1988 (12) TMI 256 - AT - Central Excise

Summary

Issues Involved:
1. Whether M/s. ICIM and ICIL are related persons u/s new Section 4.
2. Whether M/s. ICIL are favored on account of any special relationship.
3. Whether the sales made by the appellants to ICIL were at arm's length and the price was the sole consideration.
4. Determination of the assessable value for goods sold on a lease basis.
5. Applicability of Rule 10 or Rule 10A for recovery of short-levy.

Summary:

1. Related Persons u/s New Section 4:
The Tribunal examined whether ICIM and ICIL could be considered related persons under new Section 4. It was held that even if ICIL was a distributor of ICIM, they could not be considered related persons as both were limited companies and did not fit the definition of "related person" as per Section 4, following the Supreme Court judgment in Bombay Tyre International.

2. Special Relationship:
The Tribunal found no evidence that ICIM and ICIL had any direct or indirect interest in each other's business, despite being subsidiaries of the same UK holding company. It was noted that the relationship through a common holding company did not automatically imply mutual interest in each other's business.

3. Sales at Arm's Length:
The Tribunal observed that the sales transactions between ICIM and ICIL were based on agreements and were conducted on a principal-to-principal basis. The price charged by ICIM to ICIL was not found to be influenced by any extra-commercial considerations. However, it was noted that the price was not the sole consideration for the sale due to the various services rendered by ICIL, which needed to be factored into the assessable value.

4. Assessable Value for Lease Basis:
The Tribunal remanded the matter to the Assistant Collector to determine the assessable value afresh, considering the services rendered by ICIL and the guidelines laid down by the Supreme Court in Bombay Tyres International. The Tribunal held that the price declared by ICIM to ICIL should not be accepted as the sole assessable value without considering the additional services provided.

5. Applicability of Rule 10 or Rule 10A:
The Tribunal held that the demand for short-levy could be raised under Rule 10A, as there was no mis-statement or mis-construction on the part of the officers or the appellants. The appellants had declared the price based on their interpretation of the law, which was not considered a mis-statement of value. The Tribunal noted that Rule 10A could be invoked when the short-levy was not covered by the specific provisions of Rule 10, and in this case, the procedural formalities for assessment were followed.

Conclusion:
The appeals were partially allowed by remand, directing the lower authority to reassess the value considering the services rendered by ICIL and following the Supreme Court's guidelines. The Tribunal clarified that ICIM and ICIL were not related persons under Section 4, but the price declared was not the sole consideration for the sale. The demand for short-levy was to be raised under Rule 10A.