1992 (10) TMI 181 - AT - Central Excise

Issues Involved:
1. Whether the assessable value of the goods sold by the appellants to M/s. Voltas under a marketing agreement should be based on the price at which M/s. Voltas sell to their dealers.
2. Whether M/s. Voltas are considered "related persons" to the appellants under Section 4(4)(c) of the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Assessable Value and Marketing Agreement:
The primary issue was whether the assessable value of goods sold by the appellants to M/s. Voltas should be based on the price at which M/s. Voltas sold the goods to their dealers. The appellants, M/s. Pepsi Foods (P) Ltd., engaged in manufacturing food products, sold their goods through M/s. Voltas under a distributorship agreement. The authorities issued a show cause notice proposing to approve the price list under Part IV, treating M/s. Voltas as related persons of the appellants. The appellants argued that the agreement was a simple distributorship agreement, and the sale was on a principal-to-principal basis, referring to various judgments to support their stance. The department contended that the clauses of the agreement indicated an indirect interest, making the agreement not purely on a principal-to-principal basis.

2. Definition and Determination of "Related Persons":
The core issue was whether M/s. Voltas could be considered "related persons" under Section 4(4)(c) of the Central Excises and Salt Act, 1944. The definition includes persons who have a direct or indirect interest in each other's business. The appellants cited the Supreme Court judgment in the Atic Industries case, arguing that mere shareholding does not establish mutual interest. The department argued that the restrictive clauses in the agreement created an indirect interest, thereby making M/s. Voltas related persons.

Analysis of Clauses and Judicial Precedents:
The Tribunal examined the agreement clauses and relevant judicial precedents. The agreement appointed M/s. Voltas as exclusive marketers, allowing them to set resale prices and undertake marketing responsibilities. The appellants argued that these clauses did not detract from the principal-to-principal nature of the agreement. The department cited several cases to argue that the restrictive clauses indicated mutual interest. However, the Tribunal found that the agreement's clauses did not establish mutual interest, as M/s. Voltas were free to sell at their discretion, and the appellants had no control over the resale prices.

Majority Opinion:
The majority opinion, delivered by the third member, concluded that the facts of the case were similar to those in the Atic Industries case. The agreement between the appellants and M/s. Voltas was on a principal-to-principal basis, and the restrictive clauses were standard commercial terms. The appellants did not have an interest in the business of M/s. Voltas, and vice versa. Therefore, M/s. Voltas could not be considered related persons under Section 4(4)(c).

Dissenting Opinion:
The dissenting opinion argued that the appellants had an interest in the business of M/s. Voltas due to the exclusive marketing arrangement and the sale of goods under the appellants' brand name. This mutual interest made the two companies related persons.

Final Order:
In view of the majority opinion, the appeal was allowed, and the impugned order of the Collector was set aside. The assessable value should not be based on the price at which M/s. Voltas sold the goods to their dealers, and M/s. Voltas were not considered related persons to the appellants.

Conclusion:
The Tribunal concluded that the agreement between the appellants and M/s. Voltas was on a principal-to-principal basis, and M/s. Voltas were not related persons under Section 4(4)(c). The appeal was allowed, providing consequential relief to the appellants.

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