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TMI Blog1984 (6) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... Atul Products Limited and Crescent Dyes and Chemicals Limited to their purchasers but must be determined on the basis of the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited. The demand made by the Assistant Collector for differential duty must, therefore, be held to be rightly quashed by the High Court. The High Court has erred in giving direction in regard to payment of the costs incurred by the assessee in connection with the bank guarantee furnished by it in pursuance of the interim order made by the High Court. We do not think the High Court was right in giving this direction. The bank guarantee was required to be furnished by the assessee as a condition of grant of interim stay of enforcement of the demand for differential duty and if it is ultimately found that the demand for differential duty was not justified, the bank guarantee would certainly have to be discharged, but it is difficult to see how the costs of furnishing the bank guarantee could be directed to be paid by the Revenue to the assessee. - 3260 of 1979 - - - Dated:- 22-6-1984 - P.N. Bhagwati, R.S. Pathak and Amarendra Nath Sen, JJ. [Judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be the wholesale dealers of the dyes manufactured by the assessee throughout the relevant period with which we are concerned in this appeal. It was common ground between the parties that the transactions between the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were as principal to principal and the wholesale price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited was the sole consideration for the sale and no extra-commercial considerations entered in the determination of such price. Atul Products Limited and Crescent Dyes and Chemicals Limited, of course, sold the dyes purchased by them from the assesee at a higher price which inter alia included the expenses incurred by them as also their profit. 3. On 15th September, 1975 the assessee submitted a price list showing the assessable value of the dyes manufactured by it on the basis of the wholesale price charged by it to Atul Products Limited and Crescent Dyes and Chemicals Limited. The Superintendent of Central Excise demanded certain information from the assessee with a view to satisfying himself as regards the correctness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with retrospective effect from 1st October, 1975 and 'directed the assessee to file a fresh price list on the basis of the selling -price charged by Atul Products Limited and Crescent Dyes and Chemicals Limited. The demand for differential duty computed by the Superintendent of Central Excise for the period from 1st October, 1975 to 31st December, 1976 came to an aggregate amount of Rs. 1,17,77,737,65. The assessee thereupon filed a writ petition in the High Court of Gujarat challenging the 'validity of the demand made by the Assistant Collector and in the meanwhile also preferred an appeal before the Appellate Collector. The Appellate Collector rejected the appeal of the assessee without examining the merits on the grounds raised by the assessee since he took the view that all these grounds would be decided in the writ petition pending before the High Court and no useful purpose would be served by his considering the self-same grounds. 4. The assessee urged several grounds in support of the writ petition before the High Court but it is not necessary to refer to them in detail, because the High Court ultimately decided the writ petition in favour of the assessee only on two groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause (c) of sub-section (4) of section 4 of the amended Act. The Assistant Collector took the view that the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were related persons within the meaning of the first part of the definition of the term "related person" and the assessable value of the dyes manufactured by the assessee for the purpose of excise duty was, therefore, liable to be determined with reference to the price at which the dyes were ordinarily sold by Atul Products Limited and Crescent Dyes and Chemicals Limited. This view taken by the Assistant Collector was set aside by the High Court on the ground that the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were not "related persons" and the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited and not the price at which the latter sold the dyes to the dealers or the consumers, represented the true measure of the value of the dyes for the purpose of chargeability to excise duty. This conclusion reached by the High Court was assailed before us by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest in the business of Atul Products Limited. There are two points of view from which the relationship between the assessee and Atul Products Limited may be considered. First, it may be noted that Atul Products Limited is a shareholder of the assessee to the extent of 50 per cent of the share capital. But we fail to see how it can be said that a limited company has any interest, direct or indirect, in the business carried on by one of its shareholders, even though the shareholding of such shareholder may be 50 per cent. Secondly, Atul Products Limited is a wholesale buyer of the dyes manufactured by the assessee but even then, since the transactions between them are as principal to principal, it is difficult to appreciate how the assessee could be said by virtue of that circumstance to have any interest, direct or indirect, in the business of Atul Products Limited. Atul Products Limited buys dyes from the assessee in wholesale on principal to principal basis and then sells such dyes in the market. The assessee is not concerned whether Atul Products Limited sells or does not sell the dyes purchased by it from the assessee nor is it concerned whether Atui Products Limited sells su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir purchasers but must be determined on the basis of the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited. The demand made by the Assistant Collector for differential duty must, therefore, be held to be rightly quashed by the High Court. 6. But there is one small matter on which the High Court has, in our view erred in giving direction and it is in regard to payment of the costs incurred by the assessee in connection with the bank guarantee furnished by it in pursuance of the interim order made by the High Court. We do not think the High Court was right in giving this direction. The bank guarantee was required to be furnished by the assessee as a condition of grant of interim stay of enforcement of the demand for differential duty and if it is ultimately found that the demand for differential duty was not justified, the bank guarantee would certainly have to be discharged, but it is difficult to see how the costs of furnishing the bank guarantee could be directed to be paid by the Revenue to the assessee. We would, therefore, set aside that part of the order made by the High Court which directs the Revenue to pay to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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