9911796707
TMI Blog1988 (3) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... s sold their fabrics through their sister company, M/s. J.K. Commercial Corporation Limited, who acted as the Sales Managers or selling organisation of the respondents. The respondents sold their entire out-put of the fabrics to four partnership firms of Kanpur : (1) M/s. Shiv Narain Amar Nath. (2) M/s. Hindustan Traders. (3) M/s. Anand Textiles. (4) M/s. Narain Das Sajan Lal. The partners of these firms were closely inter-related. These four firms, in turn, sold the entire out-put to only one customer, M/s. Agarcon (India) Ltd., Kanpur. The four firms and M/s. Agarcon were located in the same building. The four firms had no godown or storage space of their own. The goods were carted from the respondents factory and were unloaded directly at M/s. Agarcon s premises. There was no written agreement either between the respondents and the four firms or between the four firms and M/s. Agarcon. The four firms purchased the goods on the basis of 45 days Hundi and for the period of credit they paid the interest separately, over and above the sale price of the fabrics. They added their own commission or profit - ranging from nil to 7% - on the respondents invoice price and re-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Agarcon functioned as the commission agent of the respondents did not arise out of the Collector s order since it was neither raised before the Collector in the show cause notice nor did the Collector deal with it in his order. We heard both parties on these preliminary points. We found that the Board had dealt with the facts of the case and the issues involved at great length in sub-paras (a) to (z) of Paragraph 3 of their order. The points which the Board wanted to be determined by the Tribunal, though not itemised separately as 1, 2, 3, 4, were nevertheless stated in sub-paras (x) (z) of the Board s order. Sub-para (x) stated that M/s. Agarcon sold the goods on behalf of the respondents; in other words, M/s. Agarcon were a commission agent of the respondents. Therefore, M/s. Agarcon s sale price in the wholesale market should be taken as the basis of valuation under Section 4(1)(a). Sub-para (z) stated that M/s. Agarcon were a related person of the respondents within the meaning of the first part of Section 4(4)(c), the consequence of this also being that sale price of M/s. Agarcon should form the basis of assessment in terms of Proviso (iii) to Section 4(1)(a). We are, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t adequate to make them a related person; the requirement of the second part of Section 4(4)(c) was that the distributor should be a relative of the assessee also. This condition was not specified in this case. It is not the case of any party before us that M/s. Agarcon were a related person of the respondents within the meaning of the second part of Section 4(4)(c). The point put before us is whether they were a related person of the respondents within the first part of that sub-section. Regarding the first part, it has been held by the Hon ble Supreme Court in Union of India v. Atic Industires Limited [1984 (17) E.L.T. 323 (S.C.)] that to satisfy the definition of the first part there should be mutuality of interest, direct or indirect, in the business of each other between the assessee and his buyer. We asked the department to show as to what was the mutuality of interest as between the respondents and M/s. Agarcon in this case. We were informed that there was no shareholding as between the respondent company and M/s. Agarcon. We were further informed by the respondents that no partner of the four firms had any shareholding either in the respondent company or in M/s. Agarcon. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion a consideration for sale of the fabrics to M/s. Agarcon. We were told that there were no written agreements either between the respondents and the four buyer firms or between these four firms and M/s. Agarcon. The whole thing worked on the basis of some understanding between the parties. The respondents stated that they had a vast research and development organisation of their own to ascertain the customer s choice and demand pattern for the fabrics from time to time. They had entrusted this work to their sister company, M/s. J.K. Commercial Corporation Ltd., who also acted as their selling organisation. For their services, the respondents paid that company 1-1-1/2 of the sale value plus travelling expenses. The respondents were including this commission in their sale price and there was no dispute about it. But since M/s. Agarcon, their dealers and retailers were in the actual sale business and came in touch with the consumers, they were able to sense the consumer s choice. The customers who came to the cloth shops showed their preference for particular shades, prints and designs etc. The retailers and the dealers also knew as to what were the fast moving items at particular i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge place of their own. All that they did was to cart away the goods from the respondents factory and unload them directly at the premises of M/s. Agarcon. All the four firms were located in Kanpur, the same place where the respondents factory was situated. M/s. Agarcon were also located in Kanpur. The business premises of the four firms as well as M/s. Agarcon were situated in the same building. These four firms dealt with the fabrics manufactured by the respondents alone. All the four firms, in turn, sold the entire goods to only one party - M/s. Agarcon. This is most un-usual and odd. Though one could explain away this or that feature about these firms individually, it is difficult for us to believe that the phenomenon of all the four firms selling the entire out-put to just one customer was something normal. We do not mean to say that the four firms were non-existent or were dummies or that their purchase and re-sale transactions were fictitious. The firms, no doubt, existed but they were, in reality, no more than mere carting agents or lorry contractors. In reality, M/s. Agarcon were the respondents sole selling agents in India and the goods were directly delivered to them o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e point really pressed for by the department before us was that the price at which M/s. Agarcon purchased the fabrics should form the basis of assessment. The department, of course, also pressed for adding to it the additional consideration for fashion/pattern feed-back. We have already held that there was no justification to add any such additional consideration. In the result, the purchase price of M/s. Agarcon comes out as the acceptable basis for computation of the assessable value. 13-17. The respondents submitted that if M/s. Agarcon s purchase price was to be taken as the basis, cost of transport from the respondents factory gate to the premises of M/s. Agarcon and the interest for 45-60 days credit enjoyed by M/s. Agarcon from the date of removal of the fabrics from the factory should be deducted from such price. As the respondents plea was covered by the Supreme Court judgments in the cases of M/s. Bombay Tyres International Limited - [1983 E.L.T. 1S96 (S.C.)] and M/s. MRF Ltd. - [1987 (27) E.L.T. 553 (S.C.], the learned advocate of the department had no objection to these deductions being made from M/s. Agarcon s purchase price after due verification and quantificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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