TMI Blog2015 (11) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. It is assumed that PALI and Philips India Limited were related persons within the meaning of this term as defined in the section 4 (4) (c), the assessable value of the goods sold by PALI to Philips India Limited would be the price at which the similar goods were being sold by PALI to Bajaj Electricals Limited and in this regard, the department has not refuted the plea of PALI that the sale price of the goods manufactured by them to PIL was more or less same as the sale price of similar goods to Bajaj Electricals Limited. In view of this, it cannot be said that the PALI, in respect of their sales to Philips India Limited have not paid duty on the normal price. When undisputedly 2 to 3 per cent of the sales of PALI were to Bajaj Electricals Limited and neither the genuineness of these transactions is disputed by the department nor the department has alleged that PALI and Bajaj Electricals Limited were related person within the meaning of this term as defined in section 4 (4) (c), the department cannot invoke 3rd proviso to section 4 (1) (a) and charge duty in respect of the sales of PALI to Philips India Limited at the sale price of Philips India Limited to its dealers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esently the PEIL) and PABL in the ratio of 90:10. The agreement also provided for a formula for calculating the sale price at which PALI would sell the electric lamps to PEICO electronics and electrical limited and the said price was worked back from the price of M/s. PEICO electronics to its wholesale buyers and provided some profit margin to PALI. Subsequently, on 17/4/1991, the agreement dated 19/12/1983 was superseded by another agreement between Philips Netherlands and M/s. PEICO electronics (now PEIL), PABL and PSIDC and this agreement provided for sale of shares in PALI by PSIDC and PABL to PEICO electronics. Accordingly, PEICO electronics and electricals held about 24.82 per cent shares in PALI besides the share holding of Philips Netherland in PALI. 1.3 The dispute in the present case pertains to the period from 1/3/1994 to 31/5/1998. During this period, bulk of the production of electric bulbs and tubes of PALI (about 97 to 98 per cent) was being sold to Philips India Limited (now PEIL) and about 2 to 3 per cent of the production was being sold to M/s. Bajaj Electricals Limited. Here, it may once again be clarified that M/s. PEICO Electronics and Electricals Limited wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and. Against the above mentioned order passed by the Commissioner, PEIL and Philips, Neitherlands have filed their appeals. 2. Heard both the sides. 3. Shri Prakash Shah, Advocate, ld. Counsel for the appellant, made oral submissions at the time of hearing and also subsequently submitted written submissions in which the following points were emphasized: (1). The departments allegation is that during the period of dispute, PALI (which stand merged with Philips India Limited w.e.f. 26/4/2003) and Philips India Limited (earlier known as PEICO Electronics and Electricals limited) are related persons within the meaning of this term as defined under section 4 (4) (c) read with third proviso to section 4 (1) (a) of the Central Excise Act, 1944, as the same stood during the period of dispute, in as much as PALI was a subsidiary of Philips India Limited. It is on this basis that in respect of the sales of PALI to Philips India Limited, the department seeks to determine the assessable value on the basis of the sales price of the Philips India Limited and not on the basis of the sales price of PALI to Philips India Limited. The 3rd proviso to section 4 (1) (a) read with section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at more or less the same price as the price at which the goods were being sold to Philips India Limited. The Commissioner, however, while not disputing that the similar goods were being sold to Bajaj Electricals Limited at more or less, the same price, has in para 55 of the impugned order dismissed the sales to M/s. Bajaj Electricals Limited as sales made by the appellant in meager quantity with intent to circumvent the situation of facing any Central Excise obligations and that it is Philips India Limited who were purchasing nearly the whole of the production of the appellant. This finding of the Commissioner is totally wrong, as even if 2% to 3% of the production was being sold to Bajaj Electrical Limited and these sales are treated as sales to unrelated buyers, the sale price to Bajaj Electricals Limited would have to be treated as normal price which would be applicable in respect of the sales to Philips India Limited even if Philips India Limited are treated as related person of the appellant. (3). During the period of dispute, the appellant cannot be treated as wholly owned subsidiary of Philips India Limited as the holding of Philips India Limited in the appellant co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Philips, Netherlands had shareholding in the appellant company and combined shareholding of the appellant company and Philips Netherlands was in excess of 50 per cent of the total shareholding of PALI, and Philips Netherlands and Philips India Limited controlled the nomination of five out of seven Directors of PALI, the appellant and Philips India Limited cannot be treated as related persons, as in terms of Companies Act, 1956, combined shareholding of Philips India Limited and Philips Netherlands in the appellant company cannot be considered to conclude that the appellant company is a subsidiary of Philips India Limited. Honble Allahabad High Court in the case of Unit Lamps Limited reported in 1977 (1) ELT J1 (ALL) in para 33 of the judgment has held that the contention of the Chief Standing Counsel that the meaning of the expression holding company in section 4 of the companies Act, would permit treating several companies as together constituting a holding company in relation to the another company is not acceptable. Moreover, Philips India Limited cannot be said to be controlling the majority of the Director in PALI as this power was with Philips Netherlands and Philips In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ALI was more than 50 per cent, PALI has to be treated as a subsidiary of Philips India. It was pleaded that in terms of agreement between PALI and Philips India Limited, the sale price of the lamps being manufactured by the PALI and supplied to Philips India Limited was to be determined by a formula on the basis of sale price of Philips India Limited to their dealers show as to ensure 15% profit margin to PALI and thus, the transactions between PALI and Philips India Limited cannot be said to be on principal to principal basis. Shri Pramod Kumar, also pointed out to secret understanding dated 9/9/1985 between PEICO and PALI recovered during the search of Philips India Limited at their corporate office according to which Shri C.L. Anand, promoter of PALI, would receive as the interest free advance of ₹ 1.5 crore from PEICO which will be written off after ten years and this amount was made available to PABL on 10/10/1984. As per this secret understanding in lieu of the interest free advance of ₹ 1.5 crore from PEICO to Shri C.L. Anand which will be written off after 10 years, PEICO had right to buy the entire production of PALI. Shri Pramod Kumar, pleaded that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing any Central Excise obligation has held that the sales of the lamps by PALI to Philips India would be hit by 3rd proviso to section 4 (1) (a) and in respect of these sales, it is the price at which Philips India Limited sold the goods to independent buyers which would be the assessable value. 7 Section 4 (1) (a) as the same stood during the period of dispute is reproduced below: SECTION 4 . Valuation of Excisable goods for purposes of charging of duty of excise.- (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, 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 perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the related person in course of whole sale trade at the time and place of removal to independent buyers. When, the assessee, in addition to sale of the goods produced by him to related person on regular basis, also sells the same goods on regular basis to independent buyers, the third proviso to section 4 (1) (a) would not apply and in that case the normal price at which the assessee was selling the goods to independent buyers which would be the assessable value even in respect of the sales to related persons. The reason for this is that in terms of provisions of section 4 (1) (a), as the same stood during the period of dispute, when the goods manufactured by an assessee attracted duty at an ad-valorem rate, the value of the goods for the assessment of duty was deemed to be the normal price which was defined as the price at which such goods are ordinarily sold by the assessee to the buyer in course of the wholesale trade for delivery at the time of place of removal, where the buyer is not related person and price is the sole consideration for sale. When such a price was available, it is that price which would be the assessment value and only in a situation where the entire sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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