TaxTMI 
TaxTMI 
1982 (12) TMI 49
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....e products. It is the contention of the Union of India that the main dealer appointed by the respondents is only a distributor or a sole selling agent and consequently, will be a related person within the meaning of the definition of the word under Section 4(4)(c) of the Act. The statutory authorities in that view held that the respondents would be liable to pay excise duty on the price at which the main dealer sells the products to the customers. The respondents filed the writ petition before this court challenging the stand of the Union of India and other statutory authorities and contended that the main dealer would not be a related person within the meaning of the Act. This contention was accepted by the learned single Judge, who by his judgment dated 28-9-1981, allowed the writ petition. It is, in these circumstances, the Union of India has filed this writ appeal. 3. At the outset it is necessary to refer to Section. 4 of the Act as far as it is relevant. "4(1) Where under this Act the duty of excise is chargeable on any excisable goods with reference to value, such value shall subject to the other provisions of this section, be deemed to be - (a) the normal price thereof, ....
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....cisable goods. The normal price is the price at which the goods are sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal. The buyer should not be a related person. The price must be the sole consideration for the sale. In other words, the normal price should not be the price at which goods are sold by the assessee to a related person. The point of time with reference to which the price has to be determined is the time of delivery of the excisable goods in the course of wholesale trade. The definition of related person in terms of Section 4(4)(c) of the Act consists of two parts. Under the first part, a 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. The second part includes a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor as a related person. 4. Webster's dictionary gives several meanings of the word `distribute' as follows : (1) to divide among several or many to deal out; apportion; allot; (2) to spread out so as to cover a surface or a space; ....
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....ha Sales Ltd. were only distributors of the assessees and fell within the meaning of related person as defined in Section 4(4)(c) of the Act. Ranganathan J. speaking for the Bench rejected the contention. The learned Judge observed as follows :- "The next question for consideration is whether Usha can be said to be a distributor of the assessee. The precise meaning of the expression distributor is not clear and has not been defined in the statute. This is a very wide expression which gains colour from the context in which it is employed. Its meaning is very vague, extensive, and indefinite. It ranges from a person, who, under an enforceable contract, acts as an agent of the manufacturer for the distribution of his goods to a person who at some stage or point of time distributes i.e. physically transports and sells the goods manufactured by a particular manufacturer. We have already referred to the fact that the effect of a person falling within the definition of related persons is very extensive and far reaching. It will have the effect of enabling the authorities to ignore the price at which the sale are effected to or through such persons and even to proceed right upto the stage....
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....referring to the various decisions of various other High Courts, the learned Judge said - "In the light of the discussion contained above, we are clearly of opinion that Usha cannot be said to be a distributor of the petitioner company." 7. A similar question arose for consideration before the Bench of the Bombay High Court in Amar Dye Chem. Ltd. v. Union of India, 1981 E.L.T. 348. In the said case, the assessee had been entering into agreements with what were described as distributing agents for the purpose of sale and of distribution of the goods manufactured by it. The excise authorities took the stand that the assessable value for the levy of excise duty should be the price at which the distributors sold the goods to their dealers. This contention was raised on the basis that the distributing agents fell within the meaning of related person as defined in the Act inasmuch as they were distributors. On behalf of the assessee it was contended that the distributors to whom the assessee sold the goods were not agents of the manufacturers and that when they further sold the goods to their buyers, the sale was not on account of the manufacturer, but that the sale was on account of t....
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....stituting the distributing agent was not an agent in the sense in which it was normally used in the commercial transaction. On the other hand, he was a buyer and such a buyer would not fall within the category of related person. 9. It is in the light of these decisions, the question whether the main dealer appointed by the respondents is a distributor and consequently a related person as defined in Section 4(4)(c) has to be considered. The agreement is between Ashok Leyland Ltd. (hereinafter called Ashok) and the main dealer. In clause 4(a) of the agreement, Ashok shall sell to the main dealer and the main dealer shall purchase from Ashok their products at the wholesale prices established by Ashok in effect on the date of despatch ex Ashok's premises at Madras plus any sums for freight, delivery, Government, Municipal and other charges as may be stipulated by Ashok from time to time. Payment shall be made by the main dealer to Ashok before delivery or despatch in cash or in such other manner as may be acceptable to Ashok. The main dealer shall take prompt delivery of each and every product consigned to him in fulfillment of any order. All sales by Ashok shall be in accordance with....