1989 (4) TMI 81 - SC - Central Excise

Whether the agreement dated 1st May, 1962 is an agreement for sale or is one for sole selling agency? Held that - Having regard however to the fact that we have come to the conclusion that the Tribunal was right in holding that the transaction with the Gillanders was not a transaction of sale but an agreement for agency, there was, therefore, no sale in favour of Gillanders as contended for by the appellants. If that is the position, then the first sale was by the Gillanders to the customers of the market. Then the price of that sale would be the assessable value under Section 4 in this case. The decision of the Tribunal is, therefore, right in any view of the matter, and this other aspect of the matter referred to by the Tribunal is not necessary for us to determine to dispose of this appeal. In that view of the matter, the decision of the Tribunal must be upheld. Appeal dismissed.

Issues Involved:
1. Nature of the Agreement (Sale vs. Sole Selling Agency)
2. Definition and Application of "Related Person" under Section 4(4)(c) of the Central Excises and Salt Act, 1944
3. Permissible Deductions from Assessable Value

Issue-wise Detailed Analysis:

1. Nature of the Agreement (Sale vs. Sole Selling Agency):
The primary issue was whether the agreement dated 1st May 1962 between the appellants and Gillanders was an agreement for sale or for sole selling agency. The Tribunal concluded that the agreement was for sole selling agency, not for sale, based on several key clauses:

- The appellants retained ownership and title to the goods until sold by Gillanders.
- Unsold stocks beyond two years could be returned to the appellants.
- The appellants were responsible for preferring claims for damages from carriers and reflecting any price reduction during the agreement's currency in the unsold stock's price.
- On termination, unsold stocks were to be returned to the appellants.

The Tribunal emphasized that the essence of a sale is the transfer of title from seller to purchaser, which did not occur in this case. The Tribunal's conclusion was supported by precedents, such as *Gordon Woodroffe & Co. v. Sheikh M.A. Majid & Co.*, which highlighted that the essence of sale is the transfer of title for a price, whereas an agency involves selling goods as the principal's property.

2. Definition and Application of "Related Person" under Section 4(4)(c) of the Central Excises and Salt Act, 1944:
The Tribunal held that Gillanders was a "related person" under Section 4(4)(c) of the Act, thus the assessable value for excise duty should be based on the price at which Gillanders sold the goods. The appellants contended that the relationship should be judged independently of the transaction and that Gillanders did not confer extra-commercial advantages. The Tribunal's interpretation aligned with the statutory purpose of ensuring that the assessable value reflects the true market value, free from any influence of related parties.

3. Permissible Deductions from Assessable Value:
The appellants sought deductions for transportation costs, excise duty, and sales tax from the assessable value. The Tribunal noted that these deductions were permissible subject to proof. The appellants cited *Assistant Collector of Central Excise v. Madras Rubber Factory Ltd.*, which allowed such deductions. Although the appellants did not initially claim these deductions before the Tribunal, the Supreme Court permitted them to claim these deductions upon proof, subject to the final decision in the review of the Madras Rubber Factory case.

Conclusion:
The Supreme Court upheld the Tribunal's decision that the agreement was for sole selling agency, not a sale, and that Gillanders was a related person under the Act. The Court allowed the appellants to claim permissible deductions for transportation costs, excise duty, and sales tax, subject to proof and the final decision in the Madras Rubber Factory case review. The appeal was dismissed with no order as to costs.

← Previous Next →