1987 (6) TMI 197 - AT - Central Excise

Summary

Issues Involved:
1. Whether M/s. Rakesh Bulb Industries and M/s. United Commercial Corporation are "related persons" under Section 4(4)(c) of the Central Excises and Salt Act, 1944.
2. Determination of assessable value based on prices charged by M/s. United Commercial Corporation.
3. Admissibility of deductions for post-manufacturing expenses and secondary packing costs.

Issue-wise Detailed Analysis:

1. Whether M/s. Rakesh Bulb Industries and M/s. United Commercial Corporation are "related persons" under Section 4(4)(c) of the Central Excises and Salt Act, 1944:

The primary issue in all appeals was whether M/s. Rakesh Bulb Industries and M/s. United Commercial Corporation are "related persons." Section 4(4)(c) defines a "related person" as someone associated with the assessee in such a way that they have an interest, directly or indirectly, in each other's business. The Tribunal noted that M/s. Rakesh Bulb Industries is a partnership firm consisting of four brothers, and M/s. United Commercial Corporation is another partnership firm with the same four brothers and their mother. The Tribunal rejected the appellants' argument that both firms are independent entities for tax and registration purposes, stating that the relationship should be determined in relation to the individual partners. The Tribunal concluded that M/s. United Commercial Corporation is a "related person" to M/s. Rakesh Bulb Industries, referencing the case of Pilco Pharma Kanpur v. Collector of Central Excise, Kanpur.

2. Determination of assessable value based on prices charged by M/s. United Commercial Corporation:

The Tribunal affirmed the Assistant Collector's decision that the assessable value of the electric bulbs should be determined based on the prices charged by M/s. United Commercial Corporation, less any admissible discounts. The Tribunal emphasized that since M/s. Rakesh Bulb Industries sold all their products to M/s. United Commercial Corporation, the latter is considered a distributor and a "related person" under Section 4(4)(c). The Tribunal also noted that the manufacturers and buyers being the same, there is a financial interest in each other's businesses, further justifying the classification of M/s. United Commercial Corporation as a "related person."

3. Admissibility of deductions for post-manufacturing expenses and secondary packing costs:

The Tribunal addressed the admissibility of deductions for post-manufacturing expenses and secondary packing costs. The Assistant Collector had rejected the claim for deductions on the grounds that no break-up of expenses backed by a Chartered or Cost Accountant certificate was provided. The Tribunal upheld this decision, stating that the cost of secondary packing (cartons) used by M/s. Rakesh Bulb Industries is essential for the protection of goods and does not qualify for exclusion. The Tribunal cited Supreme Court judgments in Union of India & Others v. Bombay Tyres International Ltd., Union of India & Ors. v. Godfrey Phillips India Ltd., and Asstt. Collector of Central Excise & Others v. M.R.F. Ltd., which clarified that only packing not generally used for putting goods into the wholesale market but provided solely for safe transport can be excluded. The Tribunal also dismissed the appellants' argument based on promissory estoppel, as no public document promising the exclusion of secondary packing costs was provided.

Conclusion:

1. Appeal No. 1171 of 1982-A: Dismissed, as it lacked merit.
2. Appeal No. 1449 of 1982-A: Allowed, setting aside the portion of the Appellate Collector's order permitting the exclusion of secondary packing costs.
3. Appeal No. 417/85-A: Allowed, restoring the Assistant Collector's order dated 23-11-1983.