judgement:
Appeal No. 1868 of 1970.
From the Judgment and Order dated the 30th March, 1970 of the Gujarat High Court in S.C.A. No. 1219 of 1966.
N. A. Palkhivala, Sol.
J. Sorabji, Ashok Desai, D. B. Engineer, K. K. Master, and Ravinder Narain, for the appellant.
G. L. Sanghi and Girish Chandra, for the Respondents.
The Judgment of the Court was delivered by BHAGWATI, J.
This appeal, on, certificate of fitness obtained under Article 133 (1) (a) of the Constitution, is directed against a judgment of the High Court of Gujarat dismissing Special Civil Application No. 1279 of 1966 preferred by the appellants challenging the assessments to excise duty of certain dye stuffs manufactured by them.
The facts giving rise to the appeal are few and may be briefly stated as follows.
The appellants carry on business of manufacturing dye stuffs in a factory situate in a small township called Atul in Bulsar District in the State of Gujarat.
The dye stuffs manufactured by the, appellants were, throughout the period relevant to this appeal, sold by them in wholesale units to two wholesale buyers, namely, ICI (India) Ltd. (hereinafter referred to as ICI) and Atul Products Ltd. (hereinafter referred to as Atul) under respective agreements entered into by them with ICI and Atul.
Seventy per cent of the dye stuffs manufactured by the appellants were sold to ICI, while the remaining 30% to Atul.
The price charged by the appellants to ICI and Atul was a uniform price described as "the basic selling price" less trade discount of 18%.
ICI and Atul, in their turn, resold the dye stuffs purchased by them from the appellants to two categories of buyers.
One was the category of textile mills and other large consumers, while the 565 other was the category of distributors.
The sales by ICI and Atul to the textile mills and other large consumers were at the basic selling price without any discount, but so far as the distributors were concerned, the sales to them by ICI and Atul were at a higher price, though with trade discount.
ICI charged a higher price but allowed 10% trade discount, while Atul charged a slightly lower price and allowed two and a half per cent trade discount.
The prices were, how ever, so adjusted that the net selling prices charged by ICI and Atul to :the, distributors were almost the same.
The distributors, in their turn, resold the dye stuffs purchased by them from ICI and Atul to the small consumers at a slightly higher price referred to as "small consumers price".
No discount was given by the distributors to the small consumers.
The position which, therefore, obtained during the relevant period was that the appellants sold the dye stuffs manufactured by them in wholesale units, 701% to ICI and 30% to Atul, at the basic selling price, less trade discount of 18%: ICI and Atul in their turn resold a part of the dye stuffs in retail units to the textile mills and large consumers at the basic selling price and the balance in wholesale units to the distributors at higher selling prices with 10% trade discount in case of ICI and 2 1/2% trade discount in case of Atul, the net selling prices charged by both of them, however, being the same; and the distributors, in their turn, resold the dye stuffs to small consumers in retail units at the small consumers price.
It may be pointed out that though Atul initially charged a lower selling price and gave a trade discount of 2 1/2%, it fell incline with ICI and adopted the same selling price as ICI with trade discount of 10% from and after 1st May, 1963.
There was no excise duty on dye stuffs prior to 1st March, 1961, but with effect from that date excise duty was imposed for the first time on dye stuffs, including those manufactured by the appellants.
The excise duty chargeable under the relevant entry in the first Schedule read with section 3, sub section (1) of the Central Excise and Salt Act, 1944 was ad valorem, and it was, therefore, necessary to determine the value of the dye staffs manufactured by the appellants for the purpose of assessing the excise duty payable on them.
Section 4 of the Act provided how the value of an article chargeable with duty at a rate depending on its value shall be determined for the purpose of assessment of excise duty.
It said : "Determination of value for the purpose of duty.
Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value be deemed to be (a) the whole sale 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, or if a wholesale 566 market does not exist for such article at such place, at the nearest place where such market exists, or (b) where such price is not ascertainable, the price at which an article of the like kind and quality sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of 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 thereto.
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 amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid.
" The question arose as to how the value of the dye stuffs manufactured by the appellants should be determined on a proper application of the rule aid down in section 4.
The appellants contended before the Excise Authorities that for the purpose of assessing the excise duty, the value of the dye stuffs manufactured by the appellants should be taken to be the price at which the appellants sold the same in whole sale units to ICI and Atul, less a uniform trade discount of 18% which the appellants at the relevant time gave to these two wholesale buyers.
This contention was not accepted by the Superintendent of Central Excise who was the original assessing authority.
He took the view that the value of the dye stuffs for ,the purpose of assessment of excise duty should be taken to be the price at which ICI and Atul sold the dye stuffs to the distributors and.
no deduction should be allowed in respect of the discount given by them to the distributors since it was not uniform, being 10% in case of ICI and 2 1/2% in case of Atul.
The appellants appealed against the assessment to the Assistant Collector of Central Excise, but the appeal was unsuccessful and the assessment was confirmed.
That led to the filling of a further appeal to the Collector of Central Excise.
This appeal resulted in some gain, little though it was, as the Collector of Central Excise held that in determining the, assessable value, trade discount of 21% which was given by Atul to the distributors should be allowed to be deducted from the price charged by ICI to the distributors.
This was, however, plainly illogical.
If the price charged by ICI was taken as a basis, trade discount of 10% should have been allowed as that was the discount given by ICI to the distributors.
Trade discount of 21% given by Atul on the lower price charged by it to the distributors could not be deducted from the price charged by ICI to the distributors which was fixed at a higher figure because of the larger trade discount of 10% given by it to the distributors.
The assessable value determined by the Collector of Central Excise was a strange hybrid.
The appellants preferred a revision application to the, Central Government against the order of the Collector of Central Excise.
The, Central 567 Government in revision rejected the main contention of the, appellants that the value of the dye stuffs should be arrived at the price at watch the same were sold by the appellant to ICI and Atul less 18% trade discount allowed to them.
The reason for rejecting this contention was that since dye stuffs manufactured by the appellants were not "available to an independent buyer in open market conditions at prices at which these are sold by them to the Sole Distributors, M/s ICI Ltd. and M/s Atut Products Ltd., these prices cannot be adopted as the basis of ad valorem assessment" under section 4 of the Act.
The Central Government, however, observed that these dye stuffs were "available to any independent buyer in open market conditions at the sole distributors, prices ' that is, at the price charged by ICI and Atul to the distributors and, therefore, these prices should form the basis of assessment after allowing discount of 10% on the prices charged by ICI from the beginning and 2 1/2% on the prices charged by Atul upto 30th April, 1963 and 10% thereafter and on this basis directed refund of the excise duty collected by the Excise Authorities.
The appellants were obviously not satisfied with this rather trivial and insignificant success and since their main plea was negatived by the Central Government, they filed a petition in the High Court of Gujarat under article 226 of the Constitution challenging the, validity of the various orders made by the Excise authorities culminating in the order of the Central Government and seeking a writ directing the Union of India "to refund excess duty amounting to Rs. 1,26,229.80 illegally recovered from the petitioners and to forbear from recovering duty from the petitioners in respect.
of the said products otherwise than on the basis of the prices charged by the petitioners to the said wholesale buyers viz. ICI and Atul.
" The Division Bench which heard the petition took the view, following certain decisions of the Calcutta, Mysore, Andhra Pradesh and Bombay High Courts, that where the entire production is sold by a manufacturer to one or more favoured distributors, there is no wholesale market in the sense of open market at the site of the factory where an independent buyer can purchase the goods in wholesale and in such a case the price at which the goods are sold by the manufacturer to the favoured distributors cannot be taken to be the assessable value of the goods but the assessable value must be taken to be the price at which the favoured distributors, in their turn, sell the goods in wholesale and if not in wholesale, then in retail.
The Division Bench accordingly held that the price charged by the appellants to ICI and Atul less 18% trade discount could not be adopted for determining the assessable value of the dye stuffs since ICI and Atul were favoured distributors and not independent buyers and the Central Government was right in taking the price charged by ICI less 10% trade discount and the price charged by Atul less 2 1/2% trade discount as the assessable value because "that was the wholesale cash price at which the independent buyers could get these goods in the nearest wholesale market at the relevant time.
" The appellants being agerieved by the decision of the High Court preferred the present appeal after obtaining certificate of fitness from the High Court.
5 470SupCI/75 568 It would be seen from the judgment of the, High Court that the only ground on which the High Court negatived the contention of the, applicants that the price charged by the appellants to ICI and Atul less 18% trade discount should be taken as the assessable value was that ICI and Alul were favoured distributors and apart from them, no independent buyer could purchase the dye stuffs in wholesale market at or near the place of manufacture so as to attract the appli cability of the first Part of section 4(.a).
This is ground of course, at one time, looked highly plausible, supported as it was by decisions of several High Courts.
But now, after the recent decision of this Court in A. K. Roy vs voltas Ltd.(1) it stands completely decimated.
The facts of that case are a little interesting and requires to be noticed in order to understand the true ratio of the decision.
The respondent in that case carried on inter alia business of manufacturing air conditioners, water coolers and their component parts.
It effected direct sales to consumers at list prices and the sales so effected came to about 90% to 95% of its production during the relevant period.
It also sold its articles amounting to 5% to 10% of its production 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 and the respondent would sell the articles to them at the list prices less 22% discount.
The dealers were also required under the agreements to give service to the units sold in their terdtory.
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 claimed, in accordance with section 4(a), that the list prices after deducting the discount of 22% allowed to the wholesale dealers should be taken to be the wholesale cash price, for ascertaining the real value of the articles.
This claim was resisted by the Excise Authorities and the respondent was therefore constrained to file a writ petition in the High Court of Bombay.
The High Court allowed the petition holding that the list prices at which the articles were sold to ' the wholesale dealers, less 22% discount allowed to them under the agreements, represented 'the wholesale cash price ' and excise duty was accordingly chargeable under section 4(a).
The Excise Authorities thereupon preferred an appeal by certificate to this Court.
The same argument was advanced before this Court on behalf of the Excise Authorities which has found favour with the High Court in the present case.
The Excise Authorities 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 section 4(a) of the Act.
They argued that section 4(a) visualizes a wholesale market at the place of manufacture where articles of like (1) 569 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.
speaking on behalf of the Court, explained the true scope and meaning of section 4(a) and its applicability in a situation of this kind in the following words "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 section 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 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 whichconfer certain, commercial advantages upon them.
In other words, the sale to the wholesale dealers did not cease to bewholesale sales merely because the wholesale dealers hadentered into agreement with the respondent under which certain commercial benefits were conferred upon them in consideration of their undertaking to do service to the articles sold, or because 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 section 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.
570 The learned Judge then referred to the decision of the Privy Council in Ford Motor Company of India Limited vs Secretary of State India in Council(1) and pointed out that : "This case is an authority for the 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, event 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 safes anything other than the 'wholesale cash price.
The argument that what was relevant to determine the 'wholesale cash price, under cl.
(a) of section 30 of the , 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 el.
(a) be con sidered 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.
" Then, with reference to the decisions of the various High Courts, which had taken a different view, the learned Judge observed : "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 section 4(a) of the Act merely because the man*, facturers had entered into agreements with them stipulating for commercial advantages, are correct", and proceeded to add : "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.
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 section 4(a) of the Act.
A sole distributor might or 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 whole (1) 65 I.A.32.
571 sale cash price for the purpose of section 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 section 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.
" it is not necessary for attracting the operations of section 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.
" On this view, it was held that the respondent was liable to be charged with excise duty on the basis of the price payable by the wholesale dealers, after deducting 22% discount, under section 4 (a).
This decision provides a complete refutation of the view taken by the High Court in the present case.
In fact, the present case is much stronger than the Voltas case (supra).
In the Voltas case (supra), 90 to 95 per cent of the production was sold by the manufacturer in retail and only a small percentage, namely 5 to 10 per cent was sold in wholesale and yet the price charged by the manufacturer to the wholesale dealers less trade discount of 22% was taken as 'the wholesale cash price ' for assessment of value under section 4(a).
Here, on the contrary, no retail sales at all were effected by the appellants and the entire production was sold in wholesale to ICI and Atul under agreements entered into with them.
Moreover, it was not in dispute between the parties that the agreements entered into by the appellants with ICI and Atul were made at arms length and in the usual course of business.
It was not the case of the Excise Authorities at any time that specially low prices were charged by the appellants to ICI and Atul because of extra commercial considerations or that the agreements were anything but fair and reasonable or arrived at on purely commercial basis.
The wholesale dealings between the appellants and lCI and Atul were purely commercial dcalings at arms length and the price charged by the appellants for sales in wholesale made to ICI and Atul less trade discount of 18% was, therefore, clearly 'wholesale cash price ' within the meaning of section 4(a) and it did not make any difference that the wholesale dealings of the appellants were confined exclusively to ICI and Atul and apart from these two, no independent buyers could purchase the 'dye stuffs in wholesale from the at) appellants.
The Excise Authorities, robbed of what they thought was a strong argument prior to the decision in Voltas case (supra), then tried to 572 fall back on a subsidiary argument in an attempt to save, the assessments.
They contended that all that section 4(a) provides is that the value of the article sought to be charged to excise duty shall be deemed to be the wholesale cash price for which the article is sold or is capable of being sold and it does not say which wholesale cash price shall be taken to be the value of the article that charged by the manufacturer to the wholesale dealer or that charged by the wholesale dealer who having purchased the article from the manufacturer sells it in wholesale to another dealer.
The latter price, they pointed out, would equally be the wholesale cash price within the meaning of section 4 (a) as it would be the price at which the article is sold or in any event capable of being sold in the wholesale market and there is no reason why it should not be taken to be the value of the article for the purpose of assessment under section 4(a).
The contention, therefore, was that the price charged by ICI and Atul to the dealers less trade discount allowed to them should be taken to be the assessable value of the dye stuffs and not the price charged by the appellants to ICI and Atul less trade discount of 18%.
This contention is without force and must be rejected.
It violates two basic principles underlying imposition of excise duty.
In the first place, as pointed out by Mathew, J., in Voltas ' case (supra), "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 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 pos manufacturing operation, namely, selling profit.
" The value of the goods for the purpose of excise must take, into account only the manufacturing cost and the manufacturing profit and it must not be, loaded with post manufacturing cost or profit arising from post manufacturing operation.
The price charged by the manufacturer for sale of the goods in wholesale would, therefore, represent the real value of the goods for the purpose of assessment of excise duty.
If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and the manufacturing profit of the manufacturer but also the wholesale dealer 's selling cost and selling profit and that would be wholly incompatible with the, nature of excise.
It may be noted that wholesale market in a particular type of goods may be in several tiers and the goods may reach the consumer after a series of wholesale transactions.
In fact the more common and less expensive the goods, there would be greater possibility of more than one tier of wholesale transactions.
For instance, in a textile trade, a manufacturer may sell his entire production to a single wholesale dealer and the latter may in his turn sell the goods purchased by him from the manufacturer to different wholesale dealers at 'State level, and they may in their turn sell the goods to wholesale 573 dealers at the district level and from the wholesale dealers at the district level the goods may pass by sale, to Wholesale dealers at the city level and then, ultimately from the wholesale dealers at the city level, the goods may reach the consumers.
The only relevant price for assessment of value of the goods for the Purpose of excise In such a case would be the wholesale cash price which the manufacturer receives from sale to the first wholesale dealer, that is, when the goods first enter the stream of trade.
Once the goods have entered the stream of trade and are on their onward journey to the consumer, whether along a short or a long course depending on the nature of the goods and the conditions of the trade, excise is not concerned with what happens subsequently to the goods.
It is the first immediate contact between the manufacturer and the trade that is made decisive for determining the wholesale cash price which is to be, the measure of the value of the goods for the purpose of excise.
The second or subsequent price, even though on wholesale basis, is not material.
If excise were levied on the basis of second or subsequent wholesale price,, it would load the price with a postman factoring element, namely,.
selling cost and selling profit of the wholesale dealer.
That would be plainly contrary to the true, nature of excise as explained in the Voltas ' case (supra).
Secondly, this would also violate the concept of the factory gate sale which is the basis of determination of value of the goods for the purpose of excise.
There can, therefore, be no doubt that where a manufacturer sells the needs manufactured by him in wholesale to a wholesale dealer at arms length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the, goods for the purpose of assessment of excise.
That would be the wholesale cash price for which the goods are sold at the factory gate within the meaning of section 4(a).
The price received by the wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to other dealers would be irrelevant to the determination of the value and the goods would not be chargeable to excise on that basis.
The conclusion is, therefore, inescapable that the assessable value of the dye stuffs manufactured by the appellants must be taken to be the price at which they were sold by the appellants to ICI and Atul less 18% trade discount, and not the price charged by ICI and Atul to their dealers.
We, therefore, allow the appeal, reverse the judgment of , the High Court and quash and set aside the Assessments to excise duty made by the Excise Authorities on the dye stuffs manufactured by the appellants.
We direct the respondents to refund to the appellants forthwith the amount collected in excess of the correct duty of excise leviable in accordance with the principle laid down in this judgment.
The respondents will pay to the appellants costs in this Court as well as in the High Court.
P.B.R. Appeal allowed.

summary/full:
The appellant, which was a manufacturer of dye stuffs, sold its product to, two wholesale buyers at a uniform selling price described as "the basic selling price" less trade discount of 18%.
The wholesalers in turn sold the product to large consumers such as textile mills and distributors.
One wholesaler sold the dye stuff to the distributors Pat a higher price but allowed 10% discount while the other sold at a lower price and allowed 2 1/2% discount.
The price charged by both however was so adjusted that the net selling price charged to the distributors was almost the same.
The excise duty chargeable under section 3(1) of the Central Excise and Salt Act, 1944 was ad valorem.
Section 4 provided as to how the value of an article chargeable with duty at a rate depending on its value shall be determined for the purpose of assessment of excise duty.
Before the excise authorities the appellants claimed that, for the purpose of assessing the excise duty the value of the dye stuffs should be taken to be the price at which the appellants sold the same to the two wholesale buyers less trade discount allowed to these wholesale buyers.
The Superintendent of Central Excise rejected this contention and took, for the purpose of assessment, the price at which the wholesalers sold the dye stuffs to the distributors.
He did not, however, allow any deduction in respect of the discount given by the wholesalers to the distributors since it was not uniform.
On appeal the Assistant Collector of Central Excise confirmed the assessing authority 's order.
On further appeal, the Collector of Central Excise held that in determining the assessable value, the lower trade discount of 21% allowed by one of the wholesalers to the distributors only should be deducted.
The appellant 's revision application was rejected by the Central Government on the ground that since the dye stuffs manufactured by the appellant were not available to an independent buyer in open market conditions at price at which these were sold by them to the wholesalers these prices could not be adopted as the basis of (id valorem assessment under section 4 of the Act.
It was observed that these dyestuffs were available to any independent buyer in open market conditions at the distributors ' prices, that is, at the prizes charged by the wholesalers to the distributors and,, therefore, these prices should form the basis of assessment after allowing the discount.
Dissatisfied with the decision of the Central Government the appellant filed a petition under article 226 of the Constitution.
The High Court held that where the entire production was sold by a manufacturer to one or more favoured distributors there was no wholesale market in the sense of open market at the site of the factory where an independent buyer could purchase the goods in wholesale and the assessable value must therefore be taken to be the price at which favoured distributors sell the goods in wholesale and if not in wholesale, then, in retail.
The High Court accordingly upheld the view of the Central ' Government.
Allowing the appeal, HELD : (1)(a) The assessable value of the dye stuffs manufactured by the appellants must be taken to be the price at which they were sold by the appellants to the two wholesale dealers less 18% trade discount and not the price charged by the wholesale dealers to the distributors.
[573F G] 564 (b) Where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arm 's length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise.
That would be the wholesale cash price for which, the goods are sold at the factory gate within the meaning of section 4(a).
The price received by the wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to other dealers would be irrelevant to the determination of the value of the goods and the goods would not be chargeable to excise on that basis.
[573E F] (c) The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with post manufacturing cost or profit arising from post manufacturing ,operation.
[572F] (d) Once the goods have entered the stream of trade and are on their onward journey to the consumer, whether along a short or a long course depending on the nature of the goods and the conditions of trade, excise is not concerned with what happens subsequently to the goods.
[573B C] A. K. Roy vs Voltas Ltd., , followed.


judgement:
minal Appeal No. 325 of 1974.
Appeal by Special Leave from the Judgment and Order dated the 8th April, 1974 of the Bombay High Court in Crl.
Appeal No. 305 of 1974.
Sharad Manchar, B. P. Maheshwari and Suresh Sethi, for the appellants.
section B. Wad and M. N. Shroff, for the respondent.
The Judgment of the Court was delivered by JAGANMOHAN REDDY, J.
We have just now admitted the special leave, petition and after the appeal was registered heard the learned Advocates for the parties.
This is yet another case in which a criminal first appeal against a conviction has been dismissed summarily under Section 421 of the Criminal Procedure Code.
We have heard both sides.
Mr. Wad for the State has strenuously contended that the High Court has power to dismiss summarily and has cited several decisions, but in all these cases there is nothing to the contrary to justify a view different from the one we are taking in this case.
It is submitted that the dismissal, was so summary that even the record was not called for.
No doubt, Section 421, Criminal Procedure Code does vest a power in the High Court to dismiss an appeal summarily but it can do so only on a perusal of the petition and the copy of the judgment.
Inasmuch as under our Constitution any person aggrieved by an order of the High Court can petition to this Court under Article 136 for special leave, it is not only necessary but having regard to the long series of decisions beginning as far back as 1953 (see ; onwards which discourages this practice of dismissal by one word 'dismissed ', the High Court should at least have given some reasons 67 why no arguable case is made out on a perusal of those documents.
Since we are not in a position to ascertain and it is contended before us that arguable points do arise in this case in support of which the statement made in special leave petition has been read to us, we are not in a position to say that an arguable case does not arise.
We would have been able to do so even if we had the slightest inkling in the order of the High Court.
In the absence of any reasons what has been happening in many cases is that special leave is admitted, and after hearing the appeal if this Court has come to the conclusion that the conviction is valid, it has held that the dismissal by the High Court is justified.
But this method, in our view, reverses the process and imposes unnecessary burden on this Court.
What should have been done by the High Court, is now being done by this Court.
It is only after sending for the records, getting the paper books prepared, hearing both parties in the appeal and after appreciation of the evidence that it may be held that in some cases the dismissal, in fact, was ultimately justified.
In many cases the appeals were even allowed.
Long avoidable delay thus ensues during which the person convicted entertains a doubt about his conviction and has to suffer the anxiety caused thereby.
We do hope and trust that the series of decisions over this long period disapproving of the practice of summarily dismissing by one word will be taken note of and this Court will not be ultimately burdened with such appeals arising out of summary dismissals which is really the function of the High Court at the first instance.
The appeal is accordingly allowed.
The order of the High Court is set aside.
The appeal is remanded to the High Court for hearing for admission and disposal in accordance with law and in the light of the directions made here in above.
V.P.S. Appeal allowed.

dataset_name: IN-Abs

summary/full:
Inasmuch as under the Constitution any person aggrieved by an order of the High Court can petition to the Supreme Court under article 136 for special leave, it is necessary, having regard to the long series of decisions beginning with ; , which discourage the practice of dismissal by the one word 'dismissed, that the High Court should give some reasons why no arguable case is made out on a perusal of the appeal petition and the judgment of the lower court.
In the absence of reasons.
this Court can hold the dismissal to be justified or allow the appeal only after sending for the records, getting the paper books prepared, hearing the parties and appreciating the evidence.
This process involves the Supreme Court being burdened with such appeals and doing what the High Court should do.
Further during such avoidable delay the conviction person entertains a doubt about his conviction and suffers anxiety.
[66H 67D]


judgement:
Appeals Nos. 1883 to 1886 of 1969.
From the judgment & Order dated the 12th July, 1968 of the Mysore High Court in W.P. Nos. 949, 955, 956 and 958 of 1968.
K. Srinivasan and Vineet Kumar, for the appellants.
H. B. Datar (In C.A. No. 1883/69) and M. Veerappa, for the respondents.
The Judgment of the Court was delivered by MATHEW, J.
The appellant was an excise contractor.
He secured the privilege of vending arrack in retail in certain taluks in the State of Karnataka for a period of 18 months beginning from 28 12 1967 and ending on 30 6 1969.
He purchased arrack from the Government at a price of 17 paise per litre and the Government collected besides the sale price of arrack, excise duty, health cess and education cess.
The Government also collected sales tax on the sale price of arrack, on excise duty, on health cess and on education cess for the period from 28 12 1967 to 31 1 1968 and made similar demands for the month of February, 1968 also.
The appellant and other excise contractors filed writ petitions in the High Court of Karnataka challenging the validity of the levy and collection of excise duty, education cess, health cess and sales tax.
The High Court accepted some of the contentions of the appellant, granted him reliefs on that basis but rejected the other prayers.
The appellant has filed these appeals on the basis of certificates granted by the High Court against the order.
The contentions raised by counsel for the appellant before this Court were : that no excise duty can be levied on a licensee in respect of the quantity of arrack purchased by him from Government depots, that the power to fix the rate of excise duty conferred under section 22 of the Mysore Excise Act of 1965 on the Government was bad for the 609 reason that it was an abdication by the state legislature of its essential legislative function and that no sales tax could be levied on the price for sale of arrack since section 19 of the Mysore Sales Tax Act, 1957 under which the tax was levied was beyond the legislative competence of the state legislature.
Section 22 of the Mysore Excise Act, 1965 (hereinafter referred to as 'the Act ') provides for levy of excise duty at such rate or rates as the government may prescribe on excisable articles manufactured or produced in the State under any licence or permit granted under the Act.
Section 23 of the Act deals with the method of levying excise duties.
The first contention of the appelant was that sections 16, 22 and 23 of the Act read with Mysore Excise (Distillery and Warehouse) Rules, 1967 and with Mysore Excise (Excise Duties) Rules, 1968, enables levy of excise duty only when arrack is issued from a distillery or warehouse or other place of storage established or licensed under the Act and since the government depot from which he purchased arrack does not come under the above category, no excise duty can be levied.
The High Court found that though sections 22 and 23 of the Act and Rule 2 of the Mysore Excise (Excise Duties) Rules, 1968, do not expressly state that excise duty levied at the stage of issue of liquor from the government depot should be collected from the issuer or from the person to whom it is issued, it is obvious that excise duty cannot be collected from the State Government which issues liquor from its depots and that the only person from whom it can be collected is the licensee, to whom the State Government issues liquor from its depots.
The material portion of section 16 of the Act provides that the Excise Commissioner may, with the previous sanction of the State Government, establish or license a warehouse wherein intoxicants may be deposited and kept without payment of duty and that without the sanction of the State Government no intoxicant shall be removed from any distillery, brewery, warehouse or other place of storage established or licensed under the Act unless the duty, if any imposed under the Act has been paid or a bond has been executed for the payment thereof.
It is clear from the return filed before the High Court that the Government purchase arrack from the distillers and keeps it in the warehouse established or licensed under section 16 and that any removal of arrack after the purchase of the same will attract the liability to pay excise duty shall be levied on the excisable article issued from a ware Excise Commissioner who is competent to establish or license a warehouse wherein intoxicants may be deposited and kept under clause (e) of section 16 and therefore it is not a warehouse established or licensed by the State Government.
We see no force in this contention.
Section 23 provides that excise duty shall be levied on the excisable article issued from a ware 610 house also.
We see no reason to think that a warehouse established or licensed under section 16(e) is not warehouse within the meaning of that expression in section 23.
The second contention raised by the appellant was that section 22 of the Act provides for delegation of the power to fix the rates of excise duty to the Government by making rules and since no guidance has been furnished to the government by the Act for fixing the rate there was abdication of essential legislative function by the legislature and there fore the section is bad.
The High Court after referring to the preamble of the Act said that it was the policy of the Act both to raise revenue and to discourage consumption of liquor by making the price of liquor sufficiently high, and that that 'would serve as a guidance to fix the rates of excise duty, that the rates fixed will be such as would keep the balance between these somewhat conflicting objects so as to serve the purpose of each.
The Court further said that if the rate of excise duty is too low, not only will the revenue from excise duties suffer but also there will be increase in the consumption of liquor; but if the rate of excise duty on liquor is too high, it is Rely to encourage the production and consumption of illicit liquor and consequently the control and regulation of liquor as well as the revenue from excise duty may be adversely.
The Court therefore held that the need to arrive at such rates of excise duty as will serve the twin objects of the policy underlying the Act operates as guidance for determination of the rates of excise duty.
We are not certain whether the preamble of the Act gives any guidance for fixing the rate of excise duty.
But that does not mean that the legislature here has no control over the delegate.
The legislative control over delegated legislation may take many forms.
In Corporation of Calcutta & Anr.
vs Liberty Cinema(1), the validity of section 548(2) of the Calcutta Municipal Act, 1951, which empowered the Corporation to levy fees "at such rates as may from time to time be fixed by the Corporation" was challenged on the ground of excessive delegation as it provided no guidance for the fixation of the amount.
The majority upheld the provision relying on the decision in Banarsi Das vs State of Madhya Pradesh (2 ) holding that the fixation of rates of tax not being an essential legislative function, could be validly delegated to a non legislative body.
but observed that when it was left to such a body, the legislature must provide guidance for such fixation.
The Court found the guidance in the monetary needs of the Corporation for carrying out the functions entrusted to it under the Act.
In Municipal Board, Hapur vs Raghuvendra Kripal(2) the validity 1916, was involved.
Ile Act had to fix the rate of tax and after having of the U.P. Municipalities Act, empowered the municipalities enumerated the kinds of taxes to be levied, prescribed an elaborate (1) [1965] 2,S.C.R.477.
(2) ; (3) ; 611 procedure for such a levy and also provided for the sanction of the Government., Section 135 (3) of the Act raised a conclusive prerumption that the procedure prescribed had been gone through on a certain notification being issued by the Government in that regard.
This provision, it was contended, was ultra vires because there was an abdication of essential legislative functions by the legislature with respect to the imposition of tax inasmuch as the State Government was given the power to condone the breaches of the Act and to set at naught the Act itself.
This, it was contended, was an indirect exempting or dispensing power.
Hidayatullah, J. speaking for the majority, said that regard being had to the democratic set up of the municipalities which need the proceeds of these taxes for their own administration, it is proper to leave to these municipalities the power to impose and collert these, taxes.
He further said that apart from the fact that the Board was representative body of the local population on whom the tax was levied, there were other safeguards by way of checks and controls by Government which could veto the action of the Board in case it did not carry out the mandate of the legislature.
In Devi Dass Gopal Krishnan vs State of Punjab(1) the question was whether section 5 of the East Punjab General Sales Tax Act, 1948, which empowered the State Government to fix sales, tax at such raters as it thought fit was bad.
The Court struck down the section on the ground that the legislature did not lay down any policy or guidance to the executive in the matter of fixation of rates.
Subba Rao, C.J., speaking for the Court, pointed out that the needs of the State and the purposes of the Act would not provide sufficient guidance for the fixation of rates of tax.
He pointed out the danger inherent in theprocess of delegation : "An overburdened Legislature or one controlled by a powerful executive may unduly overstep the limits of delegation.
It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive; it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation.
This self effacement of legislative power in favour of awther agency either in whole or in part is beyond the permissible limits of delegation." In Municipal Corporation of Delhi vs Birla Cotton Spining and, Weaving Mills(1), the main question was about the constitutionality of delegation of taxing powers to municipal corporations.
The Delhi Municipal Corporation Act (66 of 1957) by section 113(2) had empowered the Corporation to levy certain optional taxes.
Under section 150, power was given to the Corporation to define the maximum rate of tax to be levied, the classes of persons and the description of articler, and property to be taxed, the systems of assessment to be adopted (1) [1967]3, S.C.R. 557.
(2) ; . 612 and the exemptions, if any, to be granted.
The majority of the court held the delegation to be valid.
Wanchoo, C.J. observed that there were sufficient guidance, checks and safeguards in the Act which prevented excessive delegation.
The learned Chief Justice observed that statements in certain cases to the effect that the power to fix ,rates of taxes is not an essential legislative function were too broad and that "the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation".
According to the learned Chief Justice, the fact that delegation was made to an clected body responsible to the people including those who paid taxes provided a great check on the elected councillors imposing unreason.able rates of tax.
He then said : "The guidance may take the, form of providing maximum rates of tax up to which a local body may be given the discretion to make its choice, or it may take the form of providing for consultation with the people of the local area and then fixing the rates after such consultation.
It may also take the form of subjecting the rate to be fixed by the local body to the approval of Government which acts as a watchdog on the actions of the local body in this matter on behalf of the legislature.
There may be other ways in which guidance may be provided." In Sita Ram Bisharnbhar Dayal vs State of U.P.(1) section 3 D(1) of the U.P. Sales Tax Act, 1948, bad provided for levying taxes at such rates as may be prescribed by the State Government not exceeding the maximum prescribed therein.
Hegde, J., in speaking for the Court, observed : "However much one might deplore the 'New Despotism ' of the executive, the 'very complexity of the modern society and the demand it makes on its Government have set in motion forces which have made it absolutely necessary for the Legislatures to entrust more and more powers to The executive.
Text book doctrines evolved in the 19th century have become out of date.
" In this case, we think that section 71 of the Act which provides for the rule making power imposes the necessary check upon the wide power given to the government to fix the rate.
Sub section (4) of that section provides : "Every rule made under this section shall be laid as soon as may be after it is made, before each House of the State Legislature while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if before the expiry of the session in which it is so laid or the session immediately following, both Houses agree in making any modification in the rule (it ?) shall thereafter have effect only in such modified form or be of no effect, as the case may (1) ; 613 be; so however that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule." The appellant submitted that section 71(4) does not provide a guarantee for legislative control over delegated legislation.
The argument was that the rules would come into force as soon as they are framed and that the power of the legislature to annul the rules subsequently cannot be regarded as sufficient control over delegated legislation.
That laying of rules before the legislature is control over delegated legislation is implied in the speech of Lord Thankerton in the House of Lords in Minister of Health vs The King(1) where he said : "In this case, as in similar cases that have come before the courts, Parliament has delegated its legislative function to a Minister of the Crown, but in this case Parliament has retained no specific control over the exercise of the function by the Minister, such as a condition that the order should be 'aid before Parliament and might be annulled by a resolution of either House within a limited period.
" In Institute of Patent Agents vs Joseph Lockwood (2) Lord Watson said : "The Legislature retained so far a check that it required that the regulations which they framed should be laid upon the table of both Houses; and of course these regulations could have been annulled by an unfavourable resolution upon a motion made in either House." In Bernard Schewartz 's "An Introduction to American Administrative Law" it is stated : "In Britain, Parliamentary control over delegated legislation is exercised through the various forms of 'laying ' prescribed in enabling Acts.
Through them, the legislature is enabled at least in theory to exercise a continuing supervision over administrative rules and regulations.
" As Dean Landis pointed out, the English techniques for laying the rules before the Houses have several virtues. "For one thing, they bring the legislative into close and constant contact with the administrative.
The legislature may also retain its control over its delegate by exercising its power of repeal.
This was the basis on which the Privy Council in Cobb & Co. vs Kropp(4) upheld the validity of delegation of the power to fix rates to the Commissioner of Transport in that case.
The question there was whether the Queensland Legislature, had legislative authority under the impugned Acts to invest the Commissioner for Transport with power to impose and levy (1) (2) (3) see Landis, "The Administrative Process", 77 (1938).
(4) C.).
614 licence and permit fees.
It was not disputed before their Lordships that .fees imposed are to be regarded as constituting taxation.
Accordingly, it was contended that the legislature had abdicated its exclusive power of levying taxation.
The Privy Council held that Queensland Legislature was entitled to use any agent or machinery that it considered appropriate for carrying out the object and the purposes of the Acts and to use the Commissioner for Transport as its instrument to fix and recover the licence and permit fees, provided it preserved its own capacity intact and retained perfect control over him; that as it could at any time repeal the legislation and withdraw such authority and discretion as it had vested in him, it had not assigned, transferred or abrogated its sovereign power to levy taxes, nor had it renounced or abdicated its responsibilities in favour of a newly created legislative authority and that, accordingly, the two Acts were valid.
Lord Morris of Borth y Gest said : "What they (the legislature) created by the, passing of the Transport Acts could not reasonably be described as a new legislative power or separate legislative body armed with general legislative authority (see R. vs Burah, Nor did the queensland Legislature 'create and endow with its own capacity a new legislative power not created by the Act to which it owes its own existence (see in re the Initiative and Referendum Act (1919) A.C. 945 at 945).
" The point to be emphasized and this is rather crucial is the statement of their Lordships that the legislature preserved its capacity intact and retained perfect control over the Commissioner for T port inasmuch as it could at any time repeal the legislation and with draw the authority and discretion it had vested in him, and, therefore the legislature did not abdicate its functions.
We, therefore, think that the power to fix the rate of excise duty conferred on the government by section 22 of the Act is valid.
The dilution of parliamentary watch dogging of delegated legislation may be deplored but,, in the compulsions and complexities of modern life cannot be helped.
The last contention raised by the appellant was that section 19 of the Karnataka Sales Tax Act, 1957 is invalid as it purports to levy sales tax upon the sale of arrack made by the Government to licensees.
The appellant submitted that the definition of 'dealer in section 2 of the Act excludes the Government of Mysore and that by virtue of the provisions in section 5(3) of that Act, no tax could be levied on the sale of arrack by government to the appellant.
We see no merit in this contention.
Section 19 of the Act reads: "19.
State Government entitled to collect tax as registered dealers.
Notwithstanding anything contained in this Act the Government of Mysore shall, in respect of any sale of goods effected by them, be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under this Act.
" 615 This section makes it clear that notwithstanding anything contained in that Act, the Government shall in respect of any sale of goods effected by it be entitled to collect by way of = any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under the Act.
The section is clear that the Government could collect the tax on the sale made, by it as if it were a registered dealer, not withstanding anything contained in section 2 or section 5.
The section itself creates a right in the State to recover and an obligation on the purchaser from the State to pay the amount.
Any imposition of liability or obligation in respect of sale or purchase of goods will be covered by Entry 54 of List If of the Seventh Schedule of the Constitution.
We do not think that section 19 is ultra vires the powers of the, legislature.
We therefore dismiss the appeals but make no order as to costs.
V.M.K. Appeals dismissed.

summary/full:
The appellant.
an excise contractor secured the privilege of vending arrack in retail in certain taluks in the State of Karnataka for a period of 18 months beginning from 28 12 1967 and ending on 30 6 69.
He purchased attack from the Government at a price of 17 paise per litre and the Government collected besides the sale price of arrack.
excise duty.
health cess and education cess. 'rho Government also collected sales tax on the sale price of attacks on excise duty.
on health cess and on education cess for the period from 28 12 1967 to 31 1 1968 and made similar demands for the month of February.
1968 also.
The appellant and other excise contractors filed writ petitions in the High Court at Karnataka challenging the validity of the levy and collection of excise duty, education cess.
health cess and sales tax.
The High Court accepted some of the contentions of the appellant, granted him reliefs on that basis but rejected the other prayers.
The appellant has filed these appeals on the basis of certificates granted by the High Court against the order.
It was contended for the appellant (i) that no excise duty can be levied on a licensee in respect of the quantity of arrack purchased by him from Government depots, (ii) that the. power to fix the rate of excise duty conferred under section 22 of the Mysore Excise Act of 1965 on the Government was bad for the reason that it was an abdication by the state legislature of its essential legislative function and (iii) that no sales tax could be levied on the price for sale of arrack since section 19 of the Mysore Sales Tax Act, 1957 under which the tax was levied was beyond the legislative competence of the state legislature.
Rejecting the contentions and dismissing the appeals, HELD : (i) It is clear from the return filed before the High Court that the Government purchases arrack from the distillers and keeps it in the warehouses established or licensed under section 16 and that any removal of arrack after the purchase of the same will attract the liability to pay excise duty.
Section 23 provides that excise duty shall be levied on the excisable article issued from a warehouse also.
It cannot be said that a warehouse established or licensed under section 16(e) is not warehouse within the meaning of that expression in section 23.
[609G 610A] (ii) The High Court held that the preamble of the Act would serve as a guidance to fix the rates of excise duty.
It cannot be said with certainty that the preamble of the Act gives any guidance for fixing the rate of excise duty.
But that does not mean that the legislature here has no control over the delegate.
In this case, a. 71 of the Act which provides for the rule making power imposes the necessary check upon) the wide power given to the Government to fix the rate.
The laying of rules before the legislature provides control over delegated legislation.
Again the legislature may also retain its control over its delegate by exercising its power of repeal the power to fix the rate of excise duty conferred on the Government by section 22 is valid.
[ 6140E F; 614 E F] 608 Corporation of Calcutta & Anr.
vs Liberty Cinema, [1965] 2.
S.C R 477, Batwrsi Das vs State of Madhya Pradesh, ; , Municipal Board, Hapur vs Raghuvendra Kripal , Devi Dass Gopal Krishan vs State of Punjab, [1967] 3 S.C.R 557, Municipal Corporation of Delhi vs Birla Cotton Spinding and Weaving Mills, [1968] 3 S.C.R. 251, Sita Ram Bisliambhar Dayal vs State of U.P. ; , Minister of Health vs The King, , Institute of Patent Agents vs Joseph Lockwood, [1894] A.C. 347 and Cobb & Co. vs Kropp, , referred to.
(iii) Section 19 of the Karnataka Sales Tax Act.
makes it clear that notwithstanding anything contained in this Act of 1957, the Government shall in respect of any sale of goods effected by it be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under the Act.
The section is clear that the Government could collect the tax on the sale made by it as if it were a registered dealer, notwithstanding anything contained in section 2 or & 5.
The section itself creates a right in the State to recover and an obligation on the purchaser from the State to pay the amount.
Any imposition of liability or obligation in respect of sale or purchase of goods will be covered by Entry 54 of List II of the Seventh Schedule of the Constitution.
Section 19 is therefore, not ultra vires the powers of the legislature.
[615A C]


judgement:
minal Appeal No. 808 of 1973.
From the judgment and order dated the 30th March, 1973 of the Punjab & Haryana High Court in Election Petition No. 14 of 1972.
R. K. Garg, section C. Agarwala, V. J. Francis add R. C. K. Kaushik, for the appellant.
T. section Krishnamurthi Iyer, K. C. Agarwala, M. M. L. Srivastavta and E. C. Agrwala, for respondent No. 1.
A. T. M. Sampath, for respondent No. 2.
The Judgment of the Court was delivered by BEG, J.
Pritam Singh, the appellant before us under Section 116A of the Representation of the People Act, 1951 (hereinafter referred to as 'the Act '), was elected at an election held on 11 3 1972 for the Haryana State Legislative Assembly, the result of which was declared 47OSCI/75 586 on 12 3 1972.
The Respondent Balbir Singh questioned this election by, means of an election petition alleging that the, election was void as the appellant had committed corrupt practices hit by section 123, sub.
s.4, 5 and 6 of the Act.
The petition was allowed by a learned Judge of the, High Court of Punjab & Haryana, solely on the ground that the corrupt practice, provided for as follows, in Section 123(5) of the Act, was committed by the appellant: " 123(5).
The hiring or procuring, whether on payment or otherwise, of any vehicle or vessel by a candidate or his agent or by any other person with the consent of a candidate or his election agent, or the use of such vehicle or vessel for the free conveyance of any elector (other than the candidate himself, the members of his family or his agent) to or from any polling station provided under section 25 or a place fixed under sub section (1) of section 29 for the poll : Provided that the hiring of a vehicle or vessel by an elector or by several electors at their joint costs for the purposes of conveying him or them to and from any such polling station or place fixed for the poll shall not be deemed to be a corrupt practice under this clause if the vehicle or vessel sp hired is a vehicle or vessel not propelled by mechanical power Provided further that the use of any public transport vehicle or vessel or any tramcar or railway carriage by any elector at his own cost, for the purpose of going to or coming from any such polling station or place fixed for the poll shall not be deemed to be a corrupt practice under this clause".
The appellant assails the judgment of the High Court on the following main grounds with which we will deal seriatim : 1.
That, the High Court erred in relying upon legally unproved entries in what is called a Pukar book or register showing both the hiring out and then payments for the use of certain trucks on 11 31972, the date of election, for purposes of election.
That, the Register itself is inadmissible in evidence under any provision of the Evidence Act.
That, the entries in the Pukar Register are suspicious indicating that the Register itself, or, atleast, the entries involved were not contemporaneous but fabricated after the election was over.
That, the High Court erred in relying upon the evidence of challans by the police on 11 3 1972 of drivers of trucks said to have been used by the appellant when the best evidence in the possession of the police relating to these challans was not forthcoming so that the challans appeared to have been maneuvered for the purpose of supporting a false case.
That, the High Court erred in relying upon merely uncorroborated oral testimony of Motor truck drivers in accepting the respondent 's case which was not really corroborated as the alleged corroborative evidence was not evidence at all in the eye of law, 587 6.
That, the High Court overlooked the well established principle that the charge of a corrupt practice in the course of an election must be treated as quasi criminal in character which has to be proved beyond reasonable doubt.
We will deal with these objections, in the reverse order, starting with the last mentioned ground of attack on the High Court 's judgment.
The judgment rests largely on appreciation of oral evidence.
It could not, therefore, be easily disturbed us as has been repeatedly pointed out by this Court even in first appeals on facts in election cases.
If the High Court overlooks serious infirmities in the evidence adduced to support the case accepted by it or misreads evidence or ignores the principle that a charge of corrupt practice, in the course of an election, is a grave one which, if established, casts a serious reflection and imposes a disability upon the candidate held guilty of it, so that the Court must be satisfied beyond reasonable doubt about its veracity, this Court will not hesitate to interfere.
Learned.
Counsel for the appellant has relied upon the decision of this Court in Rahim Khan vs Khurshid Ahmed & Ors.,(1) where Krishna Iyer, J., speaking for this Court, said (at p. 666) : "An election once held is not to be treated in a lighthearted manner and defeated candidates or disgruntled electors should not get away with it by Ming election petitions on unsubstantial grounds and irresponsible evidence, thereby introducing a serious element of uncertainty in the verdict already rendered by the electorate.
An election is a politically sacred public act, not of one person or _of one official, but of the collective will of the whole constituency.
Courts naturally must respect this public expression secretly written and show extreme reluctance to act aside or declare, void an election which has already been held unless clear and cogent testimony compelling the Court to uphold the corrupt practice alleged against the returned candidate is adduced.
Indeed, election petitions where corrupt practices are imputed must be regarded as proceedings of a quasi criminal nature wherein strict proof is necessary.
The burden is therefore heavy on him who assails an election which has been concluded".
In Rahim Khan 's case (supra) our learned brother Krishna lyre also warned us in the word of Sydney Harris (at p. 666) "Once we assuage our conscience by calling something a necessary evil ', it begins to look more and more necessary and less and less evil".
He then proceeded to observe (at p. 666) "For this very reason the Court has to be stern so as induce in the candidates, the parties and workers that temper and truthfulness so appropriate to the process. (1) 1974 2 SCC p. 660 @ P. 666.
588 After pointing out the difficulty of laying down any past iron or rigid rules for testing the veracity of witnesses, this Court said (at p. 672) there "We regard it as extremely unsafe, in the present climate of kilkenny cat election competitions and partisan witnesses wear ingrobes of veracity, to upturn a hard won electoral victory merely becauselip service to a corrupt practice has been rendered by somesanctimonious witnesses.
The Court must look for seriousassurance, undying circumstances, or unimpeachabledocuments to uphold grave charges of corrupt practice whichmight not merely cancel the election result, but extinguish many a man 's public life".
In that case, this Court found the charge of a corrupt practice to be established upon oral and documentary evidence given to support it.
In the case before us, we find that the High Court accepted the evidence of Uggar Sain, P.W. 24, because, inter alia, it was supported by a "Pukar Register_" kept by the Union of truck drivers of trucks hired in the order said to be determined by their places in the Register.
It relied on this evidence despite certain serious objections to the entries in the Register showing payments for the trucks said to have been used by the appellant.
The High Court, however, held that the testimony of Uggar Sain found sufficient corroboration not only from the entries in Pukar Register but also from the testimony of Khandu Ram, P.W. 25, Harish Lal, P.W. 26, Jai Gopal, P.W. 27, Chokha Namad, P.W. 28, Gurbachan Singh, P.W. 37 and Rajinder Singh, P.W 38, each of whom had deposed that he was paid a sum of Rs. 150/ on 10 3 1972 for performing election duty for the appellant for carrying voters on 11 3 1972.
The learned Judge observed about these drivers : "None of them is shown to be interested in the petitioner or against the returned candidate nor was the deposition of any one of them shaken in cross examination and I do ,act see any good reason for discarding their sworn word.
As would be seen later, they actually plied their trucks for the returned candidate on the 11th of March, 1972. a fact which clinches the matter against him".
The denial of the returned candidate were rejected by the learned Judge on the ground that threw were made by a highly interested party.
After having been taken through the judgment we are not satisfied that the learned Judge did anything more than to rather mechanically accept the oral and documentary evidence given to support the charge.
We certainly do not find there any consideration or discussion of a number of infirmities which have been placed before us both in the oral and documentary evidence adduced to support the, charge.
We think that this is so because the learned Judge seems to have held the view that a mere consideration of probabilities, without applying a strict standard of proof beyond reasonable doubt to a charge of corrupt practice was enough here.
589 After going through the evidence relating to the use of each truck, and repeating, rather mechanically, that this evidence on behalf of the petitioner was acceptable in each instance given, the learned Judge concluded "As a result of the discussion of the evidence under this issue, I hold that the returned candidate hired and used trucks Nos.
HRR 5155, HRR 5161, HRR 5077, HRR 5013, and HRR 597, for the free conveyance of electors to various polling stations and thus committed the corrupt practice defined in clause (5) of section 123 of the Act".
We find no indication anywhere in the judgment that the stricter standard of proof, which is applicable to such charges, was kept in view by the learned Judge.
The fifth ground of objection set out above seems to proceed on the erroneous assumption that oral testimony cannot be accepted when a corrupt practice is set up to assail an election unless it is corroborated by other kinds of evidence in material particulars.
We are not aware of any such general inflexible rule of law or practice which could justify a wholesale condemnation or rejection of a species of evidence which is legally admissible and can be acted upon under the provisions of Evidence Act in every type of case if it is, after proper scrutiny found to be reliable or worthy of acceptance.
There is no presumption, either in this country or anywhere else, that a witness, deposing on oath in the witless box, is untruthful unless he is shown to be, indubitably, speaking the truth.
On the other hand, the ordinary presumption is that a witness deposing solemnly on oath before a judicial.tribunal is a witness of truth unless the contrary is shown.
It is not required by our law of evidence that a witness must be proved to be a perjurer before his evidence is discarded.
It may be enough if his evidence appears to be quite improbable or to spring from such tainted or biased or dubious a source as to be unsafe to be acted upon without corroboration from evidence other than that of the witness himself.
The evidence of every witness in an election case cannot be dubbed as intrinsically suspect or defective.
It cannot be ,equated with that of an accomplice in a criminal case whose testimony has, according to a rule of practice, though not of law, to be corroborated in material particulars before it is relied upon.
This Court pointed out in Rahim Khan 's case (supra) that there are no golden rules for appraising human testimony.
In assessing its worth Judges can err honestly just as witness can make honestly mistaken statements under oath.
The extraction of what should constitute the credible foundation of judicially sound judgment is an art which nothing except sound common sense and prudence combined with experience can teach.
A sound judgment must disclose a fair attempt to "separate the grain from the chaff" as it has often been said.
Section 3 of the Evidence Act lays down: "A fact is said to be proved when after considering the matters before it, the Court either believes it to exist or con 590 siders its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists".
Hence it has sometimes been argued that the same standard of proof applies to all types of cases.
Such a contention seems plausible.
But, what has to be borne in mind is that, in judging the evidence of a grave charge, prudence dictates that the belief in its correctness should form the basis of a judicial verdict of guilt only if that belief reaches a conviction beyond reasonable doubt.
If prudence is the real test, it prescribes differing standards of proof in differing circumstances.
Its requirements preclude any Procrustean a bed of uniformly rigid rules for each type of case.
The circumstances under which reasonable doubt may or may not exist in a case cannot possibly be exhaustively cataloged.
All that one can say is that in deciding whether the stricter standard of proof is satisfied in a case of alleged corrupt practice, resting upon oral evidence only, the Courts should be particularly astute and not omit to examine fairly the effect of every existing substantial ground which could introduce a reasonable doubt in a case.
In doing so, the Court has also to beware of bare suspicion, based on popular prejudices or belief sought to be introduced merely to bias the Court against a witness or a partly of a particular type.
In the case before us, we find that the learned Counsel for the appellant has repeatedly referred to the fact that the respondent, whose election petition succeeded before the learned Judge, was a defeated former Minister of the ruling Congress party.
Learned Counsel wanted us to infer that, because, the respondent had been welcomed and garlanded by the President of the Motor Truck Drivers ' Union of Ganaur,.
the evidence of motor drivers was easily available to him.
In other words, we were asked to assume that the motor drivers would be prepared to commit perjury, at the instance of the President of the Motor Truck Drivers ' Union, only to please a former defeated Minister.
We do not think that it is reasonable to carry such a suspicion to the extent of attributing to every witness appearing in support of the respondent 's case a tendency or desire to commit perjury.
The law does not discriminate against or frown upon a former Minister, belonging to any party, whether in or out of power, so that it must view every witness produced by him with suspicion simply because he had been a Minister.
On the other hand, we think that it would not be unreasonable to believe that a person who has occupied the responsible position of a Minister will be less inclined to suborn witnesses or conspire to produce perjured evidence just because he is defeated in an election which is not the only test of a person 's worth or respectability in society.
We think that a person who has held a responsible office will be acting imprudently if he spoils his public image by deliberately producing perjured evidence.
We are not prepared to uphold the 5th contention of the appellant that, either as a general rule.
in election cases, or on the facts of this particular case, the evidence of the motordrivers must be necessarily rejected simply because it is oral testimony of drivers of trucks who had formed a Union which had once invited 591 and garlanded the respondent.
We, however, think that the evidence had to be more carefully scrutinized than the High Court was disposed to do it.
As was Pointed out in Rahim Khan 's case (supra), evidence considered unsafe to be acted upon by a judicial Tribunal need not be necessarily false.
Turning to the 4th ground of objection, relating the prosecutions of truck drivers by the Police for alleged offenses said to have taken place on 11.3.1972, we find that the High Court accepted the allegation that the ' drivers were challenge on 11.3.
1972 without commenting on some conflicting evidence as to the date on which the motor drivers were challenge.
In reply, it has been contended that witnesses who could have given more, evidence on this question were not only given up by the petitioner respondent but also by the appellant as the date of challans was accepted or not questioned on behalf of the appellant.
Our attention is invited to Miscellaneous application No. 216 E/72 dated 19 10.1972 where learned Counsel for the appellant not merely stated that he did not want to examine either the Mohrir Constable of Police Station Ganaur or a Clerk of the office of the Superintendent of Police, Rohtak, but prayed that "the above two witnesses may kindly be informed telegraphically not to appear on 23.10.72".
It is, therefore, argued, not without force, that the date of the challans was not seriously disputed by the appellant before the High Court so that this question should not be allowed to be argued before us.
It was also contended on behalf of the respondent that there had been some tampering with the record in the Magistrate 's Court which explained the contrary evidence given by Subash Chander, P.W.11, the Ahalmad of a Magistrate 's Court, showing that the challan was dated 17 3 1972.
It was orally prayed that we should summon and examine, at this stage, the original record from the Court of the Magistrate, concerned.
However, as no argument appears to have been addressed on this question in the High Court we think that this as a matter which the High Court can and should itself examine after summoning the record from the Magistrate 's Court as we propose to send the case back to it for reconsideration after taking some further evidence.
It has been argued on behalf of the respondent that there is enough evidence of the motor truck drivers and of the voters carried as well as documentary evidence, including a log book of a driver, to show that the truck used on behalf of the respondent were carrying voters to the election booth, and were, therefore, challaned on 11 3 1972 because carrying of passengers in truck was not permitted.
It was admitted that no entry was made in the general diary of Ganaur Police Station, according to the rules, but this, it was contended for the respondent, is not conclusive as relevant entries relating to some 'petty offences are often missing.
These are, however, some of the matters which the High Court can and should consider.
It appears to us that a number of Points, on the worth of various tems of evidence, which have been raised for the 1st time to question 592 the authenticity.
of the evidence relating to the prosecution of drivers of trucks, said to have been carrying voters for the appellant were not advanced before the High Court.
We think that we ought to have the benefit of scrutiny of the whole evidence on this question by the High Court and its findings thereon.
We are not prepared to proceed on the assumption that the respondent could easily get evidence fabricated as he had been a minister.
We may now deal with the first three grounds of objection, all relating to what is called the Pukar Register.
It is true that Uggar Sain, P.W. 24, who was called to prove the Pukar Register, did not actually depose in %*hose handwriting the entries in it were made, or what could or could not be property entered here.
The trend of cross examination, however, shows that it proceeded on the assumption that Uggar Sain, P.W. 24, was actually making entries in it.
But, neither this fact was proved in the examination in chief nor was the course of business, according to which entries could be made in the Register, including entries of alleged payments by the respondent, proved.
A number of question raised before us,( throwing some suspicion on the authenticity of the entries in this Pukar Register and the dates on which they could be or were made seem to us to be entirely new.
They were not suggested to P.W. 24, Uggar Sain, who might have had some explanations for these suspicious features.
Nor do all these defects seem to have been mentioned in the course of arguments before the High Court.
For example, the truck numbers of trucks said to have been sent to the appellant do not appear against the name of the appellant but seem inserted afterwards above the place where they would be expected to be found.
The exact meaning or effect of such a feature could only have been brought out by cross examination of Uggar Sain, P.W. 24 on behalf of the appellant.
As regards the admissibility of the Pukar Register and evidence of prosecution of the truck drivers, we are unable to accept the submission that these are inadmissible under the Evidence Act.
Even though the course of business under which the Pukar Register was kept was not proved, we think that documents, such as the Pukar Register and those relating to the prosecutions of the drivers, who were said to be carrying voters on 11.
3. 1972, could be proved under section 11 of the Evidence Act.
We think that, in view of the importance of the evidence Uggar Sain, P.W. 24 both his examination in chief and his cross examination are must unsatisfactory.
We may here observe that the election Tribunal is not powerless in such cases in the performance of its duty to ascertain the truth.
There is not only Section 165 of the Evidence Act which enables the Court to put any question it likes to a witness,.
but there are also the provisions of order XVI, Rule 14, Civil Procedure Code which Jay down : "Subject to the provisions of this Code as to attendance and appearance and to any law for the time being in force, 593 where the Court at any time thinks it necessary to examine any person other than a party to the suit and not called as a witness by a party to the suit, the Court may, of its own motion, cause such person to be summoned as a witness to give evidence, or to produce any document in his possession, on a day to be appointed, and may examine him as a witness or require him to produce such document".
We think that the ascertainment of a number of essential facts relating to the charge was neither regular nor sufficiently detailed in the case now before us.
We find that the High Court proceeded on the assumption that facts which ought to have been technically proved had been sufficiently proved.
It too readily accepted the evidence, both oral and documentary, without examining all the defects of it which have been sought to be placed before us.
We are left with an unavoidable impression that important aspects of the case were neither satisfactorily brought out clearly by the evidence in the case nor examined by the High Court despite the voluminous evidence led by the parties and the lengthy judgment delivered by the Tribunal.
We also find that the Court adopted a standard of proof which is not strict enough in appraising the worth of evidence produced to support a charge of corrupt practice.
As it is not the practice of this Court to reassess evidence or to perform the duties of the Trial Court, even in election first appeals, unless no other course is left open to it, we think that this is a fit case in which we should send back the case for reconsideration by the High Court after recalling such witnesses as may be considered necessary by it, and, in particular, Uggar Sain, P.W. 24, so that at least the Pukar Register, assumed to have been duly proved, may be proved in accordance with law.
We think that the objections to the proof of this document, and of entries in it do not go beyond objections to the mode of proof.
The entries in it could be accepted as sufficiently reliable only after a much more rigorous examination of their maker than the parties or the Court subjected him to.
We think that we should not give a finding upon the reliability of these entries before the allegedly suspicious features have been specifically put to P.W. 24, Uggar Sain, who was assumed to have made the entries without even asking him whether he did make them.
In the result, we set aside the judgment and order of the High Court and we remand the case to it for disposal in accordance with law after abduction of such further evidence as may be necessary in the interests of justice.
In view of our order remanding the case to the High Court it is unnecessary to consider the three Civil Miscel 594 laneous Petitions for urging addition grounds, for condonation of delay in filing the application for urging additional grounds, and for permission to file a certified copy of the summary register for 21 3 1972 and 22 3 1972 of the Court 'of Judicial Magistrate 1st Class, Sonepat.
These applications are, therefore, dismissed.
Partics may, however, make appropriate applications in the High Court.
The costs of this litigation in the High Court as well as in this Court will abide the result.
The appellant will continue to function as an elected member subject to the result of the Election Petition.
P. B. R. Appeal allowed.

summary/full:
The respondent, in his election petition before the High Court, allegedd a number of corrupt practices hit by section 123(4), (5) and (6) of the Representation of the People Act, 1951 against the appellant, who was the duly elected candidate to the State Assembly.
The High Court allowed the petition and set aside the election.
On appeal to this Court it was contended that the High Court overlooked the well established principle that the charge of corrupt practice must be treated as quasi criminal in character which has to be proved beyond reasonable doubt.
Allowing the appeal and remitting the case to the High Court, HELD : (1)(a) The judgment of the High Court rests largely on appreciation of oral evidence.
It could not, therefore, be easily disturbed by this Court even in first appeal on facts in election cases.
[587B] (b) But if the High Court overlooks serious infirmities in the evidence adduced to support the case accepted by it or misreads evidence or ignores the principle that a charge of corrupt.
practice, in the course of an election, is a grave one which, if established, casts a serious reflection and imposes a disability upon the candidate held guilty of it, so that.
the Court must be satisfied beyond reasonable doubt about its veracity, this Court will not hesitate to interfere.
[587C] In the instant case, the High Court did nothing more than to rather mechanically accept the oral and documentary evidence given to support the charge of corrupt practice.
There was no consideration or discussion of a number of infirmities both in the oral and documentary evidence to support the charge.
Ibis is so because the High Court has held the view that a mere consideration of probabilities, without applying a strict standard of proof beyond reasonable doubt to a charge of corrupt practice was enough.
There is no indication , anywhere in the judgment that the stricter standard of proof, which is applicable to such charges, was kept in view by the High Court.
[588G H] Rahim Khan vs Khurshid Ahmed & Ors. ; @ 666. followed.
2(a) It is difficult to accept the contention of the appellant that oral.testimony could not be accepted in an allegation of corrupt practice unless it is corroborated by other kinds of evidence in material particulars.
There is no such general inflexible rule of law or practice which could justify a wholesale condemnation or rejection of a species of evidence which is legally admissible and can be acted upon under the provisions of the Evidence Act in every type of case if it is, after proper scrutiny, found to be reliable or worthy of acceptance.
There is no presumption that a witness deposing on oath in the witness box, is untruthful unless he is shown to be speaking the truth.
The ordinary presumption is that a witness deposing solemnly on oath before a judicial tribunal is a witness of truth unless the contrary is shown.
The evidence in an election petition cannot be equated with that of an accomplice in a criminal case whose testimony has, according to a rule of practice, though not of law, to be corroborated in material particulars before it is relied upon.
[589D E & F] 585 (b) It is not required by our law of evidence that a witness must be proved to be a perjurer before his evidence is discarded.
It may be enough if his evidence appears to be quite improbable or to spring from such tainted or biased or dubious a source as to be unsafe to be acted upon without corroboration from evidence other than that of the witness himself [589F] (c) There are no golden rules for appraising human testimony.
The extraction of what should constitute the credible foundation of judicially sound judgment is an art which nothing except sound common sense and prudence combined with experience can tear h.
[589G] (d) In judging the evidence of a grave charge, prudence dictates that belief in its correctness should form the basis of a judicial verdict of guilt only if that belief reaches a conviction beyond reasonable doubt.
[590B] (e) In deciding whether the stricter standard of proof is satisfied in a case of alleged corrupt practice, resting upon oral evidence only, the Courts should be particularly astute and not omit to examine fairly the effect of every existing substantial ground which could introduce a reasonable doubt in a case.
[590c] In the instant case the appellants contention that the motor drivers would be prepared to commit perjury at the instance of the respondent who was the defeated Minister and that because the respondent had been welcomed and garlanded by the President of the Motor Truck Drivers ' Union, the evidence of motor drivers was easily available to him cannot be accepted either as a general rule in election cases, or.
on the facts of this particular case.
It is not reasonable to carry a suspicion to the extent of attributing to every witness appearing in support of the respondent,,, case a tendency or desire to commit perjury.
The law does not discriminate against or frown upon a former Minister or view every witness produced by him with suspicion because he had been a Minister.
On the other hand, it is reasonable to believe that a person who has occupied the responsible position of a Minister would be less inclined to suborn witnesses or conspire to produce perjured evidence.
[590E G] Rahim Khan vs Khurshid Ahmed & Ors. ; (a) 666, followed.
(f) Where the examination in chief and cross examination of a witness are most unsatisfactory the Trbunal is not powerless in the performance of its duty to ascertain the truth.
There is not only section 165 of the Evidence Act which enables the Court to put any question it likes to a witness.
but there are also provisions of O.XVI, r. 14 CPC.
The High Court adopted a standard of proof which is not strict enough in appraising the worth of evidence produced to support a charge of corrupt practice.
[592G H]