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Issues Involved: Application of Section 4 of the Central Excises and Salt Act, 1944, prior to the 1975 amendment in a case involving a subsidiary company and its holding company.
Summary: The writ petition challenged the application of Section 4 of the Central Excises and Salt Act, 1944, to a subsidiary company manufacturing brassieres for its holding company. The dispute arose from the pricing arrangement between the two entities, leading to multiple show cause notices under Rule 10 and Rule 10A of the Central Excise Rules for different periods. The Assistant Collector of Central Excise upheld the demands on the basis that the transactions were not at arm's length, and the prices charged by the holding company to dealers should be considered as the assessable value. The Appellate Commissioner and the Government of India affirmed this decision, emphasizing the lack of arm's length dealing between the parties. The High Court, citing a Delhi High Court judgment, emphasized the need to establish not just a special relationship but also favored treatment or extremely low pricing to justify altering the assessable value. Since no evidence of favored treatment or low pricing was presented, the court set aside the authorities' orders and directed a fresh determination of the assessable value based on concrete evidence. The court granted the authorities the opportunity to establish if the prices charged were indeed low and if favored treatment was accorded. The petitioners were given the chance to provide relevant evidence for consideration. The court also addressed the issue of the bank guarantee and bond, deciding to keep them active pending the determination on the show cause notices within four months. In conclusion, the court set aside the previous orders, allowing for a fresh determination of the assessable value based on concrete evidence and considerations of favored treatment or low pricing.
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