale price means the price which a wholesale dealer, and B not the retail dealer, charges for his goods when he sells them in · c wholesale. units and what constitu'tes wholesale unit will have to be determined with reference to the practice of the trade at the place where the .goods are sold. A wtolesale market, according to the Court, is a place where goods in question or goods of a like kind and quality, are sold, or; are capable of being sold to inde p~ndent buyers meaning thereby" anyone who intends to effect such purchase upon payment of proper price without restriction. · · D ' In _Collector_ _of_ _Central_ _Excise_ _and_ _Others_ v. _Shankarlat_ _Agarwalla(_ _[2]_ _)_ the Court followed its earlier decision already referred (o and said that the 'w;1clesale cash 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. The Court also said that the ~ords wholesale market mean . a place where tire articles in questioo ·are habitually sold to any body who wishes to make a purchase at wholes.ale price and the mere fact that a factory manufactures articles at a particular place . and sells them there to stockists or dealers will not by itself convert the place of sale into a wholesale market. E F In _Frizair_ _Corporation_ v, _The_ _Collector_ _of_ _Central_ _Excise(•),_ the Court held that a sale to a favrured buyer cannot be regarded as a sale in a wholesale market and that in the light of the Jan- _+_ guage of clause (a) to s. 4 of the Act a sale by the manufacturer at the factory, by itself, would not be sufficient to constitute the price of the sale the 'wholesale earn price'. G We do not think that these de::isions in so far as they hold that the price of sales to wholesale dealers would not represent the 'wholesale cash price' for the ~urpose of s. 4 (a) of the Act merely because the manufacturer has entered into agreements with them stipulating for commeitial adv.antages, are correct. If a manufacturer were to enter hto agreements with dealers for H wholesale sales of the articles mamfactured on certain terms and l(IJ A.l.R. 1963 Mysore 216. (2) A.l.R. 1968 Calcutta 154. (3) (1969) IT Andhra Veekly Reporter 57. A. K. ROY _v._ VOLTAS LTD. _(Mathew,_ J.) !097 A B c D E F G H The next question is : what exactly is the meaning of the te;:m the 'wholesale cash price' 7 In _Vacuum_ _Oil_ _Company_ v. _Secre-_ _tary_ _9f_ _State_ _for_ _India_ _in_ _Council('),_ it was held 'that the term means the price paid by retail traders on wholesale purchase. The essence of the idea is that the purchase must ·be a wholesale purchase and not a retail one. In other words, the sale must be wholesale and not a retail one in order that the price realised may be termed the 'wholesale cash price'. In that case the appellants before the Privy Council imported at Bombay, very large quantities of lubricating oil of a particular manufacture and mark. They sold it direct to numerous customers, never to dealers. The price they charged was the same whether a large or small quantity was bought, except that if a consumer contracted tq buy 'from them all his requirements for a year, he was errtitled ·to a discount from 2! to 15 per cent according to the quantity bought in the year. No other lubricating oil of a like kind and quality was sold in Bombay. On the question wh~ther 'the appellant was bound to pay customs duty on the basis of clause (a) or clause (b) of s. 3.0 of the Sea Customs Act. 1878, the Privy Council held that smce the sales were to customers direct, the real value of tlje goods cannot be ascertained under clause (a) of s. 30 and that clause (b) of s. 30 was ~pplicable. Their I.ordships said conditions, it would not follow from that alone that the price for those sales would not be the 'wholesale cash price' for the purpose of s. 4(a) of the.Act if the agreements were made at arms length and in the usual course of business. . There can be no doubt that the 'wholesale cash price' has to _;:_ be ascertained only on 'the· basis of transactions at arrris length. ·' If there is a special or favoured buyer to whom a specially low price is char1ied because of extra-commercial considerations, e.g. because he is relative of the manufacturer, the price charged for those sales would not be the 'wholesale cash price' for levying excise under s. 4(a) of ~he Act. A sole distributor might OL' might not .. oe a favoured buyer according as terms of the agreement with him are fair and reasonable' and were arrived at on purely commercial basis. Once 'wholesale dealings at arms length are established, the determination of the wholesale cash price for the purpose of s. 4 (a) of the Act may not depend upon the number of such wholesale dealing. The fact that the respondent sold 90 to 95 per cent of the articles manufactured to consumers 'direct would not make the price of the whole5a]e sales of the rest of. the avticbs any the Jess the 'wholesale cash price' for th'l'·purpose of s. 4(a), even if these sales were made pursuant to agreements s'tipulating for certain commercial advantages, provided the agreements were entered into at arms length and in the ordinary course of business. (I) 59 Indian Appeals, 258. I Q9 S- SUPREME COURT REPORTS [1973] 2 s.e.R, ,. # t _I_ that in determinin.~ th.e price which is to represent the real valueof the goods to be taxed, "the price must be conservative in every respect and free in particular from any loading for'any post importation charg_es incurred in relation to the goods". "The price is to be a pric~ for goods, as they are both at the 'time' and 'place' of importation. It is to be a 'cash price', that is to say a price free from any augmentation for credit or other advantage allowed to a buyer; it is to. be a net price, that is to say it is a price 'less trade discount'.". Their Lordships, therefore, held that the words the 'wholesale prio~· were used in the section in con't~a-distinction to a 'retail price', and that not only on the ground that such is a well recognised meaning of the words but because their associa· tion with the words 'trade discount' indicates that sales to the trade are those in contempfation, and also because ·only by attaching ths:t meaning to the word is the 'wholesale price' reliev· ed of the loading representing post-importation expenses which, as a matter of business, inust always be charged to the consumer, and which are eliminated. Excise is a tax on the production and manufacture of goods [see _Union_ _of India_ v. _Delhi Cloth and General Mills(')]._ Section 4 of the Act therefore provides that the real value should be found after deducting the selling cost and selling profit and tha!I the real value can· include only the manufacturing cost and the manufacturing profit. The s•~ction makes it clear that excise is levied only on the amount representing the manufacturini; cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post-manufacturing operation, namely selling profit. The section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which giVt~s credit to the wholesale buyer for a period of [1] tim.e and that the price has to be fixed for delivery at the factory gate ·thereby eliminating freight, octroi and Qther charges involved in the transport of the articles. As already stated it is not r.·~cessary for attracting the operation of s. 4(a) that there should be a lar.ge number•of wholesale sales. The quantum of goods sold by a manufactutet on wholesale basis is entirely irrelevant. The mere fact that such sales may be few or scanty does not alter the 'true position. A B c D E F G The appellant contended that 22 per cent discount allowed under the agreements with the wholesal·~ dealers was not trade discount. On [1] the ground that there was no evidence to show that the discount allowed was 'trade discount' within the II\eaning of the Explanation to s. 4. There was no contention by the H appellan'ts before the High Court that the discount allowed to the (I) [1963] Supp. I S.C.R. 586. ## I ' \ A B c D A. K. ROY _v._ VOLTAS LTD. _(Mathew, 1.)_ 1099 wholesale dealers was not 'trade discount'. The whole argument before the High Court proceeded on the basis that direct sales by the respondent to consumers constituted the major portion of the sales and tha_t the sales to the wholesale dealers only represented a minor portion and, therefore, the price charged for the sales to wholesale dealers would not represent the 'wholesale cash price' of the articles sold. No data was placed before the High Court by the appellant to show that the 22 per cent discount did not reoresent 'trade discount' for the purpose of the Explanation. A 'tr-ade discoµnt' is a pe.rcentage deduction from the regular list or catalogue price of goods. As there was no case for the appeUants that there was any .secret arrangement between the wholesale dealers and the respondent in respect of the sales to them or that the price of the articles was under-st8!ted in the agreements or that any extra-commercial advantages to the dealers were taken into account in fixing the price, we do not think that we should go into the question whether the discount allowed to the wholesale dealers was 'trade discount' or not for the purpose of the Explanation. We think the High Court was right in its conclusion. We dismiss the appeal but in the circumstances make no order as to costs. G.C. _Appeal dismissed._ _521_ Sup. C.I./73-2500, _25-4-74_ G.I.P.F.