1988 (4) TMI 145 - AT - Central Excise

Summary

Issues:
1. Determining the basis of assessment for central excise duty: whether the sale price to the sole-selling agents or the sole-selling agents' sale price to their customers.
2. Assessment based on arm's length principle.
3. Interpretation of the agreement between the appellants and the sole-selling agents.
4. Consideration of relationship between the appellants and the sole-selling agents.
5. Application of Section 4(4)(c) of the Central Excises and Salt Act, 1944.
6. Analysis of the sales promotion clauses in the agreement and its impact on assessable value.

Detailed Analysis:
1. The primary issue in the judgment involved determining the basis of assessment for central excise duty, specifically whether the sale price to the sole-selling agents or the price at which the sole-selling agents sold to their customers should be considered. The lower authorities had favored the latter, considering the relationship between the parties.

2. The assessment was challenged based on the arm's length principle. The appellants argued that their agreement with the sole-selling agents was commercially sound and should not be dismissed solely due to all sales being made to one party. They relied on relevant Supreme Court judgments to support their stance.

3. The interpretation of the agreement between the appellants and the sole-selling agents was crucial. The Tribunal found that the agreement was for sale and purchase of goods, not merely stock transfer. This finding contradicted the department's claim that the sole-selling agents were acting as commission agents.

4. The relationship between the appellants and the sole-selling agents was a key point of contention. The Tribunal noted that the lower authorities had consistently referred to the sole-selling agents as a sister concern of the appellants. The appellants did not challenge this assertion, indicating an acceptance of the relationship.

5. Section 4(4)(c) of the Central Excises and Salt Act, 1944, was invoked to define "related persons." The Tribunal analyzed the relationship between the appellants and the sole-selling agents under this provision, emphasizing the mutual interest between sister concerns and its impact on the assessment of excise duty.

6. The sales promotion clauses in the agreement were scrutinized for their effect on the assessable value. The Tribunal found that the sole-selling agents were obligated to undertake sales promotion at their own cost, which provided an additional benefit to the appellants. This additional consideration led to the dismissal of the appellants' sale price as the sole basis for assessment.

In conclusion, the Tribunal upheld the lower authorities' decision, dismissing the appeals based on the relationship between the parties, application of relevant legal provisions, and the impact of sales promotion clauses on the assessable value for central excise duty.