Sales which are made in the course of normal commercial dealings and at arms length are not hit by Sec. 4(4)(c) of the Central Excises Act, 1944.

M.N. CHANDURKAR, C.J

The only question which arises in this appeal is whether the Excise authorities were justified in rejecting the price at which the appellant manufacturer sold its products to Messrs Philips India Ltd. as the wholesale cash price.

2.Admittedly, we are concerned in this appeal with the sales of electric appliances, namely, water heaters manufactured by the appellant during the period 1-3-1969 to 14-11-1969. 90 per cent of the production was sold to Messrs Philips India Ltd. at the rate of Rs. 265, Rs. 308 and Rs. 348, for water heaters having a capacity of 25, 35 and 45 litres respectively. The remaining 10 per cent of the production was sold to retailers at the rate of Rs. 340-45, Rs. 394-36 and Rs. 444-36. At one stage, the first respondent had approved the price list at the rates at which goods were sold to the retailers. However, the Deputy Collector later on by order dated 3-1-1970 changed these rates to Rs. 386-75, Rs. 446-25 and Rs. 501-50. The manufacturer-appellant had already appealed against the wholesale cash price being fixed at Rs. 340-45, Rs. 394-36 and Rs. 444-36. It also changed the wholesale prices later on fixed on 3-1-1970.

3.The only two grounds on which the Superintendent of Central Excise had rejected the price at which the products were sold to Messrs Philips India Ltd., as the wholesale cash price were-(i) Messrs Philips India Ltd. besides being a sole selling agent were attending to advertising, after sales service, warranty etc., and (ii) Messrs Philips India Ltd. were favoured buyers.

4.The Deputy Collector who heard the appeals which were filed before the Collector, however, merely observed while disposing of the appeals as follows-

"......Considering all the above matters it is hereby decided that since 14-11-1969 the majority sales of the produce was being effected to the sole distributors Philips India Ltd., I confirm the price of Rs. 386-75, Rs. 446- 25 and Rs. 50 1-50 for 25, 35 and 45 litres units respectively from 8-3-1969 to 14-11-1969 under Sec. 4(b) of the Central Excises Act......" *

He also directed that from 15-11-1969, the assessable value will be fixed by the Superintendent under Sec. 4(a) of the Act.

5.Though the Deputy Collector refers to his having considered all the matters, the order shows that the only matter which he considered was that the price approved on 17-9-1969 was much lesser than the price at which Messrs Philips India Ltd. sold to the sub-dealers and slightly higher than the final prices approved by the Superintendent on 26-8-1969. There is nothing else which seems to have been considered as it appears from the order of the Deputy Collector. A revision petition filed by the appellant came to be dismissed without any consideration of the merits of the claim of the appellant.

6.When the appellant came to this court by a writ petition questioning the validity of the orders passed by the Excise authorities, the learned Judge also confirmed the findings of the Excise authorities that Messrs Philips India Ltd. were favoured buyers getting the goods at a discount. The reason given by the learned Judge for this conclusion was that the goods were given to Messrs Philips India Ltd. at a lower price as they were buying large quantities. The order of the learned Judge does not disclose any other reason for coming to the conclusion that Messrs Philips India Ltd. were favourable buyers.

7.In this appeal, it is now contended by Mr. Natarajan appearing on behalf of the manufacturers that in the absence of any finding that the transactions with Messrs Philips India Ltd. were not transactions at arms length, the learned Judge and the Excise authorities were not justified in coming to the conclusion that the price at which a large part of the stock was sold to Messrs Philips India Ltd. who were the main buyers was not the wholesale cash price for the purpose of assessment to excise duty.

8.Mr. Somasundaram appearing on behalf of the Department relied on the two ci