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TMI Blog1984 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... he board of petitioners and also Debsons Pvt. Ltd. All these persons have ceased to be directors of the petitioner company since 1974-75. The composition of the present board of directors has been set out in para 6 of the petition. This board has been continuing since 1974. After the management of the petitioner company changed there are no persons on the board of directors of the petitioner company who are on the board of any of the said three companies. Nor are any of the said three companies subsidiaries of the petitioner company. 3. The agreements of distributorship which had been entered into by the petitioner company with the said three companies prior to 1974 expired by efflux of time. One such distributorship agreement has been annexed by the respondent to the further affidavit of J.A. Nazreth, Assistant Collector, Central Excise, Thane. This is an agreement dated 16th May, 1968 between the petitioner company and M/s. Debsons Private Limited. Clause I of the said agreement provides that the agreement will be in force for a period of 5 years. The agreements were therefore for a fixed period. It is the case of the petitioners that after the expiry of the agreements with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctice 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 Cl. (a), be deemed to be the normal price of such goods in relation to each such class of buyers ; (ii) ... ... ... … (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 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, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail ; (1) ... ... ... … (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excises and Salt Act, 1944... " These show cause notices were in respect of stereo and speaker systems falling under Tariff Item 33F, tape recorders falling under Tariff Item 37AA, Appligrams & Record Players falling under Tariff Item 37A and wireless receiving sets failing under Tariff Item 33A. 9. The petitioners replied to these show cause notices and made detailed submissions. In these submissions the petitioners have set out in detail the changes in management that had taken place. They have also set out how there is no connection between the management of the company and the three other companies. In their submissions the petitioners have also pointed out that the three agreements with the said three companies have expired in 1973 by efflux of time and the agreements have not been renewed. They have also set out that the marketing arrangements are being continued. It was also mentioned that the petitioners and the said three companies or any of them have no interest direct or indirect in the business of one another and the prices at which the goods are sold to the said three companies are prices based on commercial considerations. The dealings are at arm's length. 10. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the definition of a related person, the assessee and the person alleged to be a related person must have an interest, direct or indirect, in the business of each other. "Each of them must have a direct or indirect in the business of the other. The quality and degree of interest which each have in the business of the other may be different, the interest of one in the business of the other may be direct, while the interest of the latter in the business of the other may be indirect. That would not make any difference, so long as each has got some interest, direct or indirect, in the business of the other". The Supreme Court then considered the facts of the case before it. It observed that while the purchasing company had undoubtedly an interest in the business of the assessee because it held 50% of the share capital in the assessee company, it was not possible to show that the assessee company had any interest in the business of the purchaser company. The only relationship between the parties was that of a seller and a buyer. The transactions between them were from principal to principal. By virtue of these circumstances it could not be said that the assessee company had any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the petitioner company has continued the marketing arrangement with the said three companies even after the expiry of the agreements due to efflux of time. The letter also says that the sales are effected mainly through the distributors as they have got well established distribution channels etc. There is nothing in the letter which would indicate that the same terms and conditions which were prescribed under the original distribution agreement continued to remain in force or that the said three companies have continued to undertake the obligations that were imposed upon them under the original distribution agreements which have now expired. The petitioners have stated that the sales are effected to these three companies on a principal to principal basis. It is therefore, not possible to hold that the prices charged by the petitioners to the said three companies are not prices charged to a wholesale dealer in the normal course of trade. 15. The respondents also emphasised that the petitioner had dealt only with three companies for effecting sales of their products on a wholesale basis. In my view this, by itself, does not affect the legal position one way or the other. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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