Judgment

SABYASACHI MUKHARJI, J.:- These are appeals under Section 35L(b) of the Central Excises and Salt Act, 1944 (hereinafter called the Act). The respondents - T. I. Millers Ltd. and T. I. Diamond Chain manufacture cycle lamps and automotive chains. Both these goods are assessable under Item 68 of the Central Excise Tariff. The said respondents filed price lists for the sale of the goods through their distributors, namely, M/s. T. I. and M-Sales Ltd., M/s. Charmvel Agencies and M/s. Ambadi Enterprises Pvt. Ltd. quoting their price to the distributor as assessable value. However, subsequently following the decision of the Madras High Court in a valuation case, the respondents required that the price charged by them from buyers at the factory gate should be accepted as the assessable value and not the price to the distributors. The question is whether the price charged by the respondents from buyers at the factory gate should be accepted as the assessable value for the levy of duty under Seetion3 of the Act. The Assistant Collector found from the sales pattern of the respondents that the distributors were related persons as per Section 4 of the Act and the price at which the distributors sold the goods should, therefore, be the assessable value.

2. The respondents went up in appeal before the Appellate Collector. The Appellate Collector held that in order to establish mutuality of business interests, direct and indirect between manufacturer and buyer, it should be shown that they have been promoting the business of each other in their own interest and that in the absence of such a finding in the Assistant Collectors order, these could not be held to be related persons. Section 4 of the Act provides that where the duty of excise is chargeable on any excisable goods with reference to value, such value should be determined on the basis of 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. We are not concerned for the purpose of these appeals with the provisos nor with sub-section (2) or sub-section (3) of Section 4 of the Act. Subsection (4)(c) of Section 4 defines related person to mean a person who is so associated with the assessee that they have interest, direct or indirect, 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 such distributor. The explanation provides that holding company, subsidiary company and relative have the same meanings as in the Companies Act, 1956.

3. The words "related person have been considered by this Court in Union of India v. Atic Industries Ltd. (1984) 3 SCR 930: Bhagwati, J., as the learned Chief Justice then was, speaking for the Court held that the first part of the definition of "related person" in clause (c) of sub-section (4) of Section 4 defines "related person" to mean "a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other". It is not enough, the Court observed, that 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. To attract the applicability of the first part of the definition, it was observed, 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 quality 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