1992 (10) TMI 247 - AT - Central Excise

Summary

Issues Involved:
1. Jurisdiction of the Collector of Central Excise, Rajkot under Section 35E.
2. Whether the distributors, Sumedico Corpn. and Numedico Corpn., are 'related persons' to the appellant.
3. Validity of the trade discount given by the appellant to its distributors and by the distributors to their dealers.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Collector of Central Excise, Rajkot under Section 35E:

(a) The appellant argued that the Collector (Appeals) had clearly held that the appellants and the buyers are not 'related persons' as per the Supreme Court's judgment in the Atic Industries case. If the Collector was dissatisfied with this finding, the proper course would have been to file an appeal to the Tribunal.

(b) The respondent contended that the Collector (Appeals) findings were tentative, which is why the matter was remanded for a de novo decision.

(c) The Tribunal concluded that the Collector (Appeals) did not give categorical findings on the distributors being 'related persons'. The Collector of Central Excise, Rajkot was not reviewing the order of the Collector (Appeals) but was seeking to revise the de novo order passed by the Assistant Collector, which is within his competence under Section 35E.

2. Whether the distributors, Sumedico Corpn. and Numedico Corpn., are 'related persons' to the appellant:

(a) The appellant argued that as a private limited company, it cannot have 'relatives' as per the definition in Section 4. The agreements between the appellant and the distributors indicated principal to principal dealings. The appellant further rebutted the lower appellate authority's findings, stating that the price list was filed in Part IV under the direction of the Superintendent of Central Excise and that sales promotional activities are also beneficial to distributors.

(b) The respondent pointed out clauses in the agreements indicating that the transactions were not at arm's length, hence the discount was not admissible.

(c) The Tribunal examined the agreements and found that none of the clauses detracted from the principal to principal dealings. The stipulation of a deposit with interest, the clause on price adjustments, and the ceiling on discounts were seen as normal commercial terms. The Tribunal held that the appellants and the distributors were not 'related persons'. Therefore, the price at which goods were sold to the distributors, after a discount of 42 1/2 %, would form the basis of assessable value under Section 4.

3. Validity of the trade discount given by the appellant to its distributors and by the distributors to their dealers:

The Tribunal found that since the appellants and the distributors were not 'related persons', the discount given by the distributors to their dealers should not be denied. Even if they were 'related persons', the authorities were duty-bound to allow the discount as per proviso (iii) to Section 4(1)(a).

Conclusion:

The appeal was allowed with consequential relief to the appellants. The Tribunal found that the appellants and the distributors were not 'related persons' and that the discounts given were valid and should be considered in the assessable value.