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TMI Blog1996 (11) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the show cause notice these six factors have been set out as the ones by reason of which the appellants sales to M/s. MICO will have to be considered as sales to the related person. These six factors are enumerated herein below as set out in the show cause notice :- (i) M/s. MICO Ltd. have financed a sum of Rs. 6 lacs to M/s. BAPL as early as 1983, which is interest free. This is a clear pointer to the fact that M/s. MICO Ltd. harbours an interest in M/s. BAPL. Even though the said amount is shown as advance, a sum of Rs. 2,08,500/- remained unadjusted as on 30-4-1988 despite supplies to the tune of Rs. 1.35 crores to M/s. MICO Ltd. (details of loan repayment are noted by M/s. MICO in their letter dated 28-11-1984). (ii)&ems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han that of M/s. BAPL by 11 to 25%. To substantiate that such a huge difference in price would disprove sale on principal to principal basis. He has urged that the learned lower authority after taking note of provision under Section 4(1)(a)(iii) without bringing out as to how it could be taken as a mutuality of interest between the appellants and M/s. MICO has held that for reason of these factors the appellants sales have to be considered as those to a related person. Dealing with each one of these factors, the learned Counsel has urged as under :- (i) Interest free advance given by M/s. MICO to the appellants : The learned Counsel has pleaded that initially M/s. MICO had sought to bind the appellants to produce the goods for M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssments should have been done under the Valuation Rules and the provisions of Section 4(1)(a)(iii) could not come into play. (iii) Lease of two machines : He pleaded that the appellants have an outlay of over Rs. 1 crore in their factory and two machines valued at Rs. 80,000/- have been supplied by M/s. MICO as these machines are of certain specific designs and they have procured the same for the manufacture of the goods required by them. There is a lease agreement between the appellants and M/s. MICO under which they are paying a rental of Rs. 1,000/- per month for these machines. He pleaded that the appellants did not have any extra commercial consideration by taking these machines and, in any case, the supply of these two machines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that falls for consideration is whether in the context of the business relationship between the appellants and M/s. MICO it can be said that there is a mutuality of interest inter se which would bring the appellants' sales within the mischief of Section 4(1)(a)(iii). On going through the various factors which have been taken into reckoning by the learned lower authority, we observe that the factors which have been taken note of are deposit of money given to the appellants in 1983, lease of the two machines, use of the brand name and a stipulation that the appellants could not manufacture goods for others and the know-how. We observe that none of these factors by themselves taken individually or cumulatively on the face of it would lead to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing on the price this extra commercial consideration alone can be added for arriving of the value and for that purpose, a reliance will have to be placed to the Valuation Rules. The circumstance of Section 4(1)(a)(iii) cannot be brought in for that reason. No case in our view has been made out for invoking the provisions of Section 4(1)(a)(iii) in the present case. The price sold by M/s. MICO for the goods manufactured by the appellants was higher by 11% to 25%. This price cannot be taken to be in any way high taking into consideration the nature of the goods involved and the marketing conditions prevailing. In any case, mutuality of interest cannot be read from this factor. The appeal is therefore allowed with the above observations. X X X X Extracts X X X X X X X X Extracts X X X X
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