Per Justice U.L. Bhat:

These appeals are directed against the common order in appeal No. 403 to 422/90 dated 19.7.90 passed by the Collector (Appeals) confirming the several orders passed by the Assistant Collector on 20 price lists filed by the appellant.

2. Appellant, M/s Escorts Tractors Ltd. was selling the entire production to M/s Escorts Ltd. till 31.12.80. With effect from 1.1.81 appellant started selling to other wholesale dealers also, the volume of such sales being 20% and the rest was being sold to M/s Escorts Ltd. Even during the period prior to 1.1.81, the department was treating the two concerns as related persons and demanding duty on the basis of the prices charged by M/s Escorts Ltd. wholesalers. This controversy was settled in favour of the appellant by the High Court of Delhi.

3. The dispute in these appeals relates to various price lists effective from 1.12.82 till 24.7.89. During the entire period about 80% of the sale were to M/s Escorts Ltd. and 20% to other independent dealers and the discount allowed to M/s Escorts Ltd. was higher than the discount allowed to other wholesalers. Some time in 1983, appellant purchased some shares of M/s Escorts Ltd. The initial purchase was of 0.6% of the total shareholding and the shareholding rose to 2.13% subsequently within the period in dispute. On all the price lists which are the subject matter of the present dispute, the Assistant Collector passed orders holding that the appellant and M/s Escorts Ltd. were related persons within the meaning of Section 4(4)(c) of the Central Excise Act, 1944, approving the prices declared for sales to independent wholesalers and directing such prices to be adopted for determining the assessable value of tractors sold to M/s Escorts Ltd. also. The Collector (Appeals) having confirmed this order the present appeal has been filed.

4. Shri Dinesh Charak, Manager Law of the appellant appeared for the appellant and submitted that merely because the appellant has a small shareholding in M/s Escorts Ltd. it cannot be said that there is mutuality of interest. He also contended that appellant had no control, financial or managerial over the affairs of M/s Escorts Ltd. On these grounds it is submitted that the two concerns cannot be regarded as related persons.

5. Section 4(4)(c) of the Act defines "related person" as follows:-

"`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 such distributor."

In order that the definition should apply one person should be associated with the assessee and the association must be such that they have direct or indirect interest in the business of each other. Undoubtedly, M/s Escorts Ltd. was associated with the appellant, since during the relevant period appellant had 2.13% of the shareholding of M/s Escorts Ltd. who had 45% shareholding in the appellant. The appellant is prepared to concede that M/s Escorts Ltd. has direct interest in the business of the appellant as it has 45% shareholding in the appellant. Appellant owns a shareholding, though a small one in M/s Escorts Ltd. Can the appellant be said to have direct interest in the business of the latter? Appellant has direct interest in the growth, the profit or the loss, as the case may be, the assets and the business of M/s Escorts Ltd. and therefore, must be regarded has having direct interest in the business of M/s Escorts Ltd. It is thus clear that the two concerns have direct interest in the business of each other and must be regarded as "related persons".

6. The department has no case that the appellant, during the period in question, has so arranged that the tractors were not generally sold in the course of wholesale trade except to or through M/s Escorts Ltd. and hence consequently proviso (iii) to Section 4(1)(a) has not been