TMI Blog1998 (3) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... ose will be served to inquire into the shareholdings of the assessee, the appellant and its sole distributor as directed by the Appellate Tribunal. We are, therefore, inclined to hold that no effect be given to the judgment of the Appellate Tribunal. Appeal allowed. - 241-42 of 1991 - - - Dated:- 31-3-1998 - Sujata V. Manohar and D.P. Wadhwa, JJ. [Judgment per : D.P. Wadhwa, J.]. - M/s. Calcutta Chromotype Ltd. has filed this appeal against the order dated October 30, 1989 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, (for short `Appellate Tribunal'). By this judgment the Appellate Tribunal while upholding the order of the Collector of Appeals observed that though there was an identity of interest between the appellant, manufacturer and M/s. Ganga Saran Sons Pvt. Ltd., its sole distributor, the Assistant Collector had not considered the break up of the shares of each member of the family of the manufacturer and distributor. The Appellate Tribunal held that the fact that there was identity of interest was the determining factor in holding whether a person is a related person within the meaning of Section 4(4)(c) of the Central Excises and Salt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the common Director was not the determining factor to hold that M/s. Ganga Saran Sons Pvt. Ltd. was a related person and further that the fact that the manufacturer was printing the name of the buyer and was selling the entire product to the buyer also did not make the buyer a related person. It was also submitted that the authorities below had failed to establish that M/s. Ganga Saran Sons Pvt. Ltd. had been accorded a favourable treatment and that, in fact, low price had been charged on that account. The appellant said that in the absence of any such evidence it was not correct to hold that the price at which M/s. Ganga Saran Sons Pvt. Ltd. sold the product was the price for the purpose of determining the assessable value. 5.The Appellate Tribunal was also of the view with reference to Section 4(4)(c) of the Act that if a person is so associated with the assessee that they have interest in the business of each other then the person was a related person of the other within the meaning of the Section. Appellate Tribunal noted that Collector (Appeals) had held that the appellant as well as M/s. Ganga Saran Sons Pvt. Ltd. were started and established by G.S. Sharma and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e related to each other. Lastly, Mr. Dave submitted that there was no allegation and no finding ever recorded that the dealings between the appellant and its distributor were not at arm's length or that prices at which the goods were sold to the distributor were exceptionally low, having been influenced by some extra commercial consideration. Mr. Dave said that the Appellate Tribunal did not examine the whole facts of the case and law applicable thereto in proper perspective and that led it to give directions which are incorrect and these were now being impugned. 7.Mr. Dave also submitted that for subsequent years the Department took the view that the buyer was not a related person. He also cited a few judgments of this Court in support of his submissions. Before we refer to these judgments, we may reproduce the relevant provisions of Section 4 of the Act : "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 - the normal price thereof, that is to say, the price at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has an interest direct or indirect, in the business of the person alleged to be a related person nor is it enough that the person alleged to be a related person has an interest, direct or indirect, in the business of the assessee. It is essential to attract the applicability of the first part of the definition that the assessee and the person alleged to be a related person must have interest, direct or indirect, in the business of each other. Each of them must have a direct or indirect interest in the business of the other. The equality and degree of interest which each has 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 former 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." 9.This was followed in subsequent cases in Collector of Central Excise, Madras v. T.I. Millers Ltd., Madras and T.I. Diamond Chain, Madras [1988 (35) E.L.T. 8 (S.C.) = 1988 (Supp.) SCC 361]; Snow White Industrial Corporation v. Collector of Central Excise [1989 (41) E.L.T. 360 (S.C.)]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. Western India Glass Works. The Appellate Tribunal held that in the absence of any other factor like mutuality of interest, commonness of some Directors was not sufficient to constitute relationship between the two companies which were common independent corporate legal entities. In the second case, the assessee sold its goods through two broad channels, viz., directly to Canteen Stores Department and to the Weikfield Central Marketing Organisation. While 20% discount was allowed to Canteen Stores Department, 30% discount was allowed to Weikfield Central Marketing Organisation. Assessee justified the reasons for allowing higher discount in one case because the department was of the view that transaction between the assessee and the Weikfield Central Marketing Organisation could not be treated as at arm's length in view of the fact that most of the partners in the firm were close relatives of the Directors of the assessee which was a company under the Companies Act, 1956. The Appellate Tribunal was of the view that the assessee being a corporate concern and Weikfield Central Marketing Organisation a partnership concern, the latter could not be called a relative of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies, they cannot, than anything more, be `related persons' within the meaning of clause (c) of sub-section (4) of Section 4 of the Act is not of universal application. Law has traveled quite a bit after decision of the House of Lords in the case of Salomon v. Salomon [1897 AC 22]. This is how this Court noticed in Tata Engineering and Locomotive Company Ltd. v. State of Bihar Ors. [(1964) 6 SCR 885] : "The true legal position in regard to the character of a corporation or a company which owes its incorporation to a statutory authority, is not in doubt or dispute. The corporation in law is equal to a natural person and has a legal entity of its own. The entity of the corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purposes; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the corporation. This position has been well-est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to the many standard text books on Corporation Tax, Income Tax, Capital Gains Tax and Capital Transfer Tax. The other inroads on the principle of separate corporate personality have been made by two sections of the Companies Act, 1948, by judicial disregard of the principle where the protection of public interests is of paramount importance, or where the company has been formed to evade obligations imposed by the law, and by the Courts implying in certain cases that a company is an agent or trustee for its members. In Palmer's Company Law (23rd Ed.), the present position in England is stated and the occasions when the corporate veil may be lifted have been enumerated and classified into fourteen categories. Similarly in Gower's Company Law (4th Ed.), a chapter is devoted to `lifting the veil' and the various occasions when that may be done are discussed. In Tata Engineering and Locomotive Co. Ltd. [(1964) 6 SCR 885], the company wanted the corporate veil to be lifted so as to sustain the maintainability of the petition, filed by the company under Article 32 of the Constitution, by treating it as one filed by the shareholders of the company. The request of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on when, in fact, both, the manufacturer and the buyer, are in fact the same persons. Under sub-section (1) of Section 4 of the Act, value of the excisable goods shall not be deemed to be normal price thereof, i.e., 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, if the buyer is a related person and price is not the sole consideration for sale. As to who is a related person, we have to see its definition of Section 4(4)(c) of the Act. It is not only that both, the manufacturer and the buyer, are associated with each other for which corporate veil may be lifted to see who is behind it but also that they should have interest, directly or indirectly, in the business of each other. But once it is found that persons behind the manufacturer and the buyer are same, it is apparent that buyer is associated with the manufacturer, i.e., the assessee and then regard being had to the common course of natural events, human conduct and public and private business it can be presumed that they have interest, directly or indirectly, in the business of each other (refer Section 114 of the Evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily in the two companies. To lift the veil the actual shareholding of both the companies and the persons in control of the management of both the companies needed to be ascertained to consider the identity of interest of both the companies in the business of each other. No presumption of such mutuality of interest in the business of each other could have been drawn without the factual data. 16.However, in the present case, we are told that for subsequent years, the authorities have not treated M/s. Ganga Saran Sons Pvt. Ltd., the sole distributor of the appellant, as a related person which fact has not been controverted by the respondent and have accepted the price at which the goods are sold by the assessee to the sole distributor as the sole consideration for sale. The matter pertains to the year 1976. Order of the Assistant Collector is of the year 1978. We do not think at this late stage any purpose will be served to inquire into the shareholdings of the assessee, the appellant and its sole distributor as directed by the Appellate Tribunal. We are, therefore, inclined to hold that no effect be given to the judgment of the Appellate Tribunal. 17.Accordingly, the appeals a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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