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TMI Blog1985 (12) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... in Basle, Switzerland. The said 24 products are, inter alia sold to M/s. CIBA-Geigy of India Ltd. (hereinafter called the Buyers ). About 4 to 6% of the total manufacture are sold to buyers other than M/s. CIBA-Geigy of India Ltd. In the 24 items, 40% of the goods were sold to the Buyers during 1975 while during 1976 the percentage was 44.33. The sale of 24 products to the Buyers were in the course of the wholesale transaction principal to principal basis and the price was the sole consideration. The sales were also at arm s length and there was no extra-commercial consideration involved. The prices charged by the appellants to the Buyers were fair and competitive and there was no secret arrangement. On or about October 1975, when Section 4 was amended, the appellants were required to file fresh price list. The appellants filed the same on 12-9-1975 in part one as required by the new Section 4(l)(a) of the Central Excises and Salt Act. The appellants show the price actually charged by them to the said Buyers as the assessable value. The price list was duly approved by the concerned authorities on 8-10-1975. (Annexure - A ). Nevertheless, a letter was addressed to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants by the Appellate Collector on 17-10-1978. A revision was filed before the Government of India and on transfer the same is being treated as an appeal (with the connected appeals). 6. Shri Soli Sorabjee, the learned counsel for the appellants drew our attention to the impugned order and stated that the lower authorities had proceeded to arrive at a decision on two grounds, namely (i) that the appellants were selling their entire products S.D. 24 dyes to the Buyers , and (ii) that the appellants and the said Buyers were interconnected undertakings within the meaning of Section 2(g) of the M.R.T.P. Act, 1968. Section 4(4)(c) of the Central Excises and Salt Act, 1944 defines related person as follows :- related person means a person who is so associated with the assessee that they have interest directly, or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor. Explanation- In this cause holding company , subsidiary company and relative , have the same meanings as in the Companies Act, 1956 (1 of 1956): The test is that the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade the duty. The agreements contained the normal conditions which any prudent buyer or seller of the product would like to incorporate. The first agreement was for a period of 20 years while others were for periods of 10 years each. The agreements contained clauses safeguarding the interests of the parties to the agreements. In particular, we refer to the clauses relating to furnishing of the formula and the manufacturing processes, etc., maintaining the production schedule, supplying the dyestuffs to CIBA or such other firms as may be named by them and not to sell scheduled dyestuffs to third parties, directly or otherwise. In the subsequent agreement also we find terms such as Atul Company is free to sell to third parties provided CIBA will get the compensation. Every effort was being made to keep secret during and after termination of the agreement any processes or information received by the Buyers . These terms and conditions will not, in our view, be sufficient to hold that the appellants and the Buyers are related persons . The minutes contained safeguards regarding the secrecy of the technical know-how and initial supply of the requirements of the CIBA India befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had mutual interest in the business of each other, it is futile to contend that they are related persons . Shri A.K. Jain, SDK, argued that 12% discount was given only to the Buyers and that was the special treatment indicating an understanding between them. As rightly contended by Shri Soli Sorabjee, there is no such case made out in the show cause notice. The appellants urged that CIBA is the largest single buyer and hence the goods were sold to CIBA at a bulk discount and CIBA s sale price was bound to be higher than the price charged by the appellants to CIBA. There is no justification to hold that the Buyers are favoured buyers . The show cause notice refers only to a case of related persons . There is no allegation that the appellants derived any extra-commercial consideration in the transactions. Mutually beneficial business arrangements cannot be equated with mutual interest in the business of each other. It is not now open to the Department to urge that the buyers were given special discount which was not normally given in the trade. No secret arrangement should be presumed on the facts proved. A manufacturer is not prevented by law from making all his sales to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the considerations. Hence, even if the appellants and the buyers were interconnected undertakings as per provisions of the MRTP Act, in the absence of any mutuality of interest between two entities, we cannot hold them as related persons . 11. The appellants no doubt sell their products to the Buyers with their brand name. But in law that will not make them related persons . The question of brand name has been considered in 1985 (22) E.L.T. 302 (S.C.) (Union of India Others v. Cibatul Limited), In paragraph 7 it is observed as follows : It seems to us clear from the record that the trade-marks of the buyer are to be affixed on those goods only which are found to conform to the specifications or standard stipulated by the buyers . Several other circumstances have been set out in the judgment. It was held that latter should have manufactured the goods on behalf of the buyer. A close analysis of the facts and circumstances of this case clearly shows that the appellants cannot be considered as related persons of the Buyers . 12. Shri Soli Sorabjee stated that Rule 10 of the Central Excise Rules, 1944, was deleted on 6-8-1977 and the show cause notice issued on 6-8-1976 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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