TMI Blog1976 (12) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... has challenged the direction of the Superintendent and has contended that for the purpose of levy of excise duty the value of its products should be the prices at which it sells those products to the Customer Companies and not the prices at which they in turn sell those products to wholesale dealers or others. 3. We shall set out certain material facts which are not in controversy. The petitioner company was registered in India under the Indian Companies Act, 1913. At present there are only five shareholders of the Company. They are: 1. Bajaj Electricals Limited, Bombay. 2. Crompton Parkinson Ltd., London. 3. N. V. Philips, Eindhoven (Holland). 4. General Electric Co. Ltd., London. 5 Mazda Lamp Co. Ltd., Liecester, England. 4. For the sake of convenience the last four of the above companies will hereinafter be referred to as the Foreign Companies. The first of the above companies, namely Bajaj Electricals Ltd., Bombay, holds 1,80,000 shares in the petitioner company. It is called A shareholder. The four foreign companies together hold 1,80,000 shares. They are called B shareholders. The petitioner company is engaged in manufacture of electric lamps, fluo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the decision of this court would still govern the determination of value of its products for the purpose of levy of excise duty. 8. ln order to appreciate the rival contentions of the parties, it is necessary to set out the relevant provisions of the Act and Section 4, as it stood before, and as it stands after, the amendment by the Amendment Act. Clause (d) of Section 2 of the Act defines `excisable goods as goods specified in the First Schedule to the Act as being subject to a duty of excise. Clause (f) of Section 2 of the Act defines `manufacture as including any process incidental or ancillary to the completion of a manufactured product. Clause (k) of Section 2 of the Act defines `wholesale dealer as person who buys or sells excisable goods wholesale for the purpose of trade or manufacture. Sub-section (1) of Section 3 of the Act which is the charging section, reads: 3. (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by and into, any part of India as, and at the rates, set fort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 buyer; (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 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Privy Council and the Supreme Court. Suffice it to refer to the following observations of the Privy Council in Governor General in Council v. Province of Madras (A I.R. 1905 P.C. 98) which were quoted with approval by Sinha, C.J. speaking for the Supreme Court in In re Bill to amend S. 20 of the Sea Customs Act (A.I.R. 1963 S.C. 173. Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country........... ... ... ... ... the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. the method of collection does not affect the essence of the duty..... the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof.............though both excise duty and sales tax are levied with reference to goods, the two are very different imposts; in one case the imposition is or. the act of manufacture or production while in the other it is on the act of sale. 10. The question as to how the value of an article sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the articles. 11. The enunciation of law in Voltas Ltd s case was reiterated and amplified by the Supreme Court in Atic Industries Ltd. v. B.H. Dave, Assistant Collector of Central Excise (A.l.R. 1975 S.C. 960). There, the Supreme Court observed thus at pages 967 and 968: The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with post-manufacturing cost or profit arising from post-manufacturing operation. The price charged by the manufacturer for sale of the goods in wholesale would, therefore, represent the real value of the goods for the purpose of assessment of excise duty. If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and the manufacturing profit of the manufacturer but also tile wholesale dealer s selling cost and selling profit and that would be wholly incompatible with the nature of excise. lt may be noted that wholesale market in a particular type of goods may be in several tiers and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that where an assessee sells through a related person, the normal price of goods sold by the assessee to or through such related person, 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 of such goods. The expression `related person has been defined in clause (c) of sub-section (4) of new Section 4. 13. The learned Chief Standing Counsel contended that in view of substitution of new Section 4 by the Amendment Act, the pronouncements of the Supreme Court in Voltas Ltd. s case (supra) Atic Industries case (supra) have no application to the present case which must be decided on the basis of new Section 4. He maintained that the five Customer Companies came within the ambit of the term related person as defined in clause (c) of sub-section (4) of new Section 4 of the Act, that the sales by the petitioner company of its products to the five Customer Companies also come within the scope of clause (iii) of the proviso to Section 4(1)(a) of the Act and that hence the value of those products for the purpose of levy of excise duty, would be the prices at which the Customer Companies s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomer Companies must be regarded as having indirect interest in the business of the petitioner company. 19. Even assuming that all these four Customer Companies have interest in the business of the petitioner company, it is not shown that the petitioner company has any interest directly or indirectly, in the business of these four Customer Companies. 20. Even in regard to Bajaj Electricals Ltd., which holds shares in the petitioner company, it has not been shown how the petitioner company has interest, directly or indirectly, in the business of Bajaj Electricals Limited. 21. Thus, we are unable to accept the contention of the learned Chief Standing Counsel that these five Customer Companies fulfil the requirement of the first part of the definition of related person . 22. We shall now examine whether the Customer Companies come within the second part of the definition of related person . 23 The concept of `relative has no application to the present case because the the five Customer Companies are not natural persons but impersonal bodies. 24. The word distributor is understood in commerce as an agent or one who distributes goods to consumers. It is not the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not. 28. From the provisions of Section 4 of the Companies Act it is seen that the central idea in the concept of a holding company and a subsidiary company, is that the holding company should hold more than half in the nominal value of equity share capital of the subsidiary company should have the right to appoint or remove a majority of the number of directors of the subsidiary company. But as pointed out earlier, only Bajaj Electricals Ltd. is a share holder in the petitioner company and the remaining four Customer Companies are not subsidiary companies of the corresponding four Foreign Companies who together hold the remaining 50 per cent. of the shares in the petitioner company. Even if any of these four Customer Companies is a subsidiary of the Foreign Company bearing a similar name, none of these foreign Companies holds more than 50 per cent. of the equity shares i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel contended that Bajaj Electricals Ltd., and all the four Foreign Companies who together hold all the shares in the petitioner company, should collectively be regarded as the holding company in regard to the petitioner company and that the petitioner company should be regarded as a subsidiary company of those companies. He maintained that as provided in Section 13(2) of the Central General Clauses Act, in any Central Act the words in singular would include the plural and that, therefore, the term holding company occurring in Section 4 of the Companies Act and in new Section 4(4)(c) of the Act, should be regarded as including the plural, i.e. holding companies. 32. What Section 13(1) of the Central General Clauses Act provides is at unless there is anything repugnant in the subject or context a singular used in an Act would include the plural. So we have to look to the context of Section 4 of the Companies Act to ascertain whether several companies which together hold more than 50 per cent. of the shares and have right to appoint and to remove a majority of directors of another company, can be regarded as constituting a `holding company in relation to the other company. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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