Case: J. K. Cotton Spg. &amp; Wvg. Mills Co. Ltd.    Vs. Collector of Central Excise, Kanpur

The appellant was manufacturing fabrics which were being sold to four wholesale dealers who were M/s. Shiv Narain Amar Nath, M/s. Hindustan Traders, M/s. Anand Textiles and M/s. Narain Das Sajan Lal. These four parties in turn delivered the goods taken from the appellant to M/s. Agarcon (India) Ltd., Kanpur M/s. Agarcon (India) Ltd. then sold the said fabrics to other wholesale dealers3. The Collector of Excise decided that the value, for the purpose of excise duty, of the goods should be the price which was charged by the appellant from the said four parties. The proposal to adopt the sale price of M/s. Agarcon (India) Ltd., as being the wholesale price for the purpose of excise duty, was dropped by the Collector by his order dated 27-2-1986

Court's reasoning:
It is clear that introduction of these four firms was only a device which was adopted whereby all the fabrics manufactured by the appellant were sold only to M/s. Agarcon which in turn sold them to other dealers. M/s. Agarcon did not deal with the products of any mill other than those of the appellant. This being so and also considering the fact that the so-called wholesale dealers neither had the finances of their own and nor did they have any storage capacity, the only obvious conclusion was that this was only a device which was adopted by the appellant with a view to depress the assessable value for the purpose ofThis is further strengthened by the fact that M/s. Agarcon is only known as the agent of the appellant and the goods were manufactured according to the designs and specifications given by M/s. Agarcon.