Judgment

MATHEW, J. :- Voltas Ltd., the respondent here, filed 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 Assistant 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 notices demanding the assessed amount of Rupees 27,57,177.19. The High Court allowed the petition. This appeal, by certificate is against that order.

2. 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 came 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 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.

3. Excise duty on the basis of ad velorem value was imposed on air conditioners, water coolers on air conditioners, water coolers and parts of water coolers from March 1, 1961. The respondent s case was 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 the articles. This case was accepted by the excise authorities and assessments were made upto the end of 1962 on that basis.

4. 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.

5. The question that was canvassed before the High Court was whether the respondent was liable to be charged with excise duty on the basis of the price of retail sales made by it directly to the consumers from its head office and branch offices under clause (b) of Sec. 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 Sec. 4 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act )?

6. 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 excise duty was chargeable under Secti