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M/S. Hind Lamps Ltd. Vs. the Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case Number Civil Misc. Writ No. 179 of 1976
Reported in(1977)6CTR(All)0098A
AppellantM/S. Hind Lamps Ltd.
RespondentThe Union of India and ors.
Cases ReferredAtic Industries Ltd. vs. H. H. Dave
Excerpt:
- - 5. on the lamps manufactured by it, the petitioner company puts the brand names or trade marks like philips, osram, mazda, crompton and bajaj of the respective customer companies according to their directions. , prior to 1-10-1973, reads as follows :4. where, under this act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be :(a) the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place.....d. m. chandrashekhar, j. - in this petition under article 226 of the constitution, the question that arises for determination is as to the mode of valuation of the goods manufactured by the petitioner company for the purpose of levy of excise duty under the central excises and salt act, 1944 (hereinafter referred to as the act).3. for the purpose of determination of the value of its product, for levy of excise duty, the petitioner company submitted its price list to the superintendent, central excise, shikohabad (hereinafter called the superintendent) containing the price at which it claimed to be selling its products to five companied (hereinafter referred to as the customer companies). he did not accept the price list, but directed the petitioner company to submit the price list in form.....
Judgment:

D. M. Chandrashekhar, J. - In this petition under Article 226 of the Constitution, the question that arises for determination is as to the mode of valuation of the goods manufactured by the petitioner company for the purpose of levy of excise duty under the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act).

3. For the purpose of determination of the value of its product, for levy of excise duty, the petitioner company submitted its price list to the Superintendent, Central Excise, Shikohabad (hereinafter called the Superintendent) containing the price at which it claimed to be selling its products to five companied (hereinafter referred to as the Customer Companies). He did not accept the price list, but directed the petitioner company to submit the price list in Form IV containing the prices at which five companies to which it sells its entire output (hereinafter referred to as the Customer Companies) sell those products. The petitioner company has challenged the direction of the Superintendent and has contended that for the purpose of levy of exciser duty the value of its products should be the prices at which it sells those products to the Customer Companies and not the prices at which they in turn sell those products to wholesale dealers or others.

3. We shall set out certain material facts which are not in controversy : The petitioner company was registered in India under the Indian Companies Act, 1913. At present there are only five share holders of this Company. They are :

(1) Bajaj Electricals Ltd., Bombay.

(2) Crompton Parkinson Ltd., London.

(3) N. V. Philips, Eindhoven (Holland)

(4) General Electricals Co. Ltd. London.

(5) Mazda Lamp Co. Ltd., Liecester, England.

4. For the sake of convenience the last four of the above companies will hereinafter be referred to as the Foreign Companies. The first of the above Companies namely, Bajaj Electricals Ltd., Bombay, holds 1,80,000 shares in the petitioner company. It is called A share holder. The four Foreign Companies together hold 1,80,000 shares. They are called B share holders. The petitioner company is engaged in manufacture of electric lamps, fluorescent lamps and miniature lamps. It sells its entire output of these products exclusively to the following five Customer Companies :

(a) Bajaj Electricals Ltd.

(b) Philips India Ltd.

(c) Crompton Greaves Ltd.

(d) General Electric Co. of India Ltd.

(e) Mazda Lamps Co. Ltd.

5. On the lamps manufactured by it, the petitioner company puts the brand names or trade marks like Philips, Osram, Mazda, Crompton and Bajaj of the respective Customer Companies according to their directions. The Customer Companies to turn sell these lamps under their names as prices higher than the prices charged by the petitioner company.

6. Excise duty on electric lamps and fluorescent lamps was levied for the first time in the year 1965. At first, excise duty on lamps was a specific duty, Later excise duty on them was changed from specific to ad valorem duty. After such change, there has been a controversy between the petitioner company and the Central Excise authorities as to whether the prices charged by the petitioner company to its Customer Companies for its products or the prices charged by the Customer Companies when they sell them to wholesale dealers and others, should be the basis for determination of the value for levy of excise duty. Feeling aggrieved by the insistence of the Central Excise authorities that the latter prices should be the value for levy of excise duty, the petitioner company approached this Court by means of Civil Misc. Writ No. 2189 of 1973. This Court, by its order dated 14-5-1974, allowed the writ petition and held that the prices at which the petitioner company sold its products to the Customer Companies, should be the value for levy of excise duty and not the prices at which the Customer Companies sold them to wholesale dealers and others.

7. However, the Central Excise authorities have taken the view that the aforesaid decision of this Court which was rendered on the basis of S. 4 of the Act, as it stood before it was amended by the Central Excises and Salt (Amendment) Act, 1973, (hereinafter referred to as the Amendment Act) does not apply to levy of excise duty subsequent to the Amendment Act coming into force on 1-10-1973. On the other hand, the contention on behalf of the petitioner company is that the aforesaid amendment of the Act has not altered the legal position so far as it (the petitioner company) is concerned and that the decision of this Court would still govern the determination of value of its products for the purposes of levy of excise duty.

8. In order to appreciate the rival contentions of the parties, it is necessary to set out the relevant provisions of the Act and S. 4, as it stood before, and as it stands after the amendment by the Amendment Act.

9. Clause (d) of S. 2 of the Act defines Excisable goods as goods specified in the First Schedule to the Act as being subject to a duty of excise.

10. Clause (f) of S. 2 of the Act definess manufacture as including any process incidental or ancillary to the completion of a manufactured product.

11. Clause (k) of S. 2 of the Act defines wholesale dealer as a person who buys or sells excisable goods wholesale for the purpose of trade or manufacture.

12. Sub-s. (I) of S. 3 of the Act which is the charging Section, reads :

'3(I) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the First Schedule.'

Sub-S. (2) of S. 3 of the Act reads :

'3(2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles enumerated, either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force.'

13. S. 4 of the Act as it stood before it was amended by the Amendment Act, i.e., prior to 1-10-1973, reads as follows :

'4. Where, under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be :

(a) the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or

(b) where such price is not ascertainable the price ar which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at such place, at any other place nearest thereto.

Explanation :- In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid.'

13. The Amendment Act substituted a new Section for S. 4. The relevant portions of the substituted Section read thus :

'4(1). Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section be deemed to be -

(a) 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 wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale :

Provided that -

(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods, are sold by the assessee at different prices of different classes of buyers (not being related persons) each, such price shall, subject to the existence of the other circumstance specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyer;

(ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a prices, being the maximum, fixed under any such law, then, notwithstanding anything contained in Clause (iii) of this proviso the price or the maximum price, as the case may be, so fixed, shall in relation to the goods so sold, be deemed to be the normal price thereof;

(iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail;

(b) where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.

(2) Where, in relation to any excisable goods the price thereof for delivery at the place of removal in not known and the value thereof is determined with reference to the 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 shall be excluded from such price.

(4) For the purposes of this section -

(a) ... .... ....

(b) ... .... ....

(c) '.... related person' means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor for the assessee, and any sub-distributor of such distributor.

Explanation. - In this clause holding company. a subsidiary company and relative have the same meanings as in the Companies Act, 1956.

(d) 'value', in relation to any excisable good :

(i) .... .... .....

(ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale :

(e) 'Wholesale trade' means sales to dealers, industrial consumers, Government local authorities and other buyers; who or which purchase their requirements otherwise than in retail.'

15. The nature of excise duty has been explained is several decisions of the Privy Council and the Supreme Court. Suffice it to refer to the following observations of the Privy Council in Governor General in Council vs. Province of Madras which were quoted with approval by Sinha, C.J., speaking for the Supreme Court in In re Bill to amend S. 20 of the Sea Customs Act, 1878

'Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country ..... .... .... ..... ..... ..... ...... ...... ...... ...... ....... the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty ................. the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof .... ..... ..... ..... though both excise duty and sales tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other it is on the act of sale.'

16. The question as to how the value of an article should be determined for the purpose of excise duty under S. 4 of the Act, as it stood before it was amended by the Amendment Act, came up for consideration before the Supreme Court in A. K. Roy vs. Voltas Ltd. Referring to that Section, the Supreme Court observed thus at page 230 :

'If a manufacturer were to enter into agreements with dealers for wholesale sales of the articles manufactured on certain terms and conditions, it would not follow from that alone that the price for those sales would not be the wholesale cash price for the purpose of S. 4(1) of the Act if the agreements were made at arms length and in the usual course of business.

There can be no doubt that the wholesale cash price has to be ascertained only on the basis of transactions at arms length. If there is a special or favoured buyer to whom a specially low price is charged because an extra-commercial considerations, e.g., because he is relative of the manufacturer, the price charged for those sales would not be the wholesale cash price for levying excise under S. 4(a) of the Act. A sole distributor might or might not be a favoured buyer according as terms of the agreement with him are fair and reasonable and were arrived at on purely commercial basis. Once wholesale dealings at arms length are established, the determination of the wholesale cash price for the purpose of S. 4(a) of the Act may not depend upon the number of such wholesale dealings.'

Their Lordships further observed at pages 230 and 231 :

'S. 4 of the Act therefore provides that the real value should be found after deducting the selling cost and selling profits and that the real value can include only the manufacturing cost and the manufacturing profit. The section makes it clear that excise is levied only on the amount representing the manufacturing cost plus the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post-manufacturing operation, namely selling profit. The Section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which given credit to the wholesale buyer for a period of time and that the price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involves in the transport of the articles.'

17. The enunciation of law in Voltas Ltd, case was reiterated and amplified by the Supreme Court in Atic Industries Ltd. vs. H. H. Dave, Assistant Collector of Central Excise. There, the Supreme Court observed thus at pages 967 and 968 :

'The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with post-manufacturing cost or profit arising from post-manufacturing operation. The price charged by the manufacturer for sale of the goods in wholesale would, therefore, represent the real value of the goods for the purpose of assessment of excise duty. If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and the manufacturing profit of the manufacturer but also the wholesale dealers selling cost and selling profit and that would be wholly in compatible with the nature of excise. It may be noted that wholesale market in a particular type of goods may be in several tiers and the goods may reach the consumer after a series of wholesale transaction. It fact the more common and less expensive the goods, there would be greater possibility of more than one tier of wholesale transactions. For instance, in a textile trade, a manufacturer may sell his entire production to a single wholesale dealer and the latter may in his turn sell the goods purchased by him from the manufacturer to different wholesale dealers at State level, and they may in their turn sell the goods to wholesale dealers at the district level and from the wholesale dealers at the district level the goods may pass by sale to wholesale dealers at the city level and them, ultimately form the wholesale dealers at the city level, the goods may reach the consumers. The only relevant price for assessment of the value of the goods for the purpose of excise in such a case would be the wholesale cash price which the manufacture receives from sale to the first wholesale dealer, that is, when the goods first enter the stream of trade. Once the goods have entered the stream of trade and are on their onward journey to the consumer, whether along a short or a long course depending on the nature of the goods and the conditions of the trade, excise is not concerned with what happens subsequently to the goods. It is the first immediate contact between the manufacturer and the trade that is made decisive for determining the wholesale cash price which is to be the measure of the value of the goods for the purpose of excise. The second or subsequent price, even though on wholesale basis, is not material. If excise were levied on the basis of second or subsequent wholesale price, it would load the price with post-manufacturing element, namely, selling cost and selling profit of the wholesale dealer. That would be plainly contrary to the true nature of excise as explained in the Voltas case (supra). Secondly, this would also violate the concept of the factory gate sale which is the basis of determination of value of the goods for the purpose of excise.'

18. As submitted by the learned Chief Standing Counsel who appeared for the respondents, the Amending Act was enacted mainly to overcome the effect of the decision of the Supreme Court in Voltas Ltd. case. The concept of related person was introduced by the Amendment Act. Clause (iii) of the proviso to S. 4(I)(a) of the new Section provides that where an assessee sells through a related person, the normal price of goods sold by the assessee to or through such related person, shall be deemed to be the price at which they are ordinarily sold by the related person int eh course of wholesale trade at the time of removal of such goods. The expression related person has been defined in clause (c) of Sub-S. (4) of new S. 4

19. The learned Chief Standing Counsel contended that in view of substitution of new S. 4 by the Amendment Act, the pronouncement of the Supreme Court in Voltas Ltd. case and Atic Industriess case have no application to the present case which must be decided on the basis of new S. 4. He maintained that the five Customer Companies come within the ambit of the term related person as defined in Clause (c) of sub-S. (4) of new S. 4 of the Act, that the sales by the petitioner company of its products to the five Customer Companies also come within the scope of clause (iii) of the Proviso to S. 4(1)(a) of the Act and that hence the value of those products for the purpose of levy of excise duty, would be the prices at which the Customer Companies sell those products in the course of wholesale trade and not the prices at which the petitioner company sells them to the five Customer Companies.

20. The crux of the controversy between the parties, is whether the five Customer Companies can be regarded as related persons as defined in S. 4(4)(c). The definition of that term consists of two parts. The first part refers to a person who is so associated with the assessee that each has interest, directly or indirectly, in the business of the other. The second part of that definition refers to a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor.

21. The Explanation to clause (c) state that the expression holding company a subsidiary company and relative have the same meanings as in the Companies Act, 1956.

22. The learned Chief Standing Counsel contended that the five Customer Companies come both under the first and the second part of the definition of related person.

23. We shall first examine whether the five Customer Companies come within the first part of the definition of related person. As rightly contended by Shri S. N. Kacker, learned counsel for the petitioner company, in order to come within the first part of this definition, the petitioner company and the Customer Companies must have interest, directly or indirectly, in the business of each other. Such of the Customer Companies which hold shares in the petitioner company, can be said to have interest in the business of the petitioner company. But only one of the Customer Companies, namely, Bajaj Electricals Ltd., Bombay, holds shares in the petitioner company. The remaining four Customer Companies do not hold any share in the petitioner company.

24. However, the learned Chief Standing Counsel submitted that these four Customer Companies are respectively associated companies of the four Foreign Companies and that hence these four Customer Companies must also be held to have interest indirectly, if not directly, in the business of the petitioner company.

25. The actual relationship between each of the four Foreign Companies and corresponding Customer Companies bearing similar names, has not been placed before us. In the absence of such material, it is not possible to accede to the contention of the learned Chief Standing Counsel that these four Customer Companies must be regarded as having indirect interest in the business of the petitioner company.

26. Even assuming that all these four Customer Companies have interest in the business of the petitioner company, it is not shown that the petitioner company has any interest, directly or indirectly, in the business of these four Customer Companies.

27. Even in regard to Bajaj Electricals Ltd., which holds shares in the petitioner company, it has been shown how the petitioner company has interest, directly or indirectly, in the business of Bajaj Electricals Ltd.

28. Thus, we are unable to accept the contention of the learned Chief Standing Counsel that these five Customer Companies fulfil the requirement of the first part of the definition of related person

29. We shall now examine whether the Customer Companies come within the second part of the definition of related person.

30. The concept of relative has no application to the present case because the five Customer Companies are not natural persons but impersonal bodies.

31. The word distributor is under stood in commerce as an agent or one who distributes goods to consumers. It is not the case of the Central Excise authorities that the five Customer Companies are the agents of the petitioner company. The Customer Companies are not distributing the products of the petitioner company to consumers, but generally sell to wholesale dealers. It is also not the case of the Central Excise authorities that the Customer Companies are the distributors of the petitioner company.

32. The learned Chief Standing Counsel contended that the relationship between the petitioner company and the Customer Companies, is that of holding company and subsidiary company.

33. As stated earlier, in the Explanation to clause (c) of sub-S. (4) of new S. 4 the expression holding company and subsidiary company have the same meanings as in the Companies Act, 1956, Sub-section (19) of S. 2 of the Companies Act states that holding company means a holding company within the meaning of S. 4; sub-S. (47) of S. 2 states that subsidiary company means a subsidiary company within the meaning of S. 4 of that Act.

34. The relevant portions of S. 4 of the Companies Act read :

'4(1) For the purposes of this Act, a company shall, subject to the provisions of Sub-S. (3), be deemed to be a subsidiary of another if, but only if, -

(a) that other controls the composition of its Board of Directors; of

(b) that other -

(i) ...... ......

(ii) where the first mentioned company is any other company, holds more than half in nominal value of its equity share capital; or

(c) the first mentioned company is a subsidiary of any company is a subsidiary of any company which is that others subsidiary.........................

(2) For the purposes of sub-S. (1), the composition of a companys Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorship;........................

(3).........

(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but any if, that other is not subsidiary.

(5)................

(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not.

(7)................

35. From the provisions of S. 4 of the Companies Act, it is seen that the central idea in the concept of a holding company and a subsidiary company, is that the holding company should hold more than half in the nominal value of equity share capital of the subsidiary company and should have the right to appoint or remove a majority of the number of directors of the subsidiary company. But as pointed out earlier, only Bajaj Electricals Ltd., is a share holder in the petitioner company and the remaining four Customer Companies are not subsidiary companies of the corresponding four Foreign Companies who together hold the remaining 50 per cent of the shares in petitioner company. Even if any of these four Customer Company is a subsidiary of the Foreign Company bearing a similar name, none of these Foreign Companies holds more than 50 per cent of the equity shares in the petitioner company.

36. The petitioner company has produced a printed copy of its Memorandum and Articles of Association. Articles 106 and 105-A read :

'106. The number of Directors shall not be less than six nor more than nine. As provided for in Article 6 hereof the holders of each class of shares referred to in Articles 5 hereof shall have the right to propose and be reresented by not more than 5 Directors of the Company who shall respectively be called A Directors and B directors, provided always that holders of either class of shares shall not be entitled to propose more than 3 Directors unless at least 3 weeks prior notice has been given to the holders of the other class whereupon the holders of such other class shall be entitled to propose an equal number of Directors with effect from the same date. Any such notice shall be in writing and shall be deemed to have been sufficiently given if served personally upon or sent by post to each of the Directors being nominees of the holders of the shares of the class other than that in respect of which the notice is being given. All the Directors shall be elected by the Company according to the principle of proportional representation in the manner hereinafter appearing in Article 105A.

'105.A. All the directors of the Company shall be elected by the Company according to the system of proportional representation so that the Company shall elect :-

(i) No less than 3 and no more than 4 directors to be proposed by and representing the holders of A Shares of the Company.

(ii) an equal number of directors to be proposed by and representing the holders of B Shares of the Company.'

37. It is seem from these Articles that neither Bajaj Electricals Ltd., nor any Foreign Company has the right to appoint or to remove a majority of the directors. Hence neither Bajaj Electricals Ltd., nor any of the Foreign Companies can be regarded as a holding company with respect to the petitioner company, nor can the petitioner company be regarded as the subsidiary company of Bajaj Electricals Ltd., or any of the Foreign Companies. Much less can any of the Customer Companies the regarded as a holding company in regard to the petitioner company, nor can the petitioner company be regarded as a subsidiary company of any of the Customer Companies.

38. However, the learned Standing Counsel contended that Bajaj Electricals Ltd., and all the four Foreign Companies who together hold all the shares in the petitioner company, should collectively be regarded as the holding company in regard to the petitioner company and that the petitioner company should be regarded as a subsidiary company of those companies. He maintained that as provided in S. 13(2) of the General Clauses Act, in any Central Act the words in singular would include the plural and that, therefore, the term holding company occurring in S. 4(4)(c) of the Act, should be regarded as including the plural, i.e., holding companies.

39. What S. 13(1) of the Central General Clauses Act provides is that unless there is anything repugnant in the subject or context a singular used in an Act would include the plural. So we have to look to the context of S. 4 of the Companies Act to ascertain whether several companies which together hold more than 50 per cent of the shares and have right to appoint and to remove a majority of directors of another company, can be regarded as constituting a holding company in relation to the other company. What S. 4 contemplates is concentration in one company of holding of majority of shares and the right to appoint or remove a majority of directors of another company. The section does not, in our opinion, refer to a group of companies which together hold a majority of shares and have the right to appoint and remove a majority of directors in another company.

40. We are unable to accept the contention of the learned Chief Standing Counsel that the meaning of the expression holding company in S. 4 of the Companies Act would permit treating several companies as together constituting a holding company in relation to another company. Assuming for the sake of argument that Bajaj Electricals Ltd., and the four Foreign Companies together constitute a holding company in relation to the petitioner company, we do not see how the Customer Companies can be regarded as the holding company in relation to the petitioner company. Hence we reject the contention of the learned Chief Standing Counsel that the petitioner company is a subsidiary company of Bajaj Electricals Ltd., and or of all or of the four Foreign Companies or of the Customer Companies.

41. Thus, the second part of the definition of related person is also not satisfied in the present case. It follows that clause (iii) of the proviso to sub-S. (1) (a) of new S. 4 of the Act, has no application to the sales by the petitioner company of its products to the five Customer Companies and that the Central Excise authorities cannot regard the prices at which they (the five Customer Companies) sell such products to wholesale dealers and others, as the value of those goods for the purposes of levy of excise duty.

42. To say that sales by the petitioner company to the five Customer Companies, cannot be regarded as sales to related persons, is not to say that the transactions between the petitioner company and those five Customer Companies, are necessarily transactions at arms length and that the Central Excise authorities must accept without scrutiny the prices at which the petitioner company sell its products to the five Customer Companies as the real value of goods for the purposes of levy of excise duty. It is open to the Central Excise authorities to examine whether or not the five Customer Companies are favoured customers and whether the prices at which the petitioner company sells its products to them are the normal prices at which such goods are ordinarily sold by a manufacturer in the course of wholesale trade for delivery at the time and place of removal. If, on such scrutiny, the Central Excise authorities are satisfied that the prices at which the petitioner company sells its goods to the five Customer Companies are not such normal prices, it would be open to the Central Excise authorities to ascertain such normal prices and to levy excise duty on the petitioner company on the basis of such normal prices. But the Central Excise authorities cannot treat the prices at which the five Customer Companies sell such products to wholesale dealers or to the public, as the value thereof for the purpose of levy of excise duty on the petitioner company.

43. With these observations, we allow this petition and issue a mandamus to the respondents to consider the price list submitted by the petitioner company in accordance with the aforesaid enunciation of law.

44. In the circumstances of the case, we direct the parties to bear their own cost, in this petition.


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