TaxTMI 
TaxTMI 
2017 (3) TMI 64
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....aim a writ of certiorari or any other appropriate writ, order or direction, calling for the records in relation to the communications, more particularly set out in prayer clause (a) of the Writ Petition No. 2635 of 1995 and to quash and set aside an order passed by respondent no. 3 dated 20th July, 1995 Annexure 'GG' to the said writ petition. 3. The facts lie in a very narrow compass. The petitioners before us manufacture a product known as Betonin. The first petitioner is in the business, inter alia, of manufacturing and sale of various drugs and pharmaceutical products. One of the products is Betonin 200 ml. and 450 ml., which is referred to as "the said goods" hereafter, which is a sugar free B-complex Elixir (syrup) administered to patients suffering from vitamin 'B' deficiency and especially to diabetic patients. 4. The respondents to these petitions are the State of Maharashtra and the officials empowered by the Medicinal and Toilet Preparations (Excise Duties) Act, 1995 to recover duties of excise on the said goods, as the same contain alcohol. 5. The petitioners state that they filed a price list in respect of the said goods dated 1st July, 1994. It was....
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....the demand. A copy of this letter is at Annexure 'K' to the petition. 8. Then, there was another demand raised in the sum of Rs. 42,90,996/- for the period from 1st July, 1994 onwards. The petitioners state that every information having been furnished, explanation provided, the demand ought to have been withdrawn. However, the second respondent insisted on compliance with his requisitions. The petitioners being aggrieved and dissatisfied with the demand and the communications from respondent no. 2, preferred an appeal before the Commissioner of State Excise and applied for a stay. That was because the petitioners' licence was in jeopardy. It was threatened to be cancelled. That is why an interim stay was sought and a direction to renew the licence. It is stated that on 19th April, 1995, the licence was directed to be renewed by the said Commissioner. Thereafter, the Superintendent-licencing authority was called upon the renew the licence. The second respondent, despite such position, could not direct the officials reporting to him to renew the licence. It is in these circumstances that the petitioners had to approach this court. The petitioner had, in the absence of ....
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....s and agreements with the petitioners and the petitioners have also in turn entered into agreements in such a crafty manner that the burden of excise duty could be avoided. The petitioner applied, in March, 1994, for a licence to manufacture a syrup known as Bonitone with same ingredients as Betonin. However, they never manufactured such a product though a licence was granted. Then, the petitioners made an application for change of the name of the product from Bonitone to Betonin and that application was granted on the basis of the arrangement with M/s. Boots. M/s.Boots transferred the brand name and property rights thereof to one Zest Pharmaceutical Ltd. along with brand name of other products for a paltry sum of Rs. 800/-. The said Zest Pharma, on the same day, transferred the user licence of the said brand name of Betonin in favour of the petitioners. Hence, the petitioner started manufacturing the earlier product of the Boots, namely, Betonin as its own as per the arrangements in their own factory. This factory was earlier used by Borachem Industries. The price list was approved in respect of the product Betonin, when it was manufactured by M/s. Boots. The details of the pric....
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...., the Central Excise Department collected the excise duty on the aforesaid alcohol-free products at the price at which Petitioner No. 1 was selling to Abbott, and not at the price at which Abbott was selling the said products to its buyers, as has been wrongfully sought to be done by the State Excise Department in the case at hand before this Hon'ble Court. 5. I say that for the relevant period, the Central Excise Department collected excise duty on products which formed the substantial share of the sales of Petitioner No.1, whereas the State Excise Department collected excise duty on products which formed a relatively much smaller share of sales of Petitioner No. 1. Annexed hereto and marked as Exhibit A is a schedule of the sales turnover of Petitioner No. 1 from the FY 1996-97 to 2001-02, setting out the turnover for state excise products and central excise products in the respective years. 6. I say that the Central Excise Department, which has dealt with a larger share of products of Petitioner No. 1 which are/were being sold through Abbott, has never once raised disputes about the price declared by Petitioner No.1, or alleged that Petitioner No. 1 and Abbott are "related....
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....ther the petitioners make profit or loss when the petitioners sell the goods to M/s. Boots for the price charged by the Petitioners from Boots. Hence, there is no interest in the business of each other. Admittedly, the petitioners and M/s. Boots are not related to each other in the sense as holding or subsidiary company. Hence, the second part of the definition is also not applicable. It is submitted that the concept of "relative" as defined in section 4(4)(c) can be applied to natural person only. It cannot be applied to the body corporates. Both, the petitioners and M/s. Boots are corporate legal entities. Hence, they cannot be termed as related to each other. In addition, M/s. Boots is not a distributor. M/s. Boots makes outright purchases. In these circumstances, when the statutorily defined concept is inapplicable, the respondents cannot invoke any vague and ill defined concept to hold that the petitioners and M/s. Boots are related persons. 16. Mr. Sridharan would submit that the transaction between the petitioners and M/s. Boots is on principal to principal basis. Hence, the sales price charged by the petitioners should be the assessable value in terms of section 4(1)(a). ....
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....it that the respondents have passed the order in accordance with law. That order cannot be termed as perverse or vitiated by any error of law apparent on the face of the record. The writ petition, therefore, has no merit and be dismissed. 19. The impugned order proceeds on the footing that the office of the Commissioner for State Excise is empowered to decide the appeals. The appeals were directed against the order of the Superintendent of State Excise, Pune, dated 31st March, 1995 refusing to renew the appellant's L-1 and R. S. II licences on the ground that they had not paid the differential duty to the tune of Rs. 42,90,996/-. A second appeal had been filed on 27th April, 1995 against the Superintendent's order dated 25th April, 1995 holding that the excise duty is payable at the prices at which goods are sold by M/s. Boots to other wholesalers. Therefore, he directed that the petitioner should furnish necessary information for getting the new rates approved. He directed that no clearances would be permitted till such list is approved and the approval obtained for the same. 20. It is common ground that the petitioners manufacture Betonin 200 ml. and Betonin 450 ml. The....
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.... and that is to be found in section 8 and there is a power to arrest. By section 10, the power to summon persons to give evidence and produce documents in inquiries under this Act has been conferred. There are other powers and there are supplementary provisions as well. Thus, what is apparent from a reading of this Act is that the duties of excise to be levied and collected on certain goods are at the rates specified in the Schedule. These are levied on all dutiable goods excluding goods produced or manufactured in a Special Economic Zone manufactured in India [see section 3(1)]. The duties are leviable where the dutiable goods are manufactured in bond, in the State in which such goods are released from a bonded warehouse for home consumption, whether such State is the State of manufacture or not and where the dutiable goods are not manufactured in bond, in the State in which such goods are manufactured. The collection of duties is in such manner as may be prescribed. Prescribed means prescribed by rules. Therefore, the petitioners rightly do not dispute the power of the authorities. They are aware that since their medicinal preparation contains alcohol, it would be permissible f....
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....transactions between the petitioners and M/s. Boots were not at arms length and they were related persons in terms of section 4(4)(c) of the Central Excise and Salt Act, 1944. The rate charged by M/s.Boots to wholesalers would be the correct assessable value for the purpose of levying excise duty. The appellate authority, namely, the commissioner notes all these facts and arives at a conclusion that the arrangement between the parties would enable him to hold that the justification by the petitioners, that the difference in the maximum retail price of the product and their issue price is on account of marketable expenses, is baseless. The issue price to M/s. Boots is understated with a view to evade excise duty to the mutual benefit of both, Biostar and M/s. Boots. This is supported by some other attendant circumstances. M/s.Boots, who is the owner of the trade mark Betonin, sold the same to Zest Pharmaceuticals Ltd. on 1st October, 1993. Zest Pharma, in turn allowed the use of this trade mark to Biostar by an agreement of the same date and that too without charging any royalty or any other remuneration from Biostar. This clearly shows that M/s. Boots and Biostar have commercial in....
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....nal (1984) 1 SCC 467. On the second occasion as well and in the case of Union of India and Ors. vs. Atic Industries Ltd. 1984(17) ELT 323 (SC), the Hon'ble Supreme Court of India had an occasion to consider the applicability of this definition as it stood after its amendment by the Central Act 22 of 1973, which came into effect from 1st October, 1975. The Hon'ble Supreme Court of India, in para 5 of this decision, held as under:- "5. The second ground on which the assessee assailed the validity of the demand made by the Assistant Collector for differential duty related to 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 Chemicals Limited 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, liable to be determined with reference to the price at which the dyes were ordinarily sold by Atul Products Limited and Cresc....
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....e 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. 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, even though the shareholding of such shareholder may be 50 per cent. Secondly, Atul Products Limited is a ....
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....n 4 of 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 subsection (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." 27. Then, in the two cases, which were decided post this judgment, the Hon'ble Supreme Court of India once again considered the ambit and scope of this definition and held as under:- In the case of Collector of Central Excise, Ahmedabad vs. I.T.C.E. AIR 2002 SC 3322:- "....
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....mon Directors does not mean that the one company has an interest in the business of the other. It is, therefore, not possible to uphold the conclusion of the Tribunal that the assessee and the chemical company were related persons. This being so, it is unnecessary to go into the alternate arguments advanced on behalf of the assessee." 31. Mr. Sridharan then relied upon the judgment in the case of Commissioner of Central Excise, Aurangabad vs. Goodyear South Asia Tyres Pvt. Ltd. 2015 (322) ELT 389 (SC). The Hon'ble Supreme Court, in the backdrop of the principles in Atic Industries Ltd. (supra) and applying them to the facts of that case, held as under:- "11. No doubt, the two buyers had given Rs. 85.66 crores interest free loan to the assessee. However, that by itself may not be a reason to hold them as related persons within the meaning of Section 4(4)(c) of the Act. In the absence of any mutuality of interest existing between them, giving of this interest free loan could have been a basis to include the notional interest while arriving at the cost of product sold by the assessee to the two buyers. However, instead of doing that, the appellant wanted to make use of this fac....
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....etonin. It sold the same to Zest Pharma on 1st October, 1993 and the Zest Pharma, in turn allowed the use of this trade mark to Biostar by an agreement of the same date and that too without charging any royalty or any other remuneration from Biostar. This clearly shows that M/s. Boots and Biostar had commercial interest in common and are interrelated. We cannot uphold this conclusion on the touchstone of the legal principles enunciated in detail above. Merely because M/s. Boots is the sole distributor, is selling the entire production of the petitioner with unusually big margin between so called manufacturers' price and the price the goods can fetch in the market is termed as unusual, coupled with making available the trade mark of the goods by M/s. Boots, does not mean that petitioner no. 1 and M/s. Boots are related persons. The test applied in para 7.0(a) cannot, therefore, be enough for holding that section 4(4)(c) of the Act is attracted. For that to be attracted, it is evident that the Commissioner would have to conclude that M/s. Boots is so associated with petitioner no. 1 that they have interest, directly or indirectly, in the business of each other. We find that the C....