Customs, Excise and Gold Tribunal - Delhi
Eddy Current Controls (India) Ltd. vs Collector Of Central Excise on 7 March, 1988
Equivalent citations: 1989(39)ELT147(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. The dispute in this case is on determination of the assessable value of the goods manufactured by the appellants.
2. The facts, in brief, are that the appellants manufactured Eddy Current Clutches. This is a machinery component, it is used to control the speed of electric motors. The nature of the component is such that its customers would be the manufacturers of electic motors only. Being a small Company and not wanting to takeover the burden of marketing their goods to such manufacturers all over the country, the appellants appointed M/s. Greaves Cotton & Co. Ltd., a big Company having a wide marketing network, as their sole distributor. They entered into an agreement with M/s. Greaves Cotton & Co. Ltd. on 2.6.1978. This agreement was valid for 5 years. The next agreement was, however, entered into on 22.7.1986. During the intervening period, the old arrangement between the appellants and M/s. Greaves Cotton & Co. Ltd. continued. The appellants were earlier filing pricelists in Part-IV, i.e. on the footing that M/s. Greaves Cotton & Co. Ltd. were their 'related person' within the meaning of Section 4(4) (c) of the Central Excises and Salt Act, 1944. However, on receipt of the Supreme Court judgments in the case of Bombay Tyres International Ltd. [1983 E.LT. 1896 (SC)j and U.O.I, v. Atic Industries (India) Ltd. [1984 (17) E.LT. 323 (SC)], the appellants felt that M/s. Greaves Cotton & Co. Ltd. could not be considered their 'related person'. On 24.7.1984, they filed two pricelists No. 16/84 and 17/84 in Part-I, i.e., on the footing that M/s. Greaves Cotton & Co. Ltd. were buying their goods on principal to principal basis. They claimed deduction of 20% discount over the list price which they were giving to M/s. Greaves Cotton & Co. Ltd. The lower authorities, relying on the judgment of the Andhra Pradesh High Court in [1985 (18) E.LT. 249 (A.P.)] Moped India Ltd. have held that M/s. Greaves Cotton & Co. Ltd. were a related person of the appellants because they were bound by agreement :
(i) not to deal in like goods of other manufacturers without the consent of the appellants;
(ii) to attend to prompt after sale service, during the free warranty period;
(iii) to do effective advertisement and sales promotion for the appellants' goods; and
(iv) not to part with the benefits of the agreement to others without prior permission of the appellants.
Accordingly, the lower authorities have disallowed the deduction of 20% discount given by the appellants to M/s. Greaves Cotton & Co. Ltd. The appellants are in appeal against this order.
3. We have heard both the sides and have carefully considered the matter. Since both the appellants as well as M/s. Greaves Cotton & Co. Ltd. were Limited Companies, there could be no question of the one being a relative of the other. Further, since neither of them was holding any shares of the other Company, the Learned Representative of the Department could not tell us how the mutuality of interest in the business of each other arose in this case. The appellants submitted that the Andhra Pradesh High Court's judgment in the Moped India Ltd. case had been reversed by the Hon'ble Supreme Court in [1986 (23) E.LT. 8 (SC)] Moped India Ltd. No objection could be taken to the clauses of the Agreement which required M/s. Greaves Cotton & Co. Ltd. to take the consent of the appellants if they were to deal in similar goods manufactured by the appellants' competitors and to part with the benefits of the agreement to others. The only objection could be to M/s. Greaves Cotton & Co. Ltd. incurring expenditure on advertisement and after sale service (during the warranty period) on behalf of the appellants since these two activltles meant that some additional consideration, over and above the sale price, flowed from M/s. Greaves Cotton & Co. Ltd. to the appellants. The appellants stated before us that they were willing to have the money value of the additional consideration being added to the assessable value of the goods in terms of Rule 5 of the Central Excises (Valuation) Rules, 1975. At this, the Learned Representative of the department also very fairly stated that the present case was similar to the case of M/s. R. Gac Electrodes Pvt. Ltd., Bangalore [1988 (33)E.LT. 485/(Tribunal)] which was remanded to the Assistant Collector for redetermination of the assessable values after adding only the money value of the additional consideration.
4. At the end of the hearing before us, there was no dispute left between the parties that Rule 5 of the Valuation Rules applied to the facts of the present case and not Section 4(4) (c) of the Act. We hold that M/s. Greaves Cotton & Co. Ltd. were not a related person of the appellants. At the same time, we hold that the price paid by M/s. Greaves Cotton & Co. Ltd. was not the sole consideration for the sale. Accordingly, we set aside the impugned orders and remand the matter to the Assistant Collector who shall determine the money value of the additional consideration and add it to the sale price paid by M/s. Greaves Cotton & Co. Ltd. for determining the assessable value of the goods. The appeal is allowed by way of remand in these terms.
5. The appellants stated that their Company was in the process of being wound up and hence the remand proceedings needed to be expedited. With a view to facilitating the expeditious conclusion of the remand proceedings, we direct the appellants to furnish to the Assistant Collector on an affidavit the particulars of expenditure during the material period incurred by M/s. Greaves Cotton & Co. Ltd. on :
(i) Advertisement and sales promotion; and
(ii) After sale service during the warranty period, in respect of the appellants' goods.
The Affidavit should be supported by a Certificate of the Cost Accountant. The appellants undertook to furnish the affidavit and the Cost Accountant's Certificate within a month from the date of receipt of the Tribunal's order. On receipt of the affidavit and the Cost Accountant's Certificate, the Assistant Collector should, after such verification as he may consider necessary, redetermine the assessable values for the material period within 3 months from the date of receipt of the affidavit and the Cost Accountant's Certificate.