(1.)The appellant is a public limited company. It manufactures glassware. One of the purchasers of such glassware during the period under appeal, namely, 6/09/1979 to 15/01/1983 was the Alembic Chemical Works Company limited. Because the assessee held shares in this chemical company and the chemical company held shares in the assessee and the chairman and three directors were common, it was contended by the revenue that they were "related persons" and that the price at which the assessee sold glassware to the chemical company should be marked up for the purposes of valuation for excise duty.
(2.)The matter having reached the tribunal, the case put forth by the revenue was accepted on this basis:
"In the present case both the companies were set up by the same family and the appellant company is holding 9% of the shares of M/s. Alembic Chemical Works Co. Ltd. while M/s. Alembic Chemical Works Co. Ltd. holds 14% shares of the total shares held in the appellant company. It is clear from the fact that they have mutual interest in the business of each other. Furthermore, the chairman and the three directors are common and it is implied, both the companies are managed by same management. It is not a mere case where one company is holding shares in other company but both the companies are holding some shares in each other in addition to having common chairman and the three directors. With this factual position we do not find any infirmity in the impugned order holding that M/s. Alembic Chemical Works Co. Ltd. was a related person under section 4 (4) (c) of the Act. "
(3.)The relevant provision during the period with which we are concerned, section 4 of the Central Excise Act, reads insofar as is relevant, thus:
"Section 4 Valuation of excisable goods for purposes of charging of duty of excise
(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 to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a) , be deemed to be the normal price of such goods in relation to each such class of buyers:
(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 price, 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 persons 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) X x x x x x
(3) X x x x x x
(4) For the purpose of this section
(A) x x x x x x
(B) x x x x x x
(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 including a holding company, subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor. Explanation:- In this clause, "holding company", 'subsidiary company' and 'relative' have the same meanings as in the Companies act, 1956 (1 of 1956) ;
(D) x x x x x x
(E) x x x x x x"