2002 (12) TMI 83 - SC - Central Excise

Whether Messrs. Parle Products Limited and Messrs. Parle Biscuits Limited were related persons and were purchasing goods at lower prices and selling the same at higher prices and that the appellant had not filed the price list in Part IV for the sale to a related person rather they filed the price list in Part I? Held that - Having regard to the plain meaning of the definition of related person it is to be noticed that the appellant is a subsidiary company of Messrs. Parle Products Limited and Messrs. Parle Biscuits Limited is also a subsidiary company of Messrs. Parle Products Limited. Therefore the relationship between the appellant and Messrs. Parle Biscuits Limited though indirect they have mutual interest in the business of each other. The facts and circumstances of the case show that there is mutuality of interest between the three companies as sixty per cent of the products of the appellant are sold to Messrs. Parle Products Limited and the remaining forty per cent of the total product of toothpaste is being sold to Messrs. Parle Biscuits Limited. Moreover Messrs. Parle Products Limited are incurring the expenses for sales promotion and advertisement for the sale of the appellant s product namely Prudent toothpaste . Thus no reason to disagree with the views expressed by the Tribunal by conferming the demand.

Summary

Issues:
1. Interpretation of the term "related person" under Section 4(4)(c) of the Central Excise Act, 1944.
2. Determination of whether the appellant and other companies are "related persons" based on mutual interest in each other's business.
3. Validity of show cause notices issued to the appellant for differential duty demand.

Analysis:
1. The judgment dealt with the interpretation of the term "related person" under Section 4(4)(c) of the Central Excise Act, 1944, which includes holding companies, subsidiary companies, relatives, distributors, and sub-distributors. The definition requires a mutual interest between the assessee and the alleged related person. Previous case laws were cited to explain the concept of "related person" and the necessity of mutual interest in each other's business.

2. The court analyzed the relationship between the appellant, a toothpaste manufacturer, and two other companies, one being a subsidiary of the other. It was found that there was mutual interest as the appellant sold products to both companies, and the holding company incurred expenses for sales promotion. The court concluded that the appellant and the other companies were indeed "related persons" based on the mutual interest in each other's business.

3. The judgment also addressed the validity of show cause notices issued to the appellant for a differential duty demand. The appellant contended that previous orders had resolved the issue of being "related persons," but the Tribunal found the show cause notices to be sustainable in law. The court upheld the Tribunal's decision, stating that the appellant had already paid the excise duty and passed it on to consumers, thus not entitled to seek relief. Consequently, both appeals were dismissed without costs.

This detailed analysis of the judgment highlights the issues, legal interpretations, and conclusions reached by the Supreme Court in the case involving the interpretation of the term "related person" under the Central Excise Act, 1944, and the determination of mutual interest between companies for such classification.