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TMI Blog1992 (10) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... it on Form IV meant for sales through related persons. In compliance with same the said price list claiming the trade discount was filed by Appellant in Form IV on 16-8-80. The approval of assessable value was however claimed on wholesale price for sales less trade discount on sales on principal to principal basis. 1.4. Superintendent of Central Excise, however, issued a notice dated 3-11-80 to show cause to the Assistant Collector of Central Excise as to why the price charged by the appellant s two distributors - Sumedico Corpn. and Namedic Corpn. - in wholesale trade should not be deemed to be the price in terms of proviso (iii) to Section 4(1)(a) of the Act and why the discount claimed by it @ 42 per cent in its price list be not disallowed. 1.5. Assistant Collector of Central Excise passed an order dated 28-4-82 holding that the appellant and it s distributors were related persons under Section 4(4)(c) of the Act. Accordingly, discount claimed by the appellant @ 42 % on its sale-prices to the distributors was disallowed. The Asstt. Collector did not allow the discount given by the distributors to its dealers observing that the appellant has failed to produce the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oice or deducted from the invoice price. I conclude, therefore, that unless it is undoubtedly proved that there is a flow-back of some amount of discount (given by the appellants to the buyer), from the buyer to the appellants by the lower authority, the total denial of 42 % discount is bad-in-law and the same should be permitted in law to meet the ends of justice. In the circumstances stated above, I feel that the appellants case deserves consideration on merits. However, as the lower authority has not given sufficient reasons for not allowing the 42 % trade discount claimed by the appellants in their price-list dated 16-8-80 in the impugned order, the same was not a speaking order. I, therefore, set aside the impugned order and remand the case to the lower authority for de novo decision by following principles of natural justice, in the light of my observations in paras 3 and 4 supra. The appeal is accordingly disposed of. In other words, the lower appellate authority remanded the matter to the original authority. 1.7. Original authority, in de novo proceedings, by its order dated 31-10-1985 held that the two distributors - Sumedico Corpn. and Numedico Corpn. - are not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals). He is seeking to get the de novo order dated 31-10-85 passed by the Asstt. Collector revised. This is well within the competence of the Collector in terms of the Section 35E. (ii) Whether Sumedico Corpn. and Numedico Corpn. are related persons of the appellant. (a) Learned Advocate has urged that the appellant, being a private limited company, is a legal person in itself and therefore, there is no question of its having natural relatives as envisaged in the definition of the expression related person in Section 4 ibid. He, therefore, submits that the agreement between the appellant and the two distributors is required to be examined to determine whether the distributors and the appellant are so associated that they are, directly or indirectly interested in the business of each other. He, points out that the terms of the agreement clearly show that the dealings of the appellant and its distributors are on the basis of principal to principal. Clause 2 of the agreement clearly stipulates that the distributor should not describe itself as the Company agents except in conjunction with the words selling and distributing . He further urges that clause 3A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged that the pricing of medicines is subject to Drug Price (Control) Order. Various clauses in the agreement are normal commercial clauses indicating a relationship of arm s length transaction between dealer and the appellant. (b) Learned JDR on the other hand points out the clauses 3, 4, 6 and 12 and urges that these clauses indicate that the distributor s transactions are not at arm s length with the appellants. Therefore, prices to distributors cannot form the basis of assessable value. Hence discount of 42 % is not admissible. (c) We have considered the submissions from both sides. We have gone through the agreement. Gist of clauses 3, 4 and 6 has already been set out in the course of pleas of the learned Advocate in sub-para (a) above. Clause 12 stipulates that in case of reduction in the list price of products, the distributor should be entitled to necessary adjustments on the stock of products held by the distributor on the date of such reduction coming into force. The distributor will also issue credit note to the dealers and stockists appointed by them. We are of the view that none of the clauses taken separately or cumulatively detract from the principal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of products of the appellant company, This specific clause, to our mind, seeks to promote healthy competition among dealers in the same category. Apart from the foregoing, assuming that Clause 4 seeks to bring control of the appellant over the distributor and thus the latter to some extent loses its independence, we fail to understand as to how such a clause makes the appellants and the distributor related persons in the sense of one being interested in the business of the other. We, therefore, hold on the basis of evidence on record that the appellants and the distributors are not related persons . Price at which goods are sold by the appellants to the distributors after giving a discount of 42 % would form the basis of assessable value under Section 4 of the Act. (iii) Whether the discount given by the distributors to their dealers can also be denied, assuming that the appellants and the distributors are related persons . Finding on this issue is not necessary in view of our finding on the second issue. Suffice it to say and to put it very mildly, the authorities below are duty bound, even on their own finding that the appellants and distributors are related per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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