TaxTMI 
TaxTMI 
2003 (4) TMI 444
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....o to sub-section (1) of Section 11A of the C.E. Act, 1944 besides imposing a penalty of Rs. 5,00,000/ under Rule 173Q of C.E. Rules, 1944 on them and also a penalty of Rs. 5,00,000/ on M/s. Shaw Wallace & Company under Rule 209A of C.E. Rules, 1944. However, the Commissioner has dropped the proposal to impose penalty under Section 11AC and interest under Section 11AB on M/s. Detergents India Ltd. Ld. Commissioner has also ordered for confiscation of land, buildings, plant & machinery used in the manufacture of the dutiable goods under Rule 173Q(2) of C.E. Rules, 1944 belonging to appellant M/s. Detergents India Ltd. However, the appellant was given option to redeem the same in lieu of confiscation on payment of a fine of Rs. 5,00,000/-. 3. Brief facts of the case are that M/s. Detergents India Ltd. are manufacturers of soaps and detergents falling under Chapter 34 of the Central Excise Tariff Act, 1985 and that the goods manufactured by them had been cleared to depots of Shaw Wallace Company at much lower prices compared to the prices at which the said goods were sold to wholesale buyers by Shaw Wallace Company. Investigations carried out by officers attached to the Directo....
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....er, and (I) International audit on finance and administration and other aspects of DIL were carried out by SWC. 4. Based on the scrutiny of records and statements obtained from various persons concerned, the department had issued a show cause notice dated 26-3-97 to Detergents India Ltd. asking as to why - (a) the excess duty amounting to Rs. 1,12,42,499/- should not be paid by them under Rule 9(2) of the CE Rules, 1944 read with proviso to sub-section (1) of Section 11A of CE Act, 1944; (b) penalty should not be imposed upon them under Rules 9(2), 52(A), 173Q of the Rules and Section 11AC of the Act; (c) land, building, plant, machinery used in connection with the manufacture, production, storage, removal or disposal of the said excisable goods should not be confiscated under the provision of Rule 173Q (2) ibid; (d) pay interest @ 20% per annum on the duty mentioned above till the date of payment of the same should not be paid by them under Section 11AB of CE Act read with Notification No. 34/96-C.E. (N.T.), dated 9-10-96; (e) &n....
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....) The determination of duty was wrong as no admissible deductions such as freight, discounts, sales tax, turnover tax etc. had been given. (vii) Mutuality of interest was not proved in the Show Cause Notice and the interest of DIL in the organisation of SWC was not clearly established. (viii) The products in question were also purchased by SWC from various other independent manufacturers during the relevant period, in addition to purchase from DIL and SWC's own manufacture. Till date the Department had not made any allegation invoking the related person concept on the said other manufacturing units. (ix) That during the relevant years, the assessable value of DIL was higher than other parties and that they were yet to be provided with a copy of letter dated 24-9-94 addressed to Simon George which was referred to in Para 8.2(1) of the Show Cause Notice. Appellant M/s. Shaw Wallace & Company Ltd. in their reply dated 15-10-98 contended that as per settled law, a penalty could be imposed under Rule 209 of the CE Rules, 1944 only on a manufacturer. The judgment of Division Bench of Hon'ble Madhya Prades....
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.... [1984 (17) E.L.T. 323 (S.C.)] in which the Apex Court clearly ruled that if transactions are at arms length and there is no extra commercial consideration, a person cannot be held to be related merely because he holds 50% shares in the manufacturing company; that mutuality of interest contemplates bilateral interest between the parties and not an unilateral interest of one party over the other. The equality and the degree of interest can vary or be different. It further laid down that it is not enough that the assessee has an interest, direct or indirect in the business of the person alleged to be related nor is it enough that the person alleged to be related person has an interest, direct or indirect in the business of the assessee. It is essential that the assessee and the person alleged to be a related person must have interest direct or indirect in the business of each other. In the instant case, the department has not adduced any evidence to show that Detergents India Ltd. have direct or indirect interest in the business of each other. They have also drawn our attention to the following three tests evolved by the Hon'ble Bombay High Court to construe a transaction as one betw....
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....ove mutuality of interest or money flow back in between the two concerns before alleging related person. They submitted that supply of raw material, equipments, machinery and extending transport, trained staff and co-financing also cannot be held as a ground for related person in terms of the CEGAT's order in the case of Art Rubber Industries v. CCE, Aurangabad, as reported in 1999 (114) E.L.T. 83 (Trib.). They stated that the onus is on the part of Revenue to prove related person and in this connection they relied on the ratio of the Tribunal judgment rendered in the case of Dasani Electra (P) Ltd. v. CCE, Calcutta-I, [2000 (125) E.L.T. 646 (Tri.)] wherein the Tribunal has held that the adjudicating authority had not discussed any of the findings relating to the question of related person and that the conclusion arrived at on the ground that the appellants have not been able to put on record adequate evidence in the shape of memorandum and articles of association or authenticated statement related to said two firms who is challenging the appellants customers to be related person and when value has been increased on that basis, the onus to put evidence to that effect lies on the de....
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....in a position to prove that the manufacturer and the buyer are one and same and the buyer is a facade. There is no such allegation in the show cause notice nor any such finding in the order except for the fact that one is a holding company and another is a subsidiary company and there is no other legal nexus or connection. Further, no evidence has been adduced to prove that there is mutuality of interest and under-valuation of the goods. There is also no evidence to show that there is extra commercial consideration in the transactions. Each of the factors sought to be relied upon by the Revenue has already been dealt either by Courts or by the Tribunal concluding that they would not constitute the basis to allege related person. There is nothing in the ld. Commissioner's order which suggest that appellant M/s. Detergents India Ltd. has any interest financially or managerially in M/s. Shaw Wallace & Co. Ltd. nor the Revenue has proved that appellants M/s. Detergents India Ltd. has ultimately realised extra considerations or flow back of the sale proceeds so as to interfere or disturb the Section 4(1)(a) price adopted at arms length in the course of wholesale trade between appellants....
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....in terms of Section 4(4)(c) of the CE Act, 1944. According to the above Act, 'Related person' means "a person who is so associated with the Assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the Assessee and any sub-distributor of such distributor". Ld. SDR submitted that the investigating officers had adduced a lot of evidences to show that Shaw Wallace & Co. had controlling interest over Detergents India Ltd. and that the former and the latter were mutually interested in each other's business like (a) no independent company like Detergents India Ltd. would allow its staff to be rotated to and from other company (Shaw Wallace & Co.) unless the other company was in a position to command and control; (b) without mutuality of interest, the holding company would not be bearing the product launching expenses for the products of the subsidiary company or financing the entire cost of many schemes of the subsidiary company; (c) the holding company would not have borne the major expenses towards the advertisement and sales promotion of Detergents India Ltd.'s products ....
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.... and perused the records and the citations referred to and observe that the investigations carried out by the officers attached to the Director-General of Anti-Evasion Wing, Chennai alongwith officials of Central Excise, Hyderabad revealed, among other things, in the balance sheets, Shaw Wallace & Co. was shown as the holding company and Detergents India Ltd. and Calcutta Chemical Company as its subsidiaries. Majority of the shares of Detergents India Ltd. were held by subsidiaries of Shaw Wallace & Co. Unsecured loans were given by Shaw Wallace & Co. to Detergents India Ltd., the brands of detergent soaps owned by DIL, were taken over by the SWC, on lease by paying certain royalty; the major raw materials were purchased by DIL itself. The finished stock (various varieties of soaps) were transferred to the depots of DIL, on payment of duty and then sold to SWC, (d) DIL charged lesser processing charges from SWC, compared to that received from Hindustan Lever Ltd. (HLL); DIL's production planning was done by SWC. Instructions were given to DIL on the production schedule, quality size and formulation. Suggestions for quality improvement and cost effectiveness of products were given b....
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....less there is mutuality of interest and both are having interest in the business of each other, SWC would not have interfered in the production planning of the DIL and would not have given instructions to DIL on the production schedule, quality, size and formulation. They would not have given any suggestions for quality improvement and cost effectiveness of products. It would therefore be seen that SWC had controlled the whole production, quality and formulation. Moreover, all clearances were effected by the DIL to SWC only. Further, DIL had the practice of sending monthly news letter to SWC providing details like despatches, production achievements, problems faced, quality of their products, details of power, diesel consumption, etc. and based on these monthly reports, SWC used to give comments/suggestions on various points. Had there been no mutual interest between these two companies in the business of each other, there was no need for DIL to send monthly news letter to SWC providing details like despatches, production achievements, problems faced, quality of their products, details of power and diesel consumption etc. and there would not have been any necessity for SWC to give ....
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....he price at which SWC purchased from DIL and its sale price which was not commensurate with the declared price of DIL. They were, therefore required to pay duty at the price at which SWC sold the goods to other wholesale dealers. Both CCCO and DIL are subsidiary companies of SWC as can be seen from the consolidated report of SWC. Depots of CCCO, SWC and DIL were located in the same premises, depot expenses like rent, electricity charge, etc. were paid from SWC's imprest account as well as paid by CCCO, another subsidiary company of SWC. SWC had given them unsecured loans which no person would give without any collateral security until and unless they have mutual interest in the business of each other. Therefore, there is mutuality of interest between SWC and DIL as a consequence of which there has been under-valuation of the goods manufactured and sold by DIL resulting in short payment of Central Excise duty. 12. It is an admitted fact that SWC is the holding company to which apart from CCCO, DIL is a subsidiary company. Further, the brands manufactured by DIL though owned by DIL, were actually used by SWC on payment of small amount of token royalty. DIL did large volume of....
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....;Certain machinery installed at DIL has been financed by SWC. (v) SWC carried out advertisements, local promotions, incurred product-launching expenses, and announced schemes. (vi) Suggestions and directions for quality improvement and effectiveness are given by SWC to DIL. (vii) Officers of SWC conducted internal Audit of DIL. 11. As such, the issues for consideration in this case are : (i) Whether there is mutuality of interest between SWC and DIL as a consequence of which there has been under-valuation of goods manufactured and sold by DIL, resulting in short payment of Central Excise duty. (ii) Whether suppression of facts can be invoked in this case or whether the demand is time barred. (iii) In the event both the issues being confirmed against DIL, whether the differential duty as demanded in the Show Cause Notice has been correctly arrived at, with due consideration of the allowable abatements. Whether SWC and DIL are related persons 12. It is an admitted fact that SWC is the holding company to which apart from CCCO, DIL is a subsidiary company. Employees of the said subsidiaries are managing the affairs of marketing/s....
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....o the transaction between the buyer and the seller before a price is taken as the assessable value. The wordings in the text of Section 4, namely, 'normal price thereof', 'ordinarily sold', 'in the course of wholesale', 'for delivery at the time and place of removal', 'buyer is not a related person', 'price is the sole consideration for the sale', all clearly convey the message that the transaction should be absolutely independent and should contain all the ingredients mentioned above. Even if any one of the ingredients is not present in the transactions between the seller and buyer, explicitly or by inference, then the price adopted for such a sale cannot be taken to be the assessable value. The net effect is that - (i) the goods should be ordinarily sold for delivery at the time and place of removal. (ii) to a whole sale buyer who should not, in any way, be related to the Assessee, and (iii) there should not be any extra consideration (in cash or in kind) other than price for such transaction. 17. In the instant case, the facts clearly reveal that the sale has not been made to a buyer in the course of whole sale trade. It has actually been sold ....
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....or of such nature as would have the effect of promoting the business of each other. The use of the words directly or indirectly is to cover all those inter-relationships, which may arise as a result of any financial or other involvement directly or through third parties. The Hon'ble Supreme Court has also reiterated above views in the case of Union of India & Ors. v. ATIC Industries, 1984 (17) E.L.T. 323 (S.C.) that- "The Assessee and the person alleged to be a related person must have interest, direct or indirect, in the business of each other. Each of them must have a direct or indirect interest in the business of each other. The equality and degree of interest which each has in the business of the other may be different; the interest of one in the business of the other may be direct, while the interest of the latter in the business of the former may be indirect. That would not make any difference, so long as each has got some interest, direct or indirect, in the business of the other." 22. In this regard, the Investigating Officers have adduced lot of evidences to show that SWC had controlling interest over DIL and that SWC and DIL were mutually interested in each oth....
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....aling with SWC on principal to principal basis. So, to establish mutuality of interest in such cases, the Department has no alternative than to lift the veil or the camouflage and probe deep into the matter. Similar views have also been expressed by the Hon'ble Supreme Court in the case of Calcutta Chromotype Ltd. v. Collector, Central Excise, Calcutta [1998 (99) E.L.T. 202 (S.C.) = 1998 (60) E.C.C. 417 (S.C.)]. Under Para 14 of the said order, it has been held that - "In M/s. Mcdowell and Company Ltd. v. Commercial Tax Officer [(1985) 3 SCC 230 = (1985) 154 ITR 148], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster [(1936) AC 1] that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised as a s....
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....iated with each other. Law is specific that when duty of excise is chargeable on the goods with reference to its value than the normal price on which the goods are sold shall be deemed to be the value provided (1) the buyer is not a related person and (2) the price is the sole consideration. It is a deeming provision and the two conditions have to be satisfied for the case is to fall under Clause (a) of Section 4(1) keeping in view as to who is the related person within the meaning of Clause (c) of Section 4(4) of the Act. Again if the price is not the sole consideration, then again Clause (a) of Section 4(1) will not be applicable to arrive at the value of the excisable goods for the purpose of levy of duty of excise". 23. The above judgment clearly shows that the Department is not barred from looking beyond the projected relationship to see what was the actual relationship. We have already seen that what was projected by SWC and DIL was wrong and legally incorrect. The transaction between DIL and SWC was, in reality, a case, where the buyer and the seller are one and the same. The "so called job work agreement" etc., could not be accepted since a holding company and a sub....
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.... prices under the concept of "comparable price", we need not do so since the law does not permit such arbitrary adoption. For cases covered by related person concept we can only adopt the price as stipulated in Section 4(1)(a)(iii) and in no other manner. By adopting such a price, the investigating officers have found that there was some differential value (between SWC price and DIL price) on which DIL ought to have paid certain differential duty now proposed in the Show Cause Notice. 27. In view of the same, I hold that SWC and DIL are related persons within the meaning of Section 4(4)(c) of the Central Excise Act, 1944 and, therefore, the price adopted by DIL for the transfer of goods, manufactured on job work basis, to SWC in respect of its transaction with SWC did not conform to the norms specified in Section 4 of the Central Excise Act, 1944, since they were not based on Section 4(1)(a)(iii) of the Central Excise Act, 1944. (II) Whether there is suppression of facts warranting the invoking of proviso to Section 11A of the Central Excise Act, 1944 28. As regards suppression of facts, I note DIL had not declared to the Department, the following facts : ....
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.... the statement of grounds annexed to the Show Cause Notice that the differential duty has been worked out depot-wise after allowing all eligible abatements like discounts in cash, in kind through credit notes, and also the freight incurred upto the point of sale, by SWC. As such, no further abatement needs to be given now. 32. In view of the suppression of facts, resulting in evasion of duty amounting to Rs. 1,12,42,499/- the land, plant and machinery used in the manufacture of the said dutiable goods are also liable for confiscation under Rule 173Q ibid. 33. I find that since SWC was actively involved in the under-valuation of the goods manufactured by DIL resulting in the evasion of central excise duty as above mentioned. SWC, in the capacity of the Holding company maintained control over its subsidiary i.e., DIL, in production, selling and marketing of DIL's goods and also intentionally reduced the transfer price of such goods from DIL with a view to enjoy a higher profit margin and closely associated with and abetted in the above said evasion of Central Excise duty. Accordingly, I find the proposal to impose penalty under Rule 209 of Central Excise Rules, 1944 o....
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....ss, has got power to transfer the senior managerial staff from DIL to SWC and vice versa. They have, therefore, bilateral interest, both financially and managerially. Therefore, we are of the considered opinion that in terms of Section 4(1)(a)(iii), the price at which the goods are sold by M/s. SWC (the related person) in the course of wholesale trade at the time of removal, to dealers (not being related persons) shall be the assessable value because the department has successfully established the said mutuality of interest between these two parties. Further, the price at which SWC have sold their goods to independent dealers should be taken as the assessable value and this cannot be considered as cum-duty price because the duty has not been paid on the value at which the goods have been sold to independent wholesale dealers by M/s. SWC but at the value charged by DIL to SWC and therefore, the price charged by SWC shall be the assessable value and no abatement is involved and it cannot be considered as a cum-duty price as duty has not been paid at this price by SWC. What the department has demanded is the differential duty on the price charged by SWC from independent dealers becaus....
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....The department had to scan through enormous records and after verifying the voluminous records, the show cause notice was issued by the authorities vide Show cause notice Order No. 56/97-Adjn., dated 26-3-97 which was received by the appellants on 2-4-97. Further, it is a settled law on this issue that the depart is at liberty to issue the show cause notice, in a case like this, within a period of 5 years from the date of detection of facts which had been suppressed to the department. In the case of Nizam Sugar Ltd. the Larger Bench of the Tribunal consisting of 5-Members as reported in 2000 (123) E.L.T. 647 has clearly held that in case of suppression or fresh facts leading to the allegations to extend larger period comes to light, then show cause notice can be issued within a period of 5 years from the date of occurrence of the incident under proviso to Section 11A of the Act. The above law has also been applied by this bench in the case of Flowline Engineering Pvt. Ltd. v. CCE, Madras, [2001 (137) E.L.T. 1423 (T)] by Final order Nos. 621 & 622/01, dated 4-5-2001. The appeals filed by Flowline Engineering (P) Ltd. were rejected and demands for extended period within 5 years were ....
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....and also that of the Tribunal judgment rendered in the case of CCE v. Ralliwolf Ltd. - 1998 (100) E.L.T. 528 (Tri.). 18. Both the Advocates appeared on behalf of the respondents in Appeal No. E/685/2000 and advanced the same arguments as in the above two cases. They pointed out that both the original authority as well as the lower appellate authority have held that in order to invoke the related persons concept, the onus to prove mutuality of interest is on the department, which has not been done. Further they submitted that the aspect of mutuality of interest with material evidence was not brought out in the show cause notice dated 8-12-95. They submitted that the very admission in the Revenue appeal that the aspect of mutuality was not brought out in the show cause notice and it was only during the subsequent investigations that evidence of such mutuality of interest was revealed clinches the issue for rejection of the Revenue appeal. They stated that both the original authority as well as the Commissioner (Appeals) have followed the ratio of the Hon'ble Supreme Court rendered in the case of Atic Industries Ltd. - 1984 (17) E.L.T. 323 (S.C.) and the Tribunal judgment in t....
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....es of transactions fall within the tainted class in which case an irrebuttable presumption will arise that transactions belonging to those categories of transactions which cannot be dealt with under the usual meaning of expression 'normal price' set forth in new section 4(1)(a)........In such cases, the Revenue can proceed straightaway to determine the value in accordance with the terms of the third proviso to Section 4(1)(a) of Central Excise Act, 1944". Ld. DR submitted that the ld. Commissioner (Appeals) has failed to appreciate that the grounds for establishing mutuality of interest is not relevant factor in such cases. Thus, discussion about mutuality of interest and lack of evidence to establish the same are not relevant to the issue under consideration. Once M/s. Detergents India Ltd. is the subsidiary company of M/s. Shaw Wallace Company Ltd., the holding company they are automatically related persons in terms of definition of Section 4(4)(c) of the CE Act, 1944 and since M/s. Detergents India Ltd. did not disclose this fact in the price list, such an act amounted to suppression of facts. As the holding and subsidiary companies fall under the inclusive part of the definitio....
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.... CCCO and DIL were found to be subsidiary companies of SWC and the mutual interest between these companies was clearly established on scrutiny of the records found during the search operations conducted on 16-5-95. Since these facts were not before the Commissioner (Appeals), the Commissioner (Appeals) is directed to take into consideration all the evidences and various judgments quoted by the Revenue and the assessee and decide the case de novo after giving an opportunity to both the Revenue and the assessee. Thus, the appeal filed by the Revenue is allowed by way of remand. Ordered accordingly. Sd/- (Jeet Ram Kait) Member (T) 21. [Contra per : S.L. Peeran, Member (J)]. - With due respect, I beg to differ with my Learned Brother's order. Hence, I am recording a separate order. 22. The facts of the case, grounds of appeal, arguments of the Counsels and the findings recorded by the individual Commissioners have already been brought out in great detail by my learned brother. The grounds for holding that there is 'mutuality of interest' in the matter for adopting the wholesale price of M/s. Shaw Wallace Co. Ltd. has been briefly brought out by my learned....
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....n independent entity in totality like an individual person with independent will and acts on its own. Therefore, it has to be shown in the present case that the individual entity has been corroded by taking over of the financial interest by the Shaw Wallace Co. Ltd. The factors delineated are merely business arrangements for the purposes of carrying out the job work entrusted to the appellant, M/s. Detergents India Ltd. The said appellant is a job worker and was required to have manufactured the various goods in terms of agreement to maintain quality and standards laid down by the principal-purchaser. For the purpose of such manufacture, the appellant, Detergents India Ltd. had entered into an agreement to share the machineries, employees, telephone charges and such other expenses, which are all accounted. The said appellant does not have a cross mutual interest in the affairs of M/s. Shaw Wallace Co. Ltd. and in its management or in M/s. Shaw Wallace's various business ventures and activities as can be seen from the facts brought out in the reply to the show cause notice. It is the Shaw Wallace, who is getting the work done from the said appellant. Therefore, the ingredients alleg....
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....suppress material facts which are required to consider "mutuality of interest" for invoking larger period. There is no mutuality of interest and the factors alleged do not go to constitute 'mutuality of interest'. Therefore, in such circumstances, the non-furnishing of those details has no material consequence at all. Only those facts and details which go to constitute 'mutuality of interest', if suppressed and such facts on enquiries get revealed, then in such circumstance, the department can invoke larger period. The factors which are alleged do not go to constitute 'mutuality of interest'. Non-furnishing of same does not have any legal consequences for invoking larger period and it does not give any ground for alleged suppression, fraud, misstatement etc. as required in terms of proviso to Section 11A of the Act. In that view of the matter, appellants also succeed on the ground of time bar in this case as the SCN has been issued in the year 1997 with regard to demand period of 1992-95. 24. The issue in the present appeals is also covered in appellants' favour as contended by the Counsel, as has been laid down by the Apex Court in the case of U.O.I. v. ATIC Industries Ltd....
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....ice of the dealer in terms of Section 4 of the Act. The Apex Court in the case of Sidhosons & Anr. etc. etc., v. U.O.I. & Ors. etc. - 1986 (26) E.L.T. 881 (S.C.) decided the case with regard to the aspect of valuation of goods under Section 4 of the Act in case of customer's brand name being used by the manufacturer and it was held to be not a factor for adopting the price of buyers. The case of Ralliwolf Ltd. v. U.O.I. - 1992 (59) E.L.T. 220 (Bom.) is on identical facts. It was held that merely because the holding company had certain business interest that by itself it is not sufficient to hold mutuality of interest, in the absence of any extra commercial consideration having passed on. The Hon'ble Bombay High Court held that holding company's price cannot be adopted for arriving at the assessable value. This judgment clearly knocks out the department's case. The Tribunal also held the same ratio in CCE, Mumbai v. Ralliwolf Ltd. - 1998 (100) E.L.T. 528. This aspect of the matter was also discussed by the Hon'ble Delhi High Court in the case of Straw Products Ltd. & Anr. v. U.O.I. - 1987 (30) E.L.T. 275 (Del.). Reference can also be made to the cases of Burman Laboratories Ltd., v.....
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..... Member (Technical) and the ld. Member (J) of the regular bench have landed the matter before me as Third Member. 29. The facts of the case have already been detailed by the ld. Member (T) in his order and hence need not be repeated herein. 30. A decision on the questions listed below will resolve the conflict : (i) Whether, insofar as M/s. Detergents India Limited were concerned in the facts of the case, M/s. Shaw Wallace and Co. Limited could be considered to be a "related person" within the meaning of this expression as used in Section 4(1)(a) of the Central Excise Act, (ii) Whether, in the facts and circumstances of the case, the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act could be invoked against M/s. Detergents India Ltd. 31. Both sides have referred to relevant facts and relied on judicial authorities to buttress their respective positions on the aforesaid issues. Ld. Counsel for M/s. Detergents India Limited ("DIL" for short) and M/s. Shaw Wallace & Co. Ltd. ("SWCL" for short) have relied on the following case law on the meaning of....
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.... the latter sold the goods to their dealers/consumers? The Court examined the facts of the case as well as the relevant provisions of Section 4 of the Central Excises and Salt Act and held that Atul Products Ltd. and Crescent Dyes & Chemicals Ltd. were not "related" to the assessee within the meaning of Section 4(4)(c) and hence the assessable value must be determined on the basis of the wholesale cash price charged by the assessee to the said companies. The Court's decision on the issue is contained in Paragraph 5 of its judgment, extracted below: "5. The second ground on which the assessee assailed the validity of the demand made by the Assistant Collector for differential duty related to the applicability of the definition of "related person" in clause (c) of sub-section (4) of Section 4 of the amended Act. The Assistant Collector took the view that the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemical Ltd. on the other were related persons within the meaning of the first part of the definition of the term "related person" and the assessable value of the dyes manufactured by the assessee for the purpose of Excise duty was, therefore, liabl....
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.... indirect interest in the business of the other. The equality and degree of interest which each has in the business is of the other may be different, the interest of one in the business of the other may be direct, while the interest of the latter in the business of the former may be indirect. That would not make any difference, so long as each has got some interest, direct or indirect, in the business of the other. Now, in the present case, Atul Products Limited has undoubtedly interest in the business of the assessee, since Atul Products Limited holds 50 per cent of the share capital of the assessee and has interest as shareholder in the business carried on by the assessee. But it is not possible to say that the assessee has any interest in the business of Atul Products Limited. There are two points of view from which the relationship between the assessee and Atul Products Limited may be considered. First, it may be noted that Atul Products Limited is a shareholder of the assessee to the extent of 50 per cent of the share capital. But we fail to see how it can be said that a limited company has any interest, direct or indirect, in the business carried on by one of its shareholders....
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....als Limited. The first part of the definition of related person in clause (c) of sub-section (4) of Section 4 the amended Act is, therefore, clearly not satisfied both in relation to Atul Products Limited as also in relation to Crescent Dyes and Chemicals Limited and neither of them can be said to be a "related person" vis-a-vis the assessee within the meaning of the definition of that term in clause (c) of sub-section (4) of Section 4 of the amended Act. We, therefore, affirm the view taken by the High Court and hold that the assessable value of the dyes manufactured by the assessee cannot be determined with reference to the selling price charged by Atul Products Limited and Crescent Dyes and Chemicals Limited to their purchasers but must be determined on the basis of the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited. The demand made by the Assistant Collector for differential duty must, therefore, be held to be rightly quashed by the High Court". 33. Having thoroughly compared the facts of the present case with that of the above case, I am of the view that the ratio of the Apex Court's decision can squarely b....