2002 (4) TMI 75 - SC - Central Excise

Court rules on 'related persons' under Central Excise Act emphasizing separate legal entities

ALEMBIC GLASS INDUSTRIES LTD. Versus COLLECTOR OF C. EX. & CUS.

ALEMBIC GLASS INDUSTRIES LTD. Versus COLLECTOR OF C. EX. & CUS. - 2002 (143) E.L.T. 244 (SC) Issues:1. Whether two public limited companies can be considered 'related persons' under Section 4(4)(c) of the Central Excise Act based on shareholding and common directors.2. Interpretation of the term 'related person' as per Section 4 of the Act.3. Application of the principles established in previous judgments to determine related persons for valuation of excisable goods for excise duty purposes.Analysis:1. The case involved a public limited company manufacturing glassware, selling to another company in which they held shares, leading to a dispute on whether they were 'related persons' under Section 4(4)(c) of the Act. The Revenue argued that common shareholding and directors indicated a mutual interest, justifying a markup in valuation for excise duty. The Tribunal upheld this view based on the mutual interest and common management between the companies.2. The interpretation of 'related person' under Section 4 was crucial. The provision defined 'related person' as those having an interest, directly or indirectly, in each other's business, including holding companies, subsidiaries, relatives, and distributors. The contention was whether two public limited companies could be considered 'related persons' solely based on shareholding and common directors, as argued by the Revenue.3. The judgment referred to a previous case where the Court emphasized that mere shareholding does not establish an interest in the business of the company. It was held that the shareholders of a public limited company do not automatically have an interest in the company's business, and common directors do not imply an interest in each other's business. This principle was applied to the current case, concluding that the companies were not 'related persons' for excise duty valuation purposes.4. Additionally, the judgment highlighted another case where the concept of separate legal entities of companies was discussed. The Court rejected the notion that two separate companies cannot be 'related persons' solely based on being separate legal entities. The judgment clarified that this principle does not have universal application and remanded the matter for further inquiry based on specific facts.5. Ultimately, the Court allowed the civil appeal, setting aside the order under appeal. The Revenue was directed to refund the duty deposit, and the bank guarantee was discharged. No costs were awarded, and the Revenue was given a brief period to rectify the non-appearance issue.