1996 (11) TMI 234 - AT - Central Excise

Summary

Issues: Classification of components and determination of assessable value of power tools sold to related person.

In the judgment delivered by the Appellate Tribunal CEGAT, Mumbai, the case involved M/s. Ralliwolf Ltd. manufacturing portable power tools and components, with two main issues: classification of components and determination of the assessable value of power tools sold to Rallis India Ltd. (RI), a related person. The Assistant Collector had initially held that the assessable value of tools sold by the assessee should be based on the price at which RI sold the goods to its dealers due to their relationship. The grounds included RI holding 60% of RW's share capital, being the sole distributor for RW in India and Nepal, and other related agreements. Additionally, the deduction for wooden packing and dealer's commission was disallowed. The advocate for the assessee did not contest the component classification decided by the Bombay High Court but focused on the assessable value of power tools sold to RI and the deduction claimed for dealer's discount and packing charges.

Regarding the related person status, the Departmental Representative argued that RW and RI were related due to RI holding 60% of RW's share capital. However, the Tribunal emphasized that mere stockholding does not establish mutual interest, as per precedents like Union of India v. Atic Industries and New India Industries Ltd. v. Union of India. The agreement between RI and RW did not show a flow back of money to RW, and the advertisement charges borne by RI did not indicate mutual interest. The Tribunal concluded that the stock holding and distributorship alone were insufficient to consider them related persons, as none of the required criteria were met.

On the issue of packing charges, the Assistant Collector found wooden packing necessary for outstation customers but was challenged on appeal. The Collector (Appeals) ruled that wooden packing was not essential for all sales, citing the Supreme Court's judgment in Government of India v. Madras Rubber Factory. The Departmental Representative argued that sales to Government bodies should not be considered for determining packing necessity, but the Tribunal disagreed, stating that the nature of packing required to render goods marketable remains the same regardless of the buyer. The Tribunal upheld the Collector (Appeals)' finding that wooden crates were not necessary for sales at the factory gate, thus excluding their cost from the assessable value.

In the final analysis, the Tribunal dismissed one appeal and allowed another partially. Appeal E/125/94-Bom was dismissed, while Appeal E/114/R/96-Bom was dismissed concerning classification but allowed regarding the assessable value calculation based on the sales price from RW to RI. The judgment clarified the criteria for related person status, the inclusion of packing charges in assessable value, and the correct method for calculating differential duty based on the sales price between related parties.