TMI Blog1996 (7) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... 982 for the period 6-10-1979 to 31-10-1982 under proviso to Section 11A of the Central Excises and Salt Act, 1944, for short, the Act and dated 4-1-1983, 5-3-1983 and 18-4-1983 for the subsequent periods stating that the verification of the invoices of the buyer issued to the latter s customers showed that the trade discount was not passed on to any of the latter s customers, that the Manufacturer and the buyer were sister concerns, that there were no sales at the factory gate to independent buyers, that hence the trade discount was not liable to be deducted in arriving at the assessable value of the goods manufactured by the appellant and sold to the sister concern and the differential amount of duty was payable. The appellant denied the legality of the demand in the show cause notices. However, the Assistant Collector confirmed the demand. The Collector (Appeals) held further that the manufacturer and the buyer are partnership firms and the partners of the two firms are closely related to each other and hence mutuality of interest exists and the buyer is related person of the Manufacturer and hence the assessable value should be based on the price at which the buyer sold the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be said a limited company has any interest in the business carried on by one of its shareholders. 7. The two persons in this case are partnership firms. Till February, 1980, the partners were :- Manufacturer (1) Shiv Prasad Agarwal, Managing Partner. (2) Ratanlal Agarwal S/o Shiv Prasad Agarwal (3) Mahender Kumar S/o Shiv Prasad Agarwal Buyer (1) Kamla Devi, W/o Shiv Prasad Agarwal Mahender Kumar, Managing Partner till he died in (2) 1980 Sudha Bansal, (3) Wife of Mahender Kumar, Managing Partner after the death of her husband Thus it is seen that the partners of the two firms are close relations and till February, 1980, one of the partners was common. This circumstances by itself will not make the two firms related persons as long as the criteria contemplated in Section 4 (4) (c) of the Act are not satisfied. 8. Under the Income-tax law and Sales-tax law in India, a partnership firm is treated as an entity distinct from the persons constituting the firm. See A.W. Figgies and Company and Others, AIR 1953 SC 455. The Supreme Court had occasion to consider this aspect in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the partners. 9. In Mohanlal Maganlal Bhavsar and Others v. Union of India and Others - 1986 (23) E.L.T. 3, the Supreme Court considered the case of goods manufactured by a firm of three partners being taken by another firm consisting of the same three partners and the son of each of them, as Chief Distributor. Excise duty was levied on the value of goods at the wholesale price charged by the Chief Distributor and not at the price charged by the Manufacturer to the Chief Distributor. The firms had their offices in the same premises. Under the agreement of partnership, the sons of the three partners were to share only in the profits and not to be liable for the losses. In these circumstances, the court held that the two firms were not at arms length or independent parties and the price at which the goods were supplied by the Manufacturer firm to the Chief Distributor cannot be taken to be the real value of the goods. 10. Our attention has been invited to certain decisions of the Tribunal. In Collector of Central Excise v. Paper Packing Industries - 1988 (36) E.L.T. 340 manufacture was carried out in the name of two firms, one with two partners and other with sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole selling agent/distributor. The firms had no common partners. But eight of the nine partners of the manufacturing firm were related to one or the other of seven of eight partners of the distributor firm. The partners who were so related together had 85 per cent interest in the manufacturing firm, which was held to indicate overwhelming mutuality of interest between the two firms. Under the agreement, the manufacturing firm passed on to the Distributor the function of publicity, sales promotion and safeguarding the goodwill of the products in the market. It was also provided that if due to the neglect of the distributor market is adversely affected, the cost of setting right would be not by the latter. In these circumstances, it was held that the payment made by the distributor to the manufacturer was not the sole consideration for the sale, that financial involvement was beyond doubt and that the sale was not on principal to principal basis. There was indication to show that the distributor was functioning as an extended arm of the manufacturer. Hence it was held that the distributor was related person. 12. Though a partnership firm has no corporate personality, it has a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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