TaxTMI 
TaxTMI 
1998 (3) TMI 138
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....cises and Salt Act, 1944 (for short `the Act'). Since the Assistant Collector had not considered the break up of the shares of each member of the family comprising the two companies being the manufacturer and the distributor, the Tribunal remanded the matter to the Assistant Collector to consider the break up of the shares of each member of the family and if the "test of identity" was satisfied, he should confirm the order. 2.The appellant manufactures playing cards. It sells the entire stock of playing cards manufactured by it to its sole distributor M/s. Ganga Saran & Sons Pvt. Ltd. The Assistant Collector, Central Excise under the Act levied duty at the price at which the playing cards were sold by M/s. Ganga Saran & Sons Pvt. Ltd. as according to the Assistant Collector it was related person within the meaning of Section 4(4)(c) of the Act of the appellant. Collector of Appeal confirmed the order of the Assistant Collector also holding that M/s. Ganga Saran & Sons Pvt. Ltd. was the related person of the appellant. Against the order of the Collector the appellant filed a revision application under Section 36 of the Act, prior to its amendment, and thereafter the revision applic....
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....d his family members and further that Assistant Collector had found that the shares of the appellant and the shares of the buyer company were held by the members of the same Sharma family and, thus, by the persons that who were related to each other. The Appellate Tribunal referred to the decision of this Court in Mohanlal Magan Lal Bhavsar (Deceased) through LRs. and Ors. v. Union of India and Ors. [1986 (23) E.L.T. 3] and also to its own decision in Diamond Clock Manufacturing Co. Ltd. v. C.C.E., Pune [1988 (34) E.L.T. 662] where it interpreted the definition of related person. Relying on these two decisions as applicable to the facts of this case, the Appellate Tribunal was of the view that there was identity of Interest and M/s. Ganga Saran & Sons Pvt. Ltd. was related person within the meaning of Section 4(4)(c) of the Act. The Appellate Tribunal disposed of the appeal with the directions aforesaid. 6.Mr. Dave, learned Counsel for the appellant, contended that the Appellate Tribunal erred in holding that the appellant and M/s. Ganga Saran & Sons Pvt. Ltd. were related persons or that there was an identity of interest between the two. He said the two judgments, one of Supreme ....
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....ich(a) such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale : Provided that - (i) ..... (ii) .... (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail; (b) ...... (2) ...... (3) ...... (4) or the purpose of this section, - (a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; (c) "related person" means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business....
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....ed out that this Court in a special appeal [Civil Appeal No. 9850/95, decided on April 4, 1996 - 1996 (86) E.L.T. A161] filed against the order of the Appellate Tribunal had dismissed the same where the Appellate Tribunal had held that mere commonness of partners and Directors between the buyer and seller was not sufficient to treat the buyer as a `related person' even if entire production was sold through them. We have examined the file of C.A. 9850/95. What we find is that the appeal was filed by the Revenue which was barred by limitation and delay was condoned subject to payment of cost Rs. 500/- payable within four weeks to the Counsel for respondents. Since the cost had not been paid the appeal was dismissed by order dated April 4, 1996. This dismissal of the appeal, therefore, does not help the appellant. The Appellate Tribunal in the order, which was impugned in C.A. 9850/95, found that the assessee had sold 95 out of 96 arc lamps to a company of which one of the partners of the assessee firm was a Director. On this Department took the view that the company was a related person and sought to assess the goods at a higher price at which the assessee sold the goods to the buyer....
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....eikfield Central Marketing Organisation as a favoured buyer, there must be sufficient proof to show that specifically low price was charged. 11.Mr. Sharma, Counsel for the Revenue, referred to a decision of this Court in Mohanlal Maganlal Bhavsar (Deceased) through LRs. & Ors. v. Union of India & Ors. [1986 (23) E.L.T. 3 (S.C.)]. In this case one of the pleas raised by the appellant was that the High Court was not correct in holding that the wholesale price of the preparations of the appellant could not be taken for the purpose of valuation under Section 4 of the Act at the price at which these were supplied to M/s. M.B. Bhavsar & Sons, Chief Distributor of the appellant. This Court observed as under : "The next contention of the Appellants, which was also negatived by the High Court, was that in determining the value of the medicinal preparations for the purpose of levying excise duty thereon the authorities erred in taking the wholesale price of the said preparations and not the price at which these preparations were supplied by the said firm to their Chief distributor Messrs. M.B. Bhavsar & Sons. In order to test the correctness of this contention it is necessary to set out a ....
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.... decision in the of Salomon v. Salomon & Co. [(1897) A.C. 22 H.L.] was pronounced in 1897; and indeed, it has always been the well recognised principle of common law. However, in the course of time, the doctrine that the corporation or a company has a legal and separate entity of its own has been subjected to certain exceptions by the application of the fiction that the veil of the corporation can be lifted and its face examined in substance. The doctrine of the lifting of the veil thus marks a change in the attitude that law had originally adopted towards the concept of the separate entity or personality of the corporation. As a result of the impact of the complexity of economic factors, judicial decisions have sometimes recognised exceptions to the rule about the juristic personality of the corporation. It may be that in course of time these exceptions may grow in number and to meet the requirements of different economic problems, the theory about the personality of the corporation may be confined more and more." 13.In Life Insurance Corporation of India v. Escorts Ltd. & Ors. [(1986) 1 SCC 264], this Court again considered this question and said : "While it is firmly establish....
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....nd that it was not possible to treat the company as a citizen for the purposes of Article 19. In CIT v. Sri Meenakshi Mills Ltd. [AIR 1967 SC 819], the corporate veil was lifted and evasion of income tax prevented by paying regard to the economic realities behind the legal facade. In Workmen v. Associated Rubber Industry Ltd. [(1985) 4 SCC 114], resort was had to the principle of lifting the veil to prevent devices to avoid welfare legislation. It was emphasised that regard must be had to substance and not the form of a transaction. Generally and broadly speaking, we may say that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interes....
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....fficult to lay down any broad principle to hold as to when corporate veil should be lifted or if on doing that, could it be said that the assessee and the buyer are related persons. That will depend upon the facts and circumstances of each case and it will have to be seen who is calling the shots in both the assessee and the buyer. When it is the same person the authorities can certainly fall back on the third proviso to clause (a) of Section 4(1) of the Act, to arrive at the value of the excisable goods. It cannot be that when the same person incorporates two companies of which one is the manufacturer of excisable goods and other is the buyer of those goods, the two companies being separate legal entities, the Excise authorities are barred from probing anything further to find out who is the person behind these two companies. It is difficult to accept such a narrow interpretation. True that shareholdings in a company can change but that is the very purpose to lift the veil to find out if the two companies are associated 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 ....