1989 (12) TMI 50 - HC - Central Excise

Summary

Issues:
Challenge to order of Assistant Collector regarding related persons under Section 4(4)(c) of Central Excises and Salt Act, 1944; Clubbing of sales and denial of exemption under Notification No. 65/81.

Analysis:
1. The petitioners contested the Assistant Collector's decision deeming them and M/s. Modi Rubber Ltd. as related persons under Section 4(4)(c) of the Act. They argued that they are not related as per Supreme Court precedents, emphasizing the seller's independent manufacturing process and the absence of mutual business interest.

2. The Supreme Court's rulings in various cases, including Union of India v. Cibatul Limited, outlined the test for determining related persons under Section 4(4)(c). The Court clarified that the mere use of a brand name does not establish a relationship, emphasizing the importance of mutual business interest and direct or indirect interest in each other's business.

3. The valuation for excise duty was also addressed, with the Supreme Court establishing that if the buyer and seller are not related persons, the relevant value is the seller's price, not the buyer's price. This principle was reiterated in Union of India v. Cibatul Ltd. and other cases.

4. The Assistant Collector's decision was based on the buyer using the seller's brand name, selling flaps wholesale through its depot, and receiving raw materials from the seller. However, the petitioners demonstrated a separate payment for raw materials and highlighted the lack of manufacturing on behalf of the seller, as required by Supreme Court precedents.

5. The impugned order failed to consider the wholesale trade dynamics between the buyer and seller, the absence of manufacturing on behalf of the seller, and the crucial test of mutual business interest. Consequently, the order was deemed contrary to Supreme Court decisions and was set aside, allowing the petitioners to maintain their exemption under Notification No. 65/81.

6. In conclusion, the petition succeeded, and costs were awarded in their favor. The ruling clarified the criteria for determining related persons under Section 4(4)(c) and emphasized the significance of mutual business interest and independent valuation for excise duty purposes.

End of Analysis