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PETITIONER: A.   K. ROY & ANR.

       Vs.

RESPONDENT: VOLTAS LIMITED

DATE OF JUDGMENT01/12/1972

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN GROVER, A.N. MUKHERJEA, B.K.

CITATION:  1973 AIR  225            1973 SCR  (2)1089  1973 SCC  (3) 503  CITATOR INFO :  F          1975 SC 960  (6,10,11,12)  RF         1984 SC 420  (6,23,24, ETC.)  RF         1988 SC1154  (5)  RF         1989 SC 516  (34)  RF         1989 SC1555  (11)  R          1989 SC1733  (3)  E&D        1990 SC1676  (7)  R          1992 SC1324  (16)  R          1992 SC2005  (6,8)

ACT: Central  Excises & Salt Act 1944, S. 4(a)-Bulk of  sales  to consumers  direct-Some goods sold also to wholesalers at  22 per  cent  trade  discount-Duty  whether  to  be  levied  on ’wholesale  cash  price’  or  on  list  price  of  sale   to consumers-Wholesale market, what is-Ingrediehts of  section- Components of ’wholesale cash price’.

HEADNOTE: 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 cent 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 value was imposed  on  air- conditioners  and  parts of water coolers with  effect  from March  1, 1961.  The respondent 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  of

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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 that  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 should be a market  in  the  physical sense of the term where articles of a like kind and  quality are or could be sold or that the articles should be sold  to so-called independent buyers. [1093 G] Even  if  there was no market in the physical sense  of  the term at or near the place of manufacture where the  articles of a like kind and quality are or could be sold, that  would riot in any way affect the existence of market in the proper sense of the term provided the articles themselves could  be sold wholesale to traders, even though the articles are sold to  them  on the basis of agreements  which  confer  certain advantages upon 1090 them.   The application of s.4(a) 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  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 like kind and quality.- [1093 H] (ii)There  can be no doubt that the ’wholesale cash  price’ has  to be ascertained only on the basis of 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  wholesale dealings.   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 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 pursuant  to agreements  stipulating for certain  commercial  advantages, provided the agreements were entered into at arms length and in the ordinary course of business. [1097 B] (iii)The  Privy Council held in the case of Vacuum  Oil Company  that  the  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  net price that is to say ’less trade discount’. [1098 B-C] 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 after deducting the selling cost and selling profit  and  that  the  real  value  can  include  only  the manufacturing  cost  and  the  manufacturing  profit.    The section postulates that the wholesale price should be  taken on  the basis of cash payment thus eliminating the  interest

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involved  in  wholesale  price which  gives  credit  to  the wholesale buyer for a period of time and that the price  has to  be  fixed  for delivery at  the  factory  gate,  thereby eliminating  freight, octroi and other charges  involved  in the transport of the articles. [1098 E] (iv)The  appellant’s contention that 22 per  cent  discount allowed to the wholesalers was not ’trade discount’ was  not raised  before  the High Court and therefore  would  not  be considered. Ford  Motor Company of India Limited v. Secretary  of  State for  India  in  Council, 65 Indian  Appeal,  32  Vacuum  Oil Company v. Secretary of State for India in Council 59 Indian Appeals 258, applied. National  Tobacco Co. of India Ltd. v. Collector of  Central Excise and others, A.I.R. 1961 Calcutta, 477, Union of India v. Vengunta Survaprakasa Rao and Another, A.I.R. 1967 Andhra Pradesh 281, Amco Batteries (P) Ltd.  Bangalore v. Assistant Collector,  Central  Excise, Bangalore and  Another,  A.I.R. 1963  Mysore 216, Collector of Central Excise and Others  v. Shankarlal  Agarwalla, A.I.R. 1968 Calcutta 154  and  Frizai Corporation  v.  The Collector of Central  Excise,  1969  II Andhra Weekly Reporter 57, disapproved.

JUDGMENT: 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.  Peti- tion No. 324 of 1967. 1091 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 the respondent. Soli J. Sorabji, D. B. Engineer, P. C. Bhartari and Ravinder Narain, for the intervener (Attice 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.-Voltas Ltd., the respondent here, tiled  a  writ petition  before the High Court of Bombay,  challenging  the validity of the appellate order passed by the 1st  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  Assist-ant  Collector  of  Central   Excise relating  to the 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

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dealers   for  the  relevant  years  contained   terms   and conditions  similar to those mentioned in Exhibit A  annexed to the writ petition.  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 cent 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 value was imposed  on air  conditioners, water coolers and parts of water  coolers from March 1, 1961.  The respondent’s case was that the list price after 1092 deducting  the  discount  of  22 per  cent  allowed  to  the wholesale  dealers  would  constitute  the  ’wholesale  cash price,’  for  ascertaining the 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. In  April,  1964,  the  Superintendent  of  Central   Excise intimated the respondent that excise duty would be  assessed and levied not on the footing of the ’wholesale cash  price’ but  on  the  basis of the retail price and,  by  his  three orders  dated September 5, 1964 and one dated September  10, 1964,  he assessed the 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, 1963, and a notice of demand dated October 8, 1964,  was served  on the respondent calling upon it to pay  the  above sum.  The respondent filed an appeal against the orders  but that  was dismissed by the 1st appellant by his order  dated May 2, 1967 and this was the main order that was  challenged in the writ petition. The  question that was canvassed before the High  Court  was whether the respondent was liable to be chargedwith excise duty on  the  basis of the price of  retail  sales made byit directly to the consumers from its head office and branch officesunder clause (b) of  s. 4 or  whether it was liable to be charged onthe  basis of  the  price payable by the wholesale dealers, after deducting the 22 per cent  discounts  under clause (a) of s. 4  of  the,  Central Excises  and Salt Act 1944 (hereinafter referred to  as  the ’Act’) ? The  High Court held 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 that exise duty was chargeable under s. 4(a)  of the Act. Section 4 of the Act provides :               "4.  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-               (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  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

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             1093               (b)   where  such price is not  ascertainable,               the price at which an article of the 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 not. 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 chargeable with duty from the  factory               or other premises aforesaid." The appellants contended that the agreements with the whole- sale  dealers conferred certain extra-commercial  advantages upon  them,  and  so, the sales to them were  not  sales  to independent purchasers but 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 that  s. 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 postulates a market  where any  wholesale purchaser can purchase the articles, and,  as no articles of a like kind and quality were sold, at or near the  place of manufacture, and as the wholesale  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 disregard 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 latter 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 concept of wholesale  market in  the  context.  A wholesale market does not  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 if there was no market  in  the  physical sense of 1094 the  term  at  or near the place of  manufacture  where  the articles  of a like kind and quality are or could  be  sold, that would not in any way affect the existence of market  in the   proper  sense  of  the  term  provided  the   articles themselves  could be sold wholesale to traders, even  though the  articles  are sold to them on the basis  of  agreements which  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  certain commercial benefits were conferred upon  them

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in  consideration of their undertaking to do service to  the articles  sold,  or 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 does 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 the 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 Council(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 obtained from the distributors information as  to their  future  requirements and placed  consolidated  orders accordingly  with the manufacturers in Canada.   The  retail price  charged  by the distributors to the 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 the appellants was  the same price less a discount of 20 per cent.  The distributors bad  to pay that price before obtaining delivery, which  was given "free on rail".  On arrival in India the vehicles were not  completely  assembled,  and were so  delivered  to  the distributors,  an agreed 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 real value of the goods  for  levy  of customs duty, the Privy Council held that the price  charged by   the  appellants  to  the  distributors  excluding   the assembling  allowance  was the "wholesale cash  price,  less trade  discount" for which the vehicles were sold "  at  the time  and  place of importation" within the  meaning  of  s. 30(a)  of  that  Act, the terms of which are  more  or  less similar to     those  of S. 4 (a) of the Act.  This case  is an authority for the (1) 65 Indian Appeals 32. 1095 proposition  that mere existence of the  agreements  between the respondent and the wholesale dealers under which certain obligations  were  undertaken by them like  service  to  the articles,  would  not  render the price  any  the  less  the ’wholesale  cash price’.  To put it in other words, even  if the articles in question were sold only to wholesale dealers on the basis of agreements and not to independent  persons,- that  would not make the price for the sales anything  other 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 saying 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 the price obtainable for goods of a like kind  and quality at the time and place of importation. Counsel for the appellants submitted that the  preponderance of authority in the various High Courts is in favour of  the view 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

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Central, Excise and others(1) 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 into 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 ,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 Court was of 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 meaning of s.   4  (a)  of the Act. In  the  Union  of India v. Vengunta  Suryaprakasa  Rao  and Another(2),  the  Court  said that  the  sale  to  wholesale distributors  with whom the company in question had  entered into  agreements  for sale of the articles  stipulating  for certain commercial advantages would not constitute the price of  those  sales "wholesale cash price" as mentioned  in  s. 4(a).  The Court further said that (1) A.I.R. 1961 Calcutta 477. (2) A.I.R. 1967 Andhra Pradesh 281. 1096 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 in Ford Motor Company of India Ltd. v. Secretary of State for India in Council (supra)  but did not seem to have appreciated the real ratio 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 not the retail dealer, charges for his goods  when  he  sells  them in  wholesale  units  and  what constitutes  wholesale unit will have to be determined  with reference  to the practice of the trade at the  place  where the  goods are sold.  A wholesale 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 independent  buyers meaning thereby, anyone who  intends  to effect  such purchase upon payment of proper  price  without restriction. In  Collector  of Central Excise and  Others  v.  Shankarlal Agarwalla  (2)  the  Court  followed  its  earlier  decision already  referred  to.  and said that  the  ’wholesale  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  words wholesale market mean a  place,  where  the articles  in  question are habitually sold to any  body  who wishes  to make a purchase at wholesale 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. In   Frizair  Corporation  v.  The  Collector   of   Central Excise(3),  the Court held that a sale to a  favoured  buyer cannot be regarded as a sale in a wholesale market and  that

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in  the light of the language 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 cash price’. We do not think that these decisions in so far as they  hold that  the  price  of sales to wholesale  dealers  would  not represent the ’wholesale cash price’ for the purpose of S. 4 (a)  of the Act merely because the manufacturer has  entered into   agreements  with  them  stipulating  for   commercial advantages,  are correct.  If a manufacturer were  to  enter into  agreements  with dealers for wholesale  sales  of  the articles manufactured on certain terms and (1) A.T.R. 1963 Mysore 216. (2) A.I.R. 1968  Calcutta 154. (3) (1969) II Andhra Weekly Reporter 57. 1097 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  arms length.   If there is a special or favoured buyer to whom  a specially  low price is charged 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  the  Act.  A sole distributor might of might  not  be  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 wholesale sales of the rest of the articles any the less the wholesale cash price’ for the purpose of s. 4(a), even if these sales were made pursuant to agreements  stipulating for  certain commercial advantages, provided the  agreements were entered into at arms length and in the ordinary  course of business. The  next question is : what exactly is the meaning  of  the term  the ’wholesale cash price’ ? In Vacuum Oil Company  v. Secretary of State for India in Council(1), 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 to buy  from  them  all his requirements for  a  year,  he  was entitled  to a discount from 2-1/2 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 whether the appellant was bound to pay customs duty on the basis of clause (a) or clause (b) of s. 30 of the Sea Customs  Act,  1878, the Privy Council held that  since  the sales were to customers direct, the real value of the  goods

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cannot  be  ascertained under clause (a) of s. 30  and  that clause (b) of s. 30 was applicable.  Their Lordships said (1)  59 Indian Appeals, 258. 1098 that in determining the price which is to represent the real value  of  the  goods  to be  ’taxed,  "the  price  must  be conservative  in every respect and free in  particular  from any  loading  for any post importation charges  incurred  in relation  to  the goods".  "The price is to be a  price  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 price’  were used in the section in contra-distinction to  a ’retail price’, and that not only on the round that such is a  well  recognised meaning of the words but  because  their association  with the words ’trade discount’ indicates  that sales  to  the trade are those in  contemplation,  and  also because  only by attaching that meaning to the word  is  the ’wholesale price’ relieved of the loading representing post- importation  expenses which, as a matter of  business,  must 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(1)]. Section 4 of the Act therefore provides that the real  value should be found after deducting the selling cost and selling profit  and  that  the  real  value  can  include  only  the manufacturing  cost  and  the  manufacturing  profit.    The section  makes  it clear that excise is levied only  on  the amount   representing  the  manufacturing  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  gives credit to the wholesale buyer for a  period  of time and that the price has to be fixed for delivery at  the factory  Rate thereby eliminating freight, octroi and  other charges  involved  in  the transport of  the  articles.   As already  stated  it  is not  necessary  for  attracting  the operation of S. 4(a) that there should be a large number  of wholesale   sales.    The  quantum  of  goods  sold   by   a manufacturer on wholesale basis is entirely irrelevant.  The mere  fact  that such sales may be few or  scanty  does  not alter the true position. The  appellant contended that 22 per cent  discount  allowed under  the  agreements with the wholesale  dealers  was  not trade discount.  On the round that there was no evidence to show  that the discount allowed was ’trade discount’  within the  meaning  of  the  Explanation to S.  4.  There  was  no contention by the appellants before the High Court that  the discount allowed to the (1)  [1963] Supp. 1 S.C.R. 586, 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 that  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

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not represent ’trade     discount’  for the purpose  of  the Explanation.  A trade discount’    is a percentage deduction from the regular list or catalogue price     of  goods.   As there was no case for the appellants 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 understated 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. I Sup.  C.I./73-2500,25-4-74 G.I.P.F.