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TMI Blog2023 (3) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act"). 2. BIL was incorporated as Mitsu Industries Ltd. (hereafter 'MIL') in 1992; it was formed by members of the Bilkhias family who were its major shareholders/promoters. MIL used to manufacture pesticides, insecticides and their intermediaries classifiable under Chapter 38, Central Tariff Act, 1985 (hereafter 'CETA'). These fell under the broad category of pyrethroid products. Besides other products like Cypermethrin and alpha Cyermethrin, MIL manufactured Allethrins, Deltamethrin, and intermediates for the entire range of products. Before July 1999, MIL did not manufacture Esbiothrin and Esbiol (falling under the product group of Allethrins). 3. On 16.02.1998, AgrEvo GmbH and MIL signed a Letter of Intent, and on 22.11.1998 they signed a letter of Memorandum of Understanding ('MOU') expressing their intention to form a joint venture for research, manufacture, and sale of mainly synthetic pyrethroids products and their intermediates. Thereafter, MIL, AgrEvo GmbH, and AgrEvo SA entered into a Joint Venture Agreement (JVA) on 03.07.1999. This was for the purpose of researching, developing and manufacturing agrochemicals and environmental health products. MIL agreed to first t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by AgrEvo SA outside India. BIL arrived at the price in the same manner for its sale to AgrEvo (India) Ltd. / Aventis CropScience (India) Ltd. within India. Certain changes in share holding patterns of foreign companies occurred later; however, they are not relevant for the purposes of deciding this case. 6. What is relevant for this case is that in BIL, AgrEvo SA held 51% of the share capital initially (which was increased to 74% subsequently) and it continued to hold more than 51%. BIL thus became a subsidiary of AgrEvo SA. AgrEvo SA held 100% shares in Aventis Crop Science (India) Ltd. Therefore, both BIL and Aventis Crop Science (India) Ltd. became subsidiaries of AgrEvo SA (the name of which was changed to Aventis CropScience SA around March 2000; both names are used interchangeably hereafter) during the relevant period. The dispute in this case arose as regards value of Esbiothrin. During the period between 19.04.2000 - 23.05.2001, BIL sold the goods to Aventis CropScience (India) Ltd., who sold the same to end customers. For this period, the revenue proposed to treat the price at which Aventis Crop Science (India) Ltd. sold the product to the end customers as the assessabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the CESTAT, these transactions between the foreign company (AgrEvo SA, later known as Aventis CropScience SA) and two Indian subsidiaries was a combined operation by which both benefited. Therefore, the price at which BIL sold the goods to Aventis Crop Science (India) Ltd., was to be treated as sales to a "related person". 8. Mr. V. Shridharan, learned senior advocate appearing on behalf of BIL, submitted that the impugned order is erroneous. He submitted that the test applied consistently by this court to decide if an entity was "related" to another has been whether the seller has an interest in the business and affairs of the buyer; and likewise, whether the buyer has an interest in the business of the seller. Even if one were present, in the absence of the other, there would be no relationship, for the purpose of Section 4(4)(c) and the transaction should be treated as one at arm's length. Learned counsel relied on the decisions of this court, reported as Union of India & Others v. Atic Industries Ltd. [1984] 3 SCR 930, Union Of India & Ors v. Hind Lamp Ltd. [1989] 2 SCR 1023, Commissioner of Central Excise, Hyderabad v. Detergents India Ltd. [2015] 6 SCR 886, and Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. (2) Where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. (3) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (4) For the purposes of this section- (a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; *********** ********** (c) "related person" means a person who is so associated with the assessee that they have interest, directly or indirectly in the business of each other and includes a holding company a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of the assessee, and any sub-distributor of such distributor." 11. In Atic Industries (supra), this court examined the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 'Atul Products Limited buys dyes from the assessee in wholesale on principal-to-principal basis and then sells such dyes in the market. The assessee is not concerned whether Atul Products Limited sells or does not sell the dyes purchased by it from the assessee nor is it concerned whether Atul Products Limited sells such dyes at a loss. It is impossible to contend that the assessee has any direct or indirect interest in the business of a wholesale dealer who purchases dyes from it on principal to principal basis. The same position obtains in regard to Crescent Dyes and Chemicals Limited. Perhaps the position in regard to Crescent Dyes and Chemicals Limited is much stronger then that in regard to Atul Products Limited. Crescent Dyes and Chemicals Limited is not even a shareholder of the assessee and it has, therefore, no interest direct or indirect in the business of the assessee." 12. In the subsequent decision Hind Lamp Ltd. (supra), the same principle was echoed: "It is not enough that the assessee has an interest, or indirect in the business of person alleged to be a related person nor is it enough that the person alleged to be a related person has an interest, direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly before the Commissioner as pointed out above, the Commissioner's order does not contain any finding based on this fact." 14. The decision in Commissioner of Central Excise, Aurangabad v. Goodyear South Asia Tyres Pvt. Ltd. & Ors. (2015) 11 SCC 646 is instructive. The assessee, a JV entity of Goodyear and CEAT (both of whom had equal share in it), had borrowed substantial sums of money from both Goodyear and CEAT. Later, CEAT transferred its entire shareholding to Goodyear. The revenue alleged that the assessee and Goodyear were related persons, which was negatived by this court: "7. The expression 'in the business of each other' clearly denotes that interest of the two persons have to be mutual, i.e., in each other, in order to treat them as related persons. 8. We find from the order of the Member Judicial that only on the ground that the two companies had given a loan of Rs. 85.66 crores to the Assessee company, was treated as sufficient to establish the relationship between the Assessee and the buyers. That only shows one way traffic whereas requirement is that of two way traffic. The other Member, in our opinion, aptly held that this cannot be the factor wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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