JUDGMENT MUHAMMAD KHIYAR, J.--1. M/s. Kohat Cement Company Limited through Chief Executive (M.K. Saleem) petitioner herein has invoked the constitutional jurisdiction of this Court to declare the order dated 4.7.89 passed by the Assistant Collector Customs (respondent No. 4 herein) and order in appeal dated 26.8.1989 by the Collector, Customs (respondent No. 3 herein) and order in revision dated 12.3.1990 by the Additional Secretary, Ministry of Finance (respondent No. 2 herein) as being illegal without lawful authority and ineffective on his rights.
2. The petitioner has been paying sales tax regularly assessed on the wholesale each price of the cement. He received a show-cause notice on 13.6.1989 from (respondent No. 4) that its product was under valued for the purpose of payment of sales tax, as the transport charges and octroi duty leviable on the product were not included in the wholesale cash price. In reply to show-cause notice petitioner said that he did not charge any transportation charges or octroi duty from the Stockists retail traders and as such the wholesale cash price declared for the period under consideration was correct. The Assistant Collector Customs (respondent No. 4) heard the petitioner and passed the order on 4.7.1989 directing him to pay the amount of Rs. 14,05,443/- as sales tax and a sum of Rs. 2,000/- as penalty.
The petitioner feeling aggrieved from :he order of the Assistant Collector, Customs filed an appeal before the Collector (respondent No. 3) who vide order dated 26.8.1989 maintained the findings of the Assistant Collector on the view that provisions of section 4(1) of the Central Excises and Salt Act, 1944 do not admit any abatement except that of duty and sales tax and as such the transportation charges and packing charges should have been included in the assessable value of the cement.
He, however, ordered that declared price with regard to the quantity of cement supplied to Government Agencies should be accepted. Against this order the petitioner filed a revision petition before the Additional Secretary (respondent No. 2 herein) who, concurred, with the views of the forums below that all the charges up to the retail traders were to be included in value determined under section 4(1) of the Central Excises and Salt Act, 1944 read with section 3 subsection (4) of the Sales Tax Act, 1951 and rejected the revision petition on 12.3.1990. The petitioner having no other remedy is now availing the constitutional jurisdiction of this Court to declare the aforesaid orders of the respondents as illegal, null and void and ineffective on its rights. The respondents submitted their comments through Law Officer Customs and Central Excises, Peshawar, wherein the grounds justifying the action are the same as were taken by the respondents in the impugned orders that the value declared should confirm with the norms laid down under section 4(1) of the Central Excises and Salt Act, 1944 read with section 2(16) and the provisions of section 3 (4) of the Sales Tax, 1951. It is further stated in the comments that expenses incurrable up to the point of delivery of the goods to the nearest market of whole sale retail traders are to be included while arriving at assessable value within the meaning of law and that it is immaterial that charges of packing, loading transportation octroi and un-loading etc: are not charged from the retail traders.
4. Haji Maqsood Ahmed, advocate for the petitioner has taken exception to the interpretation of section 4(1) of the Central Excises and Salt Act, 1944 as made by the respondents that the abatement or reduction of the charges of transportation octroi etc: cannot he made while determining the value for purposes of duty. He contended that under section 4(1) of the Central Excises and Salt Act, 1944, the value of articles shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold to the retail traders on the day on which the article is assessed to duty, is removed from the factory and deduction of charges are not to be made if those are incurred by the factory. Since the petitioner did not incur the charges, therefore, the deduction was not made and the cement supplied to the Stockists during the relevant period was correctly valued for purposes of duty.
5. Mr. Abdul Hakim Kundi, advocate for the respondents argued that under section 4(1) of the Central Excises and Salt Act, 1944 while determining the value of the articles, the wholesale cash price for which an article of like kind and quality is sold or is capable of being sold to the general body of retail traders or if there is no general body of retail traders, the general body of consumers, on the day on which the article which is being assessed to duty is removed from the factory without any abatement or deduction whatever except the amount of duty and sales tax.
The learned counsel for the respondents was of the view that even if the factory has not included the charges of transportation etc: in the price, and the charges are paid by the retail traders, the deduction of those charges cannot be made while determining the value under section 4(1) of the Central Excises and Salt Act, 1944.
6. We have applied our mind to the respective contentions of the learned counsel for the parties. The point to be resolved in this case is as to how the value of articles is to be determined for the purposes of duty under section 4(1) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). The petitioner considers the value of the article i.e., of cement as the wholesale cash price received from the stockist/retail traders whereas the respondents take the wholesale cash price as that which is inclusive of the transport charges, loading charges and octroi duty etc. The value of the articles for the purposes of duty is determined under section 4(1) of the Act. The section reads as under:-- Section 4(1) "(1) Where under this Act any article is chargeable with duty at a rate dependent on the value of the articles, such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold to the general body of retail traders, the general body of consumers, on the day on which the article which is being assessed to duty is removed from the factory or the warehouse, as the case may be, without any abatement or deduction whatever except the amounts of duty and sales tax then payable". A careful perusal of the aforesaid provision of law would show ^ that the value of article chargeable with duty at a rate dependant on the value, shall be deemed to be the wholesale cash price, for which the article is sold to the general body of retail traders on the day on which the article which is being . Assessed to duty is removed from the Factory without any abatement or deduction. In the present case value determined is not in dispute. What is disputed is the deduction of transportation charged, octroi duty etc:. We have applied our mind to this aspect of the case and are of the view that since there is no evidence to show that wholesale cash price declared by the factory included the transport charges, loading charges, octroi duty etc;, therefore, the question of deduction does not arise. The contention of the learned counsel for the respondents that even if the charges are not incurred by the factory, those have to be included in determining the wholesale cash price is devoid of force. 7.
Section 3 of the Sales Tax Act, 1951 (Act III of 1951) provides for levying and collection of taxes on the value of goods enumerated therein. Clause (a) of sub-section (1) of section 3 ibid applies to the case of the petitioner being producer and manufacturer of the cement. Sub-section (4) of section 3 of the Sales Tax Act, 1951. Provides that tax in respect of the case mentioned in clause (a) shall be payable on the occurrence of the events enumerated therein. The event (i) reads as follows; (i) when the goods are delivered to the purchasers. Accumulative effect of the aforesaid provision of law would be that tax in respect of cement shall be payable when the goods are delivered to the purchasers. The petitioner shall be liable to pay the tax when the goods are delivered to the purchasers and the value determined shall be the wholesale cash price as envisaged in section 4(1) of the Act read with section 2 sub-section (16) (i) of the Sales Tax Act, 1951. Here we may with advantage refer to a case from Indian jurisdiction reported in AIR 1973 SC 225 wherein it is held; "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 is no market in the physical sense of the term at or nea^ 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. 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 another goods of a like kind and quality. If a manufacturer were to enter into agreements with dealers for wholesale sales of the articles manufactured on certain terms and 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 Section 4 (a) of the Act if the agreements were made at arms length and in the usual course of business. AIR 1961 Cal 477 and AIR 1967 and Pra 281 and 'AIR 1963 Mys 216 and AIR 1968 Cal 154 and (1969) 2 and WR 57, Overruled; AIR 1938 FC 15, Relied on. 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'. Once wholesale dealings at arms length are established, the determination of the wholesale cash price for the purpose of Section 4 (a) of the Act may not depend upon the number of such wholesale dealings. Section 4 of the Act 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 profit. AIR 1932 PC 168 an&AIR 1963 SC 791, Relied on. 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 gate thereby eliminating freight, octroi and other charges involved in the transport of the articles".
8. We are not prepared to accept the respondents' contentions that even if the charges are not incurred, deduction is not allowed under section 4(1) of the Act. While determining the wholesale cash price of the articles no abatement or deduction whatever except the amount of duty and sales tax then payable can be made provided it is proved that the transport charges, octroi duty etc: were borne by the petitioner. The charges Vere borne by the retail traders to whom the cement was sold in wholesale. The petitioner had correctly valued the articles for the period in question. The impugned orders passed by the respondents are without lawful authority.
9. We would, therefore, accept this writ petition and declare the impugned orders of respondents No. 2 to 4 demanding the extra sales tax, as illegal, null and void, without lawful authority and ineffective on the rights of the petitioner. No order as to costs.