1930 (10) TMI 1 - HC - Central Excise

Valuation - Related person - Criteria for - Effect of common directors - Valuation - Distributor - Connotation of

Issues Involved:
1. Determination of assessable value of electric fans for purposes of the Central Excises and Salt Act, 1944.
2. Inclusion of the value of regulators in the assessable value of electric fans.
3. Deduction of post-manufacturing expenses from the assessable value.
4. Whether Usha Sales Limited is a "related person" under Section 4 of the Act.

Issue-wise Detailed Analysis:

1. Determination of Assessable Value of Electric Fans:
The primary issue concerns the determination of the assessable value of electric fans manufactured and sold by the petitioner for the purposes of the Central Excises and Salt Act, 1944. The respondents argued that the assessable value should be based on the price at which Usha Sales Limited (Usha) sold the goods to other dealers. The petitioner contended that the assessable value should be the price at which it sold the goods to Usha, not the resale price by Usha.

2. Inclusion of the Value of Regulators:
The petitioner argued that the value of regulators should not be included in the assessable value of electric fans until 18th June 1977, when the Tariff was amended to include regulators. The court agreed, stating that a speed regulator is not an integral or indispensable part of an electric fan. The court noted that ceiling fans could be sold without speed regulators and that the manufacture of electric fans could be complete without manufacturing speed regulators. The amendment effective from 19th June 1977 changed the position to include the cost of regulators in the assessable value of fans.

3. Deduction of Post-Manufacturing Expenses:
The petitioner contended that post-manufacturing expenses should be deducted from the price at which the goods were sold to Usha to determine the assessable value. These expenses included transport, godown charges, publicity, servicing, repair charges, interest, and the like. The court upheld this contention, referencing the judgment in Hindustan Milkfood Manufacturers Limited v. Union of India and Others, which supported the deduction of post-manufacturing expenses from the assessable value.

4. Whether Usha Sales Limited is a "Related Person":
The court examined whether Usha could be considered a "related person" under Section 4 of the Act. The definition of "related person" includes those who have mutual interest in each other's business or are distributors of the assessee. The court found no material indicating that Usha and the petitioner had mutual business interests. The court also concluded that Usha could not be considered a distributor in the context of the Act, as the relationship between the petitioner and Usha was on a principal-to-principal basis, not an agency relationship. The court referenced several judicial decisions, including M/s. Hind Lamps Ltd. v. Union of India and S.M. Chemicals & Electronics v. R. Parthasarathy, to support its conclusion that Usha was not a related person.

Judgment:
The court directed the respondents to charge excise duty based on the price at which the goods were sold to Usha, excluding post-manufacturing expenses and the value of regulators for the period prior to 19th June 1977. The court also addressed a preliminary objection regarding the writ petition, stating that the existence of an alternative remedy does not bar the entertainment of a writ petition, especially when constitutional issues are raised.

Conclusion:
The writ petition was allowed, and the respondents were directed to determine the liability of the petitioner to excise duty in accordance with the principles enunciated in the judgment. The petitioner was entitled to costs in the writ petition, with counsel's fee set at Rs. 500/-.

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