2011 (3) TMI 909

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....rs are private limited companies. The ground for the proposed demand was that the assessee and the distributors were related persons. The period of dispute is from 1995 to September 2000. The amounts in dispute: Rs.2,30,16,649/- for July 95 to March 2000 and Rs. 9,16,600/- for April 2000 to September 2000. The Commissioner did not find the respondents and the distributors to be related as proposed. Vide the impugned order, the Commissioner dropped proposals in the two Show Cause Notices to demand differential duty based on sale price of the respondent manufacturer#s distributors compared to its own corresponding price to its distributors (buyers). 2. Heard both sides. 3. We find that as per the Show Cause Notice the assessee sells 80 ....

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....Therefore, we hold that the impugned order correctly dropped the proposal to demand differential duty on clearances made during the period upto 1.7.2000 with reference to the sale price of the distributors of the assessee. In this connection, we note that the Commissioner correctly relied on the decision of the apex Court in UOI Vs M/s Kanthilal and Chunnilal [1986(56)ELT 289(SC)] where it was held as follows: "If a part of the sales are made to a related person and the rest to non-related persons, in course of normal whole sale trade, the price at which the assessee ordinarily sale to whole dealers at the factory gate even in respect of the sales made to are to the related persons would form the basis of arriving at the assessable value....

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.... be related persons when, (i) They are inter-connected undertakings; (ii) They are relatives; (iii) Amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) They are so associated that they have interest, directly or indirectly, in the business of each other. That the distributors hold some shares in the assessee company cannot be held to make them related persons of the assessee. As for the transactions between them, the buyers of the assessee standing guarantee to the bank for the bill discounting facility enjoyed by the assessee for sales to them to the tune of three crores for three months cannot be held as an arrangement that is not commercial in nature. Th....