Full Judgment
However, there are no wholesale in such cases. In these areas the sales are made to one Exide Products Ltd., the appellant's subsidiary. It is not disputed that the sales to the subsidiary are at the same price at which they are sold to the wholesale dealers of the other states. Of the total quantity sold in wholesale (excluding, as we have done, the clearances to original equipment manufacturers and governmental buyers) the Exide Products Ltd. 25% were purchased by the subsidiary and the remaining to the dealers.
2. The notice issued to the appellant alleges that in respect of the clearances made to Exide Products Ltd., the related person, the value has to be determined by applying the provisions of the proviso (iii) under Sub-section (1) of Section 4 of the Act. It is noted that any dealer located in the states in which the related person was buying the goods has to buy only that from the related persons, and could not buy them from the factory gate. It is contended that the wholesale purchaser from the subsidiary at any place could not buy the batteries from the factory gate of the manufacturer at the same price at which the subsidiary purchased it. It therefore stated that the proviso (iii) should apply and the price at which the goods are sold by the subsidiary, the price at which the subsidiary sold them. The Commissioner having confirmed the proposal in the notice demanding duty and imposed a penalty, the assessee is before us.
"(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." 4. The Bombay High Court in Ralliwolf Ltd. v. Union of India 1992 (59) ELT 220 found that this proviso requires the following conditions to be fulfilled before it to be applied: There should be mutuality of interest, the price charges should not be normal price but the price lower to the normal price, and extra commercial considerations should have resulted in reduction in the normal price. Parties must satisfy the definition as contained in Section 4(4)(c) of the Act. There is no dispute before us that the Excise Products Ltd. is in fact a related person within the meaning of Section 4(4)(c). It is possible, although not determined, that there is mutuality of interest between the manufacturer and relater buyer. However, we are unable to see that the price charged by the related person before us is lower than the normal price. As we have note,d it is not in dispute that the price at which the related person buys the goods from the manufacturer is no different from the price at which the dealers located in other areas buy the goods. In other words, the price at which the manufacturer sells the goods in wholesale is the same irrespective of whether a buyer is related or not. That being the case, it is not possible to say that the price at which related person buys the goods has been lower, let alone that such sale would have some extra commercial consideration.
5. The fallacy in the notice, is that it seeks to compare the price at which the goods are cleared from the first wholesale buyer who purchased the goods directly from the appellant wit the purchase price of second wholesale buyer. Such a comparison is specious. The sale which is to be considered for determination of price under Section 4 is the wholesale price at which the manufacturer sells the goods to its buyers. The position might be different if the appellant were directly selling the goods to two types of wholesale buyers one wholesaler located at each state level, but at the same time to wholesale dealers located district/city level. Such a situation may arise if at one station the buyer have the option of buying of batteries either from the depots or appellant directly. We are however not confronted with such a situation. It is not the department's case that the sales are to be made by the appellant only to the wholesaler who is related. it is also to be noted that out of the total quantity of sales by the appellant, only 25% is made to related person. Therefore, the requirement in the proviso (iii) that the assessee must so arrange that the goods are generally sold to or through is also not satisfied.
6. The counsel for the appellant also brings to our notice the observation of the Supreme Court made while dismissing an appeal filed by the department against the decision of the Tribunal in Plus Cosmetics Pvt. Ltd. v. CCE (2002 (143) ELT A 268), in which the Supreme Court has said that the question as to whether the buyer and seller are related need not be gone into in the light of the finding of the Tribunal that the price at which the goods were sold to the alleged related person and other purchaser is the same.
7. The above will apply with equal force to this appeal. We therefore allow the appeal and set aside the impugned order.
8. In the light of our findings, we have not gone into the question of limitation.