9911796707
TMI Blog1981 (9) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... des a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor." The claim of the respondents is that the amount which the main dealer was entitled to earn on selling the goods to other dealers should be treated as part of the price of the vehicle sold by the petitioner and that excise duty should be paid on the total amount of the price for which the main dealer sells the goods. Since there was need for maintaining continuity of business without interruption, the petitioner complied with the requirements under protest and has filed this writ petition aggrieved not only against the order of the third respondent but also against the orders of the second respondent and first respondent, which had confirmed the stand of the third respondent in appeal and revision filed respectively. 2. Sri Ramasubramaniam, learned counsel for the petitioner contends that the word 'related person' would be applicable only to such of those instances where the manufacturer is directly or indirectly interested in the business of the main dealer or distributor and that those interests should exist mutually. The definition of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r should be added to the price to arrive at the assessable value. The test to be applied is whether each has a direct or indirect interest in the business of the other. When the petitioner itself accepts that its dealers are acting as main dealers which in other terms means that they perform the functions of a distributor, it cannot be said that the agreement involved in this petition would not come within the ambit of the definition 'related person'. A distributor is ordinarily distinguished from the dealer in that he is not merely interested in buying the goods for selling the same for making a profit but is also interested in the equitable and proper distribution of the goods, sales promotion and after-sales service, whereas a dealer is not such a person. A dealer has no such obligation and further he is free to deal in similar products of other competitors, whereas in the case of distributors, they are debarred from engaging in the sale of competitors' products. A distributor is paid overriding commission in respect of direct sales made by the assessee in his territory, whereas the dealer does not have this benefit. Advertisements are also effected at the cost of the main deale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. After analysing the terms and conditions of the agreement, it was held that the assessee's claim will have to be upheld. 6. In Amar Dye Chem. Ltd. v. Union of India (1981 E.L.T. page 348 Bombay) a Division Bench of the Bombay High Court held that it is wholly immaterial whether the price is paid in cash or the goods are supplied on credit, provided it be established that the property in the goods had passed in favour of the buyer, who may be described as a distributor and such expressions are not conclusive and what is to be looked at is the legal incidences of the sale. 7. The relevant terms and conditions of the agreement are referred to in the order of the third respondent, the first condition is that the main dealer is given the sole right of selling the products within the territory. Assigning a particularly area for sale of goods purchased to a main dealer is nothing inconsistent with the transfer of property in the goods taking place in favour of the buyer, who is prevented from selling to others outside the territorial limits. Hence it cannot be said that the restricted territory given would make it a distributorship agreement. 8. The second clause referred to is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, when the goods are sold, they are covered by a warranty period and the obligation is on the manufacturer to satisfy the customer by such after sale service, which the main dealer undertakes to do. This condition is conceived of in the interests of the consumer. This obligation has to be discharged for the benefit of the consumer by the manufacturer, main dealer and dealer. This cannot be considered as resulting in a direct or indirect interest in the business of each other. 12. Therefore the contention of Sri Ramasubramaniam, learned counsel for the petitioner that the fixation of a territorial limit, the obligation to restrict activities within the territory, to discharge the post-sale obligations to comply with the warranty conditions etc. would not by themselves or even put together, result in the concept of 'related person' being injected in the transactions entered into by the petitioner with its main dealers. 13. What is more significant is that, an invoice is prepared in favour of the main dealer who pays the price and takes delivery of the vehicles and thereafter they belong to him. In turn he makes the invoice on the dealer or a sub-dealer, in his own right. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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