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TMI Blog1988 (3) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... he price to the distributors. The question is whether the price charged by the respondents from buyers at the factory gate should be accepted as the assessable value for the levy of duty under Section 3 of the Act. The Assistant Collector found from the sales pattern of the respondents that the distributors were 'related persons' as per Section 4 of the Act and the price at which the distributors sold the goods should, therefore, be the assessable value. 2. The respondents went up in appeal before the Appellate Collector. The Appellate Collector held that in order to establish mutuality of business interests, direct and indirect between manufacturer and buyer, it should be shown that they have been promoting the business of each other in their own interest and that in the absence of such a finding in the Assistant Collector's order, these could not be held to be related persons. Section 4 of the Act provides that where the duty of excise is chargeable on any excisable goods with reference to value, such value should be determined on the basis of the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the respondents and their distributors according to which they were the company's distributors for the sale of their goods. Major portion of the sales were effected through M/s. T.I. and M Sales Ltd. who were the main distributors of M/s. Tube Investments of India Ltd. and its subsidiary companies and rest of the sales through the other two distributors. M/s. Tube Investment of India was the holding company of M/s. T.I. Millers Ltd. The agreement between the assessee and the T.I. and M Sales Ltd. was registered under the MRTP Act. The Government of India also found that there was a territorial earmarking for the operation of the distributors, who also undertook advertisements and helped the sub-dealers for maintaining show rooms in dealer's premises. The distributors did not deal with competitor's goods. The Government of India also noted that the assessee granted mark up to the distributors to cover their establishment expenses, travelling expenses, advertisement and sundry expenses. On these grounds, the Government of India tentatively considered that it was a fit case for reversing the order of the Appellate Collector who had held that the distributors were not related pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the wholesale price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery should be excluded from such price. It was further held that these principles could not apply where the tariff value had been fixed in respect of any excisable goods under sub-section (2) of Section 3. The Court also dealt with the interpretation of definition of 'related person'. The Court further held that the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely, after sales service and marketing and selling organisation expenses including advertisement expenses marketing and selling organisation expenses and after-sales-service promote the marketability of the article and enter i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by them on behalf of the manufacturer. Learned counsel pointed out that this was a case where it was an extension of the manufacturer's self to the point of sale by the distributor. Learned counsel for the revenue urged that it was a case of indirect relationship and came within the ratio of the aforesaid decision of this Court in Bombay Tyre International case (supra). In this case, it was highlighted that manufacturer had interest in the buyer who were their distributors and the distributors were only charging limited commission, maintained show-rooms, and did not deal in the products of competitors of the manufacturer. It was further contended that sales of their products as original equipment, could not be considered as sales in the ordinary course of wholesale trade. It was further highlighted that the norm of inter-connected undertakings found in MRTP Act is not relevant to decide 'related persons' in the Act. It was further argued that mere area restriction is not relevant for proving mutuality of interests, but it has to be shown that the sale was not at an arms length and not a principal to principal transaction. It appears from the letter, dated 10th September, 1981 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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