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TMI Blog1984 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... All these persons have ceased to be directors of the petitioner company since 1974-75. The composition of the present board of directors has been set out in para 6 of the petition. This board has been continuing since 1974. After the management of the petitioner company changed there are no persons on the board of directors of the petitioner company who are on the board of any of the said three companies. Nor are any of the said three companies subsidiaries of the petitioner company. 3. The agreements of distributorship which had been entered into by the petitioner company with the said three companies prior to 1974 expired by efflux of time. One such distributorship agreement has been annexed by the respondent to the further affidavit of J.A. Nazreth, Assistant Collector, Central Excise, Thane. This is an agreement dated 16th May, 1968 between the petitioner company and M/s. Debsons Private Limited. Clause I of the said agreement provides that the agreement will be in force for a period of 5 years. The agreements were therefore for a fixed period. It is the case of the petitioners that after the expiry of the agreements with the said three companies, the petitioner company has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in Cl. (a), be deemed to be the normal price of such goods in relation to each such class of buyers ; (ii) ... ... ... … (iii) Where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail ; (1) ... ... ... … (2) ... ... ... … (3) ... ... ... … (4) For the purpose of this section - (a) ... ... ... … (b) ... ... ... … (c) "related person" means a person who is so associated with the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners have also pointed out that the three agreements with the said three companies have expired in 1973 by efflux of time and the agreements have not been renewed. They have also set out that the marketing arrangements are being continued. It was also mentioned that the petitioners and the said three companies or any of them have no interest direct or indirect in the business of one another and the prices at which the goods are sold to the said three companies are prices based on commercial considerations. The dealings are at arm's length. 10. Thereafter in respect of the four show cause notices orders were passed by the Assistant Collector of Central Excise being orders dated 23rd August, 1980, 28th August, 1980, 3rd September, 1980 and 9th September, 1980. Under these orders the 1st respondent has held that the said three companies are distributors and related persons under Section 4(4)(c) of the Central Excises and Salt Act of 1944. The orders state that the prices charged by the said three companies to independent dealers or customers should be taken as wholesale price for excise purposes. The orders also require the petitioners to dealers the price list in part IV o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t then considered the facts of the case before it. It observed that while the purchasing company had undoubtedly an interest in the business of the assessee because it held 50% of the share capital in the assessee company, it was not possible to show that the assessee company had any interest in the business of the purchaser company. The only relationship between the parties was that of a seller and a buyer. The transactions between them were from principal to principal. By virtue of these circumstances it could not be said that the assessee company had any interest, direct or indirect, in the business of the wholesale buyer. The assessee company was not concerned whether the buyer sold or did not sell the product purchased by it, nor was it concerned whether such goods were sold by the wholesale buyer at a profit or at a loss. The Supreme Court held that such a wholesale buyer, therefore, does not fall within the definition of a related person. 13. The ratio of the Supreme Court applies directly to the facts of the present case. In fact the ratio applies with greater force in the present case because none of the three purchasing companies of their directors have a substantial sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have now expired. The petitioners have stated that the sales are effected to these three companies on a principal to principal basis. It is therefore, not possible to hold that the prices charged by the petitioners to the said three companies are not prices charged to a wholesale dealer in the normal course of trade. 15. The respondents also emphasised that the petitioner had dealt only with three companies for effecting sales of their products on a wholesale basis. In my view this, by itself, does not affect the legal position one way or the other. In the case of Union of India v. Atic Industries Ltd. the assessee company had dealt with only two parties exclusively for the purpose of selling their products in the wholesale market. Sales to the said three companies are therefore not sales to related persons within the first part of the definition of "related person" in Section 4(4)(c) of the Central Excises and Salt Act, 1944. 16. The only other point which requires consideration is whether it is a sale to a distributor and a related person. The orders which are under challenge emphasise the fact that the said three companies are distributors and related persons. This par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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