1982 (2) TMI 70 - HC - Central Excise

Valuation - Customer cannot be treated as distributor even if goods are produced with his brand name - Sale under contract - Determination of value

Summary

Issues:
1. Interpretation of assessable value for goods sold under contract.
2. Determining if parties are "related persons" under the Act.
3. Validity of levy of excise duty based on the price at which goods are sold to dealers.
4. Compliance with provisions of the Act in determining assessable value.

Analysis:
1. The judgment addresses the dispute over the assessable value of goods manufactured by the petitioner for another company under a contract. The petitioners argue that the assessable value should be based on the price agreed with the buyer, while the respondents assert it should be the subsequent selling price of the buyer. The court examines the legislative competence of Parliament in such levies and emphasizes the need to distinguish between excise duty and sales tax.

2. The court delves into the definition of "related person" under section 4(4)(c) of the Act. It concludes that the mere commercial transaction between the petitioner and the other company does not establish an interest in each other's business as required by the definition. The judgment clarifies that the parties are competitors in the market and do not fall under the scope of related persons as per the Act.

3. The judgment scrutinizes the respondents' argument that the normal price for assessing excise duty should be the subsequent wholesale price at which the buyer sells the goods. The court rejects this stance, emphasizing that the price at the factory gate, representing an arm's length sale, should be the assessable value. It highlights the importance of avoiding unnecessary litigation and upholds the principle that the factory gate price is the relevant value for excise duty calculation.

4. In the final decision, the court issues a mandamus to cancel the impugned letters from the excise authorities and directs them to approve the price list submitted by the petitioner. It declares the respondents' stance on assessable value as illegal and instructs compliance with the valuation rules. The judgment ensures that excise duty is levied based on the price at which the goods are sold to the buyer, not the subsequent selling price, and grants costs to the petitioners.