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TMI Blog1982 (12) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... at which the main dealer sells the same products. It is the contention of the Union of India that the main dealer appointed by the respondents is only a distributor or a sole selling agent and consequently, will be a related person within the meaning of the definition of the word under Section 4(4)(c) of the Act. The statutory authorities in that view held that the respondents would be liable to pay excise duty on the price at which the main dealer sells the products to the customers. The respondents filed the writ petition before this court challenging the stand of the Union of India and other statutory authorities and contended that the main dealer would not be a related person within the meaning of the Act. This contention was accepted by the learned single Judge, who by his judgment dated 28-9-1981, allowed the writ petition. It is, in these circumstances, the Union of India has filed this writ appeal. 3. At the outset it is necessary to refer to Section. 4 of the Act as far as it is relevant. "4(1) Where under this Act the duty of excise is chargeable on any excisable goods with reference to value, such value shall subject to the other provisions of this section, be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r indirectly in the business of each other. The second part includes a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor as a related person. 4. Webster's dictionary gives several meanings of the word `distribute' as follows : (1) to divide among several or many to deal out; apportion; allot; (2) to spread out so as to cover a surface or a space; (3) to divide or separate, as into classes, orders, kinds, or species to classify; assort; as specimens, letters etc. The same meaning is found in the Oxford's Concise dictionary, Murry's Standard dictionary gives a somewhat better definition. The second meaning attached to the word is "to spread or disperse abroad, through a whole space or over a whole surface; properly, so that each part of the space or surface receives a portion; less definitely, to spread generally scatter". The distributor can therefore be only either an agent who sells goods for and on behalf of a manufacturer or a person who physically distributes the goods on behalf of the manufacturer. In the ordinary commercial parlance, also, the word distributor is understood as an agent or one who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time distributes i.e. physically transports and sells the goods manufactured by a particular manufacturer. We have already referred to the fact that the effect of a person falling within the definition of related persons is very extensive and far reaching. It will have the effect of enabling the authorities to ignore the price at which the sale are effected to or through such persons and even to proceed right upto the stage of retail distribution for the purpose of determining the assessable value. Having regard to the very radical impact of this definition on the assessable value of the excisable goods it appears to us that this expression should be given a very restricted meaning. It will be seen that to give a very wide meaning would practically alter the entire scheme of the Excise Act. It any person who distributes a fairly good part of the goods of a manufacturer were to be treated as a distributor (and it should not be forgotten that the definition also takes in the sub-distributors of such distributor) the effect will practically be that the assessable value in many cases will be taken as the retail price of the goods." 6. Then after referring to the observation of Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was raised on the basis that the distributing agents fell within the meaning of related person as defined in the Act inasmuch as they were distributors. On behalf of the assessee it was contended that the distributors to whom the assessee sold the goods were not agents of the manufacturers and that when they further sold the goods to their buyers, the sale was not on account of the manufacturer, but that the sale was on account of the distributor himself. Dealing with this contention, Chandurkar J. on behalf of the Bench observed as follows :- "The crucial question which we must decide at the outset before we go to the challenge to a part of the provision in Section 4(1)(a) and in the third proviso to that section is what to the scope of the concept of the distributor who is included in the definition of a related person in Section 4(4)(c). It is necessary at this stage to point out that a distributor in the commercial world is understood to be a person who distributes goods of the manufacturer to the consumers and in so doing, he acts for and on behalf of the manufacturer. A distributor normally is, therefore, an agent of the manufacturer for the purpose of reaching out the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Madras plus any sums for freight, delivery, Government, Municipal and other charges as may be stipulated by Ashok from time to time. Payment shall be made by the main dealer to Ashok before delivery or despatch in cash or in such other manner as may be acceptable to Ashok. The main dealer shall take prompt delivery of each and every product consigned to him in fulfillment of any order. All sales by Ashok shall be in accordance with Ashok's usual conditions of business. Under clause 4(b) Ashok has reserved a discretion to sell and deliver to the main dealer any product on credit. Under clause 2(b) Ashok shall have the right to make direct sales of its products to any purchaser within the territory without being under any liability or obligation to pay the main dealer any commission upon such sales. Ashok has reserved an absolute discretion to pay to the main dealer such commission in respect of such products so sold as it may decide. Under clause 2 Ashok has agreed to sell and supply their products to the main dealer and also granted the sole right of selling the products within the specified territory. It is unnecessary to refer to the other clauses in the agreement. From the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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