9911796707
TMI Blog1989 (5) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause and the demand notices. Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... said respondent merely manufactures the aforesaid items for Bush India and after manufacturing those, it sells those to Bush India Ltd. It was contended that, for the purpose of finding out the price for payment of excise duty, only the price which was charged by the respondent from Bush India Ltd. could be taken into account and the price at which Bush India Ltd. further sold those goods in the market was not the price which was to be taken for the purposes of excise duty. It was contended that Bush India Ltd. was not a related person of the respondent within the meaning of section 4(4)(c) of the Central Excises and Salt Act, 1944 (hereinafter referred to as "the Act"), and reliance was placed on the decision of this court in Union of India v. Bombay Tyre International Ltd. [1984] 1 SCR 347 ; [1986] 59 Comp Cas 460. On the merits of the case, reliance was also placed on certain decisions of this court as well as the decision of the Delhi High Court. The High Court found that the case of the respondent was directly covered by all these decisions. In the premises, the High Court quashed the said show-cause notices and the demand notice. The question, therefore, is whether the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to such dealers, to dealers (being related persons) who sell such goods in retail ;" According to clause (c) of sub-section (4) of section 4 of the Act, "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. The Explanation to section 4(4)(c) further provides that in this clause "holding company", "subsidiary company" and "relative" have the same meanings as in the Companies Act, 1956 (1 of 1956). It is in this context that the validity or otherwise of the High Court's view has to be judged. In Union of India v. Bombay Tyre International Ltd. [1986] 59 Comp Cas 460 (SC), this court had to examine this question. This court examined the scheme of section 4(1)(a) before the Amendment Act, 1973, and also the position after the amendment. It was contended in that case before this court that the definition of the expression "related person" was arbitrary and it included within its ambit a distributor of the assessee. This court, however, held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of each other. Each of them must have a direct or indirect interest in the business of the other. The quality and degree of interest which each has in the business of the other may be different ; the interest of one in the business of the other may be direct while the interest of the latter in the business of the former may be indirect. That would not make any difference so long as each has got some interest, direct or indirect in the business of the other. In that case, this court found that Atul Products Ltd. had interest in the business of Atic Industries Ltd. since it held 50% of the share capital of that assessee and had interest as shareholder in the business carried on by the assessee. But this court was of the view that it could not be said that the assessee, a limited company, had any interest, direct or indirect, in the business carried on by one of its shareholders, namely, Atul Products Ltd., even though the shareholding of such shareholder might be 50%. Secondly, it was noted that Atul Products Ltd. was a wholesale buyer of the dyes manufactured by the assessee but even then, since the transactions between them were as principal to principal, it was difficult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the respondent, Cibatul Ltd., entered into two agreements with Ciba Geigy of India Ltd. for manufacturing resins by the seller. The joint manufacturing programme indicated that the resins were to be manufactured in accordance with the restrictions and specifications constituting the buyer's standard and supplied at prices to be agreed upon from time to time. The buyer was entitled to test a sample of each batch of the goods and, after its approval, the goods were to be released for sale to the buyer. The products were to bear certain trade marks being the property of the foreign company, Ciba Geigy of Basle. Tripartite agreements were also executed between the buyer, the seller and the foreign company recognising the buyer as the registered or licensed user of the trade marks, authorising the seller to affix the trade marks on the products manufactured "as an agent for and on behalf of the buyer and not of his own account" and the right of the buyer being reserved to revoke the authority given to the seller to affix the trade marks. The respondent in that case filed a declaration for the purposes of levy of excise duty under the said Act showing the wholesale prices of differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pparent that the seller could not be said to manufacture the goods in those facts, it was held, on behalf of the buyer. It was further found that it was clear from the record that the trade marks of the buyer were to the affixed on those goods only which were found to conform to the specifications or standard stipulated by the buyer. All goods not approved by the buyer' could not bear those trade marks and were disposed of by the sellers without-the advantage of those trade marks. This question was again examined by this court in joint Secretary to the Govt. of India v. Food Specialities Ltd. [1985] Supp. 3 SCR 165. There, the respondent used to manufacture certain goods for sale in India by Nestle's Products India Ltd. (for short Nestle's) under certain trade marks in respect of which the latter was registered as the sole registered user in India. The goods were supplied to Nestle's at wholesale price on rail at Moga or free on lorry at factory. The respondent disputed the value of the goods determined by the excise authorities for the purpose of the levy under the said Act and ultimately the respondent filed writ petitions in the High Court. The High Court allowed the writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court came to the conclusion that the market value of the goods of the respondent herein was the price charged from Bush India Ltd. and not the market value at which price Bush India Ltd. sold to its wholesalers for the purpose of payment of excise duty. The High Court, therefore, quashed the showcause notice and the demand notice. Shri A. Subba Rao, on behalf of the Revenue, tried to contend before us that the facts of this case revealed that it was a device to under-charge. The respondent herein was brought in to divide the sale price of Bush India Ltd. to be the basis of the assessable value. It is true that the facts of this case do warrant a great deal of suspicion. But it is not possible to hold otherwise than what has been held by the High Court in this case. It is true, as Shri Rao drew our attention, that even though the corporation might be a legal personality distinct front its members, the court is entitled to lift the mask of corporate entity if the conception is used for tax evasion, or to circumvent tax obligation or to perpetrate a fraud. In this connection, reference may be made to the observations of this court in Juggilal Kamlapat v. CIT [1969] 73 ITR 702 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
