COLLECTOR OF CENTRAL EXCISE AHMEDABAD Vs. ITEC PRIVATE LIMITED BOMBAY
SUPREME COURT OF INDIA
COLLECTOR OF CENTRAL EXCISE, AHMEDABAD
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(1.)THIS appeal, filed by the Revenue, is from the judgment and order No. 532/91-A of the Customs, Excise and Gold (Control) Appellate Tribunal in Appeal No. ED/SB.A. No. 777/83-A dated 25/07/1991.
(2.)THE respondent-assessee was selling projectors and other goods to M/s. International Talkie Equipment Co. Pvt. Ltd. (hereinafter referred to as 'M/s. International'). It was also enjoying the benefit of exemption under Notification 71/78 dated 1/03/1978. On the ground that M/s.International was a related person within the meaning of the Central Excise Act, 1944 (for short, 'the Excise Act'), the Superintendent of Central Excise issued a notice on 13/04/1982 for the period 11/04/197 8/09/1979 to the respondent to show cause as to why the duty at appropriate rate under Rule 9(2) of the Central Excise Rules on the higher value fetched directly or indirectly by it from the independent buyers should not be charged when they were not paying excise duty, in view of the benefit of the Notification 71/78, and as to why penalty should not be imposed. After adjudication, the duty and penalty were confirmed. On appeal, the Tribunal accepted the findings recorded by the adjudicating authority and held that the respondent and M/s. International were related persons. In regard to the application of larger period of limitation under Section 11-A of the Excise Act, the Tribunal found that there was no suppression of fact by the respondent and, therefore, the benefit of Section 11-A was not available to the Revenue. THE Tribunal allowed the appeal of the respondent herein on 25/07/1991. That is the order under challenge before us.
The learned Attorney General, appearing for the appellant, contends that without anything more the findings, accepted by the Tribunal are sufficient to show that the requirements of 'related person' are satisfied. Learned counsel for the respondent invited our attention to the following findings of the Tribunal :
"No evidence regarding mutuality of interest has been brought on record except the evidence of sale of goods by the appellants to or through M/s. International."
He contends that as there is no material to hold that the respondent and M/s. International are related persons the Tribunal has rightly allowed the appeal.
The question as to whether the respondent and M/s. International are related persons has to be determined in the light of the definition of that expression in Section 4(4)(c) of the Excise Act. It reads as follows :
"(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 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)."
(3.)FROM a plain reading of the definition, it is evident that if a person is so associated with the assessee that both of them have interest directly or indirectly in the business of each other, they would be treated as related persons. The definition also includes a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor, but we are not concerned with the later part of the definition. The ingredients of the first part of definition are : first, a person to be treated as related person must be associated with the assessee; secondly, the person so associated and the assessee must have interest in the business of each other; and thirdly, such interest may be direct or indirect. Mutuality of interest between the other person and the assessee in the business of each other, whether direct or indirect, is necessary to label such a person as a related person.
In Union of India and others etc. etc. v. Bombay Tyre International Ltd., etc. etc., (1984 (1) SCR 347), a three-Judge Bench of this Court upheld the constitutional validity of the said definition by reading it down.
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