Allowing the appeal the Court held  that by a process of auction or tender, the excise contractors were shortlisted. Thereafter, they were provided permits. On the strength of the permits, they obtained arrack in bottled condition (or in sealed polythene sachets) from the warehouse or depot on payment of issue price fixed by the Excise Commissioner. Such arrack was then sold in retail by the excise contractors in the area or areas allotted to them. Therefore, it could not be said that by virtue of the auction, certain quantities of arrack were purchased by the excise contractors. At this stage there were two transactions, each distinct. The first transaction was shortlisting of excise contractors by a process of auction, etc., for the right to retail vend. The second transaction, which was contingent upon the first transaction, was obtaining of arrack for retail vending by the excise contractors on the strength of the permits issued to them post successful shortlisting following auction. Therefore, it was clear that arrack was not obtained by the excise contractors by way of auction. What was obtained by way of auction was the right to vend the arrack on retail on the strength of permits granted, following successful shortlisting on the basis of auction. Thus, the first condition under clause (iii) of Explanation (a) to section 206C was satisfied. After the arrack was obtained by the excise contractor, the requirement of the second condition under Explanation (a)(iii) was that he had to sell it in the areas allotted to him at the sale price fixed in terms of rule 4 of the 1967 Rules. The language of the second condition was that the sale price of such goods to be sold by the buyer was fixed by or under any State statute. Rule 4 of the 1967 Rules enabled the excise contractor to sell the arrack in retail at a price within the range of minimum floor price and maximum ceiling price which is fixed by the Excise Commissioner. A minimum price and a maximum price were fixed within which range the arrack had to be sold by the excise contractor. Thus, the price of arrack to be sold in retail was not dependent on market forces but predetermined within a range. Therefore, the arrack was sold at a price which was fixed statutorily under rule 4 of the 1967 Rules and thus the second condition was satisfied. Since both the conditions as mandated under Explanation (a)(iii) were satisfied, the excise contractors or the liquor vendors selling arrack would not come within the ambit of “buyer” as defined under Explanation (a) to section 206C of the Act. Section 206C was not applicable in respect of the assessee and the liquor vendors (contractors) who bought the vending rights from the assessee on auction could not be termed “buyers” within the meaning of Explanation (a) to section 206C of the Act. The orders of the Division Bench of the High Court, the single judge and the Deputy Commissioner (TDS) were to be quashed.  That though a show-cause notice was issued to the assessee to which reply was also filed, that would not be adequate having regard to the consequences that such an order passed under section 206C(6) of the Act would entail. It was incumbent on the Assessing Officer to have afforded the assessee an adequate and reasonable opportunity of hearing. (AY.1995-96 to 2000-01)