Customs, Excise and Gold Tribunal - Delhi
Rallis India Ltd. vs Commissioner Of Central Excise on 10 December, 1999
Equivalent citations: 2000(118)ELT780(TRI-DEL)
ORDER
K. Sreedharan, J. (President)
1. The short question that arises for consideration is whether the price at which goods manufactured by the assessee are to be assessed is the price at which they are selling it to Rallis India Ltd. or at the price at which Rallis India Ltd. sold it to their dealers. The department took the view that assessment must be on the value at which the goods were sold by Rallis India Ltd. to their dealers. This view was taken on the ground that the assessee is a subsidiary company of Rallis India Ltd. Without entering a finding regarding relationship between Rallis India Ltd. and the assessee in this case, adjudicating authority relied on its finding in its or-der-in-original No. l/MP/88 dated 28-7-1988. In that order the adjudicating authority observed:
"Charge in brief in all the show cause notices is that they sold their entire electrical fans manufactured by them to M/s. Rallis India Ltd., Bombay, who in turn sold to various customers. M/s. Rallis India Ltd. charged at higher prices while selling electrical fan in the market than the price declared by M/s. Rallis Machines Ltd., Uhana who had declared much less price in the price list for payment of Central Excise duty. Since the entire production was sold through M/s Rallis India Ltd., and M/s. Rallis Machines Ltd. is also a subsidiary of M/s. Rallis India Ltd., they both have special commercial relationship. As such, the price charged by M/s. Rallis India Ltd. should be the assessable value for payment of Central Excise duty."
On this charge, the adjudicating authority came to the conclusion :
"Thus by being a subsidiary company of M/s. Rallis India Ltd. and selling their entire products only through M/s. Rallis India Ltd., both are related persons so far as their commercial transaction is concerned. Accordingly, the price charged by M/s Rallis India Ltd. shall be the assessable value for payment of Central Excise duty."
On the basis of this finding reached by the adjudicating authority in the or-der-in-original dated 27-8-1987 (which was the subject matter of appeal E/750/91-A which was disposed of by us today), the price list submitted by the assessee was not approved. This action of the department is under challenge.
2. Assessee in this case Rallis Machines Ltd. was a subsidiary of M/s. Rallis India Limited during the period with which we are concerned in this appeal Rallis India Ltd. held nearly 90% of the shares in Rallis Machines Ltd. Even so, according to the learned Counsel representing the appellant, relationship cannot be presumed unless the department succeeds in showing mutuality of interest. In support of this argument, learned counsel brought to our notice two decisions of the Bombay High Court, the case of Dawn Apparels Ltd. v. Union of India, 1989 (43) E.L.T. 401 and in the case of Ralliwolf Ltd v. Union of Indiai 1992 (59) E.L.T. 220. In the first case, learned single Judge of the Bombay High Court took the view that the mere fact that assessee happened to be the subsidiary of another company will not in any way go without establishing that the transaction between the subsidiary company and the other company was not at arms length. For a proper understanding of the law stated by the Bombay High Court, we read paragraph 11 of that judgment:
"11. In the present case also, each of the authorities below has proceeded only upon the basis that there was a special relationship between the petitioners and Dawn Mills, in that the petitioner, were a subsidiary of Dawn Mills. No attempt has been made to establish that, in fact, a low price has been charged and/or that Dawn Mills have been accorded any favourable treatment. In the absence of such evidence and merely upon the basis that there is a special relationship such as that of susidiary and principal it cannot be held that the price at which the subsidiary sells to the principal is not the correct price for the purposes of assessment of excise duty."
Same issue came up for consideration before a Division Bench of the same High Court in the second decision referred to above. There, after quoting Section 4(4) (c), their Lordships took the view that the department has to establish three conditions to reject the price of the assessee. Firstly, there should be mutuality of interest, secondly the price charged should not be the normal price but lower to the normal price and extra commercial considerations for reducing the normal price and lastly the person producing the commodity should be related to the assessee. In case all the three conditions are not satisfied, then price cannot be stated to be the one coming under Section 4(1)(a) of the Act.
3. In the instant case, the adjudicating authority did not find any mutuality of interest between the two firms. He has not stated that the price at which the entire produce was sold was not a commercially acceptable one. He found relationship only on the ground of the assessee being a subsidiary company of Rallis India Ltd. This one ingredient by itself cannot be a justifiable ground in the light of the law stated by the Bombay High Court.
4. In appeal No. E/750/91-A, the order-in-original passed by the adjudicating authority has been reversed by us.
5. In view of the above circumstances, departmental authorities are directed to recompute the duty payable by the assessee as if it is not related to Rallis India Ltd. Consequential relief if any due to the assessee, will be paid in accordance with law.
6. In view of what has been stated above, we allow this appeal and set aside the impugned order passed by the lower authorities.