1. This is a revision application filed before the Government of India which on transfer is being treated as an appeal.
2. The appellants are licensed manufacturers of typewriters, calculators and adding machines. They also manufacture spare parts for these machines. They submitted their classification and price lists and opted to avail the concession granted under Notification No. 120/75-CE, dated 30-4-1975. According to the appellants the spare parts were available for sale to any person who required the same. The Assistant Collector withdrew the concession accorded under the Notification No.120/75-CE on the ground that the clearances of spare parts were being made only to the distributors. According to him, transactions between the assessee and his distributors were not acceptable for purpose of determining the assessable value under the amended Section 4 of the Central Excises and Salt Act, 1944. On appeal, the Appellate Collector confirmed the findings holding that it would be far from the truth to say that the invoice price at which the goods were delivered to the distributors was not influenced by any commercial, financial or other relationship between the appellants and the distributors.
3. Shri M. Chandrasekharan, Advocate appeared for the appellants and urged that the distributors should not be treated as related persons.
He emphasised that the appellants were entitled to the benefit of Notification No. 120/75-CE. He relied on the decision reported in 1984 (17) E.L.T. 313 (S.C.) (Union of India and Ors. v. Atic Industries Ltd.) wherein the concept of "related person" occurring in Clause (c) of Sub-section 4 of Section 4 of the Central Excises and Salt Act, 1944 was considered by the Supreme Court.
4. Miss. J.K. Laisram, J.D.R., submitted that the appellants were not entitled to the benefit of Notification No. 120/75-CE inasmuch as the distributors should be treated as "related persons".
5. We have carefully considered the contentions raised. From a reading of the orders below, the benefit of Notification No. 120/75-CE was denied on the ground that the invoiced price could not be said to be not influenced by any commercial, financial or other relationship. In other words, the relationship between the appellants and the distributors had been construed as one of related person' 6. The concept of "related person" has been considered by the Supreme Court in the decision cited supra. In paragraph 5 the Hon'ble Supreme Court has observed as follow : "... What the first part of the definition requires is that the person who is sought to be branded as a "related person" must be a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other. It is not enough that the assessee has an interest, direct or indirect, in the business of alleged to be a related person nor is it enough that the person alleged to be a related person has an interest, direct or indirect, in the business of the assessee. It is essential to attract the applicability of the first part of the definition that the assessee and the person alleged to be a related person must have interest, direct or indirect, in the business of each other.
Each of them must have a direct or indirect interest in the business of the other. The quality and degree of interest which each has in the business of the other may be different; the interest of one in the business of the other may be direct, while the interest of the latter in the business of the former may be indirect. That would not make any difference, so long as each has got some interest, direct or indirect in the business of the other." In the show cause notice it is mentioned that M/s. Saradha Agencies, M/s, Forbes and Forbes Cambeli & Co. Ltd., M/s. Continental Commercial Company Ltd. and M/s. Ciciko Machines Pvt. Ltd., Calcutta, the distributors of the appellants are related persons. Admittedly, some of these are limited companies and some private limited companies; these are, therefore, distinct legal entities. It is not shown how these companies have any interest direct or indirect in the business of the appellants. Applying the ratio of the decision of the Supreme Court, therefore, we have no hesitation in holding that these distributors cannot be considered "related persons".
7. Notification No. 120/75-CE contemplates, inter alia, that the exemption shall be available only if the invoice price is not influenced by any commercial, financial, or other relationship whether by contract or otherwise other than the relationship created by sale of any goods. In this case there is no evidence to show that concessional or lower prices were charged by the appellants on account of any extra commercial consideration. There is also no proof that the appellants had any direct or indirect interest in the business of the distributors. Even the Appellate Collector has referred to the sale of spare parts to M/s. Chellur Corporation. It is not the volume or the quantity of the sale at the factory gate, but the fact that the goods produced in this factory and sold through the distributors was readily available to any person. The order of the Assistant Collector withdrawing the concession of assessment in terms of Notification No.120/75-CE and confirmed by the Appellate Collector cannot be sustained.
The impugned order is, thus, set aside and the appeal is allowed.