1976 (12) TMI 179 - HC - Central Excise

Summary

Issues Involved:
1. Mode of valuation of goods for excise duty purposes.
2. Definition and applicability of 'related person' under Section 4 of the Central Excises and Salt Act, 1944.
3. Determination of normal price for the purpose of excise duty.

Detailed Analysis:

1. Mode of Valuation of Goods for Excise Duty Purposes:
The core issue is the mode of valuation of goods manufactured by the petitioner company for the levy of excise duty under the Central Excises and Salt Act, 1944. The petitioner company argued that the value should be the prices at which it sells its products to five specific customer companies, not the prices at which these customer companies sell to wholesale dealers or others.

2. Definition and Applicability of 'Related Person':
The controversy centered on whether the five customer companies could be regarded as 'related persons' under Section 4(4)(c) of the Act. The definition of 'related person' consists of two parts:
- The first part requires that the petitioner company and the customer companies must have an interest, directly or indirectly, in the business of each other. Only one customer company, Bajaj Electricals Ltd., holds shares in the petitioner company, and it was not shown that the petitioner company has any interest in Bajaj Electricals Ltd.
- The second part refers to a holding company, a subsidiary company, a relative, and a distributor of the assessee. The court found that neither Bajaj Electricals Ltd. nor any foreign company has the right to appoint or remove a majority of the directors of the petitioner company, thus failing to meet the criteria for 'holding company' or 'subsidiary company.'

3. Determination of Normal Price:
The court examined whether the prices at which the petitioner company sells its products to the five customer companies are the normal prices at which such goods are ordinarily sold by a manufacturer in the course of wholesale trade. The court reiterated that the Central Excise authorities could scrutinize whether the prices charged to these customer companies are normal. However, the authorities cannot treat the prices at which the customer companies sell the products to wholesale dealers or the public as the value for excise duty purposes.

Conclusion:
The court allowed the petition, issuing a mandamus to the respondents to consider the price list submitted by the petitioner company in accordance with the enunciation of law. The court directed the parties to bear their own costs. The judgment clarifies that the Central Excise authorities must ascertain normal prices if they find that the prices charged by the petitioner company are not normal, but they cannot use the prices at which customer companies sell to others for excise duty valuation.