ORDER
G.P. Agarwal, Member (J)
1. All the three captioned appeals relate to the same parties and are filed under the following circumstances.
M/s. Rakesh Bulb Industries are the manufacturers of Electric Bulbs falling under Central Excise Tariff Item No. 32 and sell all the electric bulbs manufactured by them to M/s. United Commercial Corporation, Pune. M/s. Rakesh Bulb Industries is a partnership firm consisting of four partners who are real brothers, namely, S/Shri (i) Radheylal Anantram Patodia, (ii) Manoharlal Apantram Patodia, (iii) Mahendrakumar Anantram Patodia and (iv) Rameshkumar Anantram Patodia. The said M/s. United Commercial Corporation is also a partnership firm consisting of five partners. Four out of these five partners are the same as those of M/s. Rakesh Bulb Industries. The fifth partner in this firm, i.e. M/s. United Commercial Corporation, is none other than the mother of these four brothers, namely, Mrs. Manibai Anantram Patodia. M/s. Rakesh Bulb Industries however filed price lists claiming approval of the prices charged by them to M/s. United Commercial Corporation. Since it appeared that both the firms were a “related person” within the meaning of Section 4(4)(c) of the Central Excises and Salt Act, 1944, the authorities concerned issued a Show Cause Notice to the said M/s. Rakesh Bulb Industries calling upon them to show cause as to why the normal price of the electric bulbs manufactured by them should not be determined on the basis of prices charged by M/s. United Commercial Corporation. It appears that no reply was filed to the Show Cause Notice and during the personal hearing it was submitted by M/s. Rakesh Bulb Industries that M/s. United Commercial Corporation was not a “related person”. Since, according to them, (i) Both were independent entities for all purpose like Income Tax, Sales Tax, Registration of Firms etc., and (ii) M/s. Rakesh Bulb Industries was not selling his goods to M/s. United Commercial Corporation at a special low price, but at a modest discount of 10%. However, the Assistant Collector adjudicated the case against M/s. Rakesh Bulb Industries and held that the manufacturers and the buyers being the one and the same, it cannot be imagined that they have no financial interest in themselves or that the mother has no financial interests in her sons’ business, which consists of both manufacturing and buying. Consequently both are a “related person”. It appears that at the time of personal hearing it was also argued that the prices of M/s. United Commercial Corporation are loaded with selling expenses, but this contention was also rejected by the Assistant Collector holding that no break-up of the prices of M/s. United Commercial Corporation backed by a Chartered or Cost Accountant Certificate was produced. In the result, the Assistant Collector ordered that all pending price lists are approved on the basis of prices charged by M/s. United Commercial Corporation less admissible discount, if any, in accordance with the provisions of Section 4(1)(a)(iii) of the Central Excises & Salt Act, 1944. The Assistant Collector further ordered that since M/s. Rakesh Bulb Industries deliberately and wilfully suppressed the fact that their sales were through a “related person”, they should forthwith make good the amount of Central Excise Duty which they had not paid by wrongfully availing of concerned exemption Notification. Against this order, M/s. Rakesh Bulb Industries, Pune, filed their appeal before the Collector of Central Excise (Appeals), Bombay, who by the impugned order while confirming the findings of the Adjudicating Authority that M/s. Rakesh Bulb Industries, Pune and M/s. United Commercial Corporation are a “ralated person”, directed the jurisdictional Assistant Collector to redetermine the assessable value of the goods in question after allowing the necessary admissible deductions and other post manufacturing expenses if established. Still dis-satisfied, M/s. Rakesh Bulb Industries filed their Revision Petition before the Government of India which now stands statutorily transferred to this Tribunal to be dealt with as an appeal.
M/s. Rakesh Bulb Industries, respondents herein, filed their price list (in part I) effective from 1st 3uly, 1980 claiming approval of the prices charged by them to M/s. United Commercial Corporation. The Assistant Collector of Pune, vide his Order dated 30.9.1981 held that M/s. Rakesh Bulb Industries and M/s. United Commercial Corporation were a “related person”, and hence duty shall be paid on the value determined with reference to the price charged by the “related person”, viz., M/s. United Commercial Corporation and the respondents claim for deduction of the selling expenses incurred by M/s. United Commercial Corporation was not accepted by the Assistant Collector on the ground that the respondents did not furnish any break-up of these expenses backed by Chartered or Cost Accountant certificate. Against this order, the respondent filed their appeal before the Collector (Appeals), Bombay, who vide his order-in-appeal dated 16.4.1982 confirmed the findings of the Assistant Collector that Rakesh Bulb Industries and United Commercial Corporation are a “related person”, but also held that respondents Rakesh Bulb Industries are entitled for deduction on account of actual transport expenses from the factory to the premises of the “related person”, amount of excise duty, sales tax, and octroi duty and also cost of secondary or tertiary packing, if any, included in the selling price of the “related person”. Regarding the post manufacturing expenses, he directed the respondents to establish the same before the Assistant Collector. It appears that the Government of India on examination.of the records was not satisfied with that part of the order of the Collector (Appeals), which directed exclusion of cost of secondary or tertiary packing. Consequently, a Show Cause Notice was issued to the respondents to show cause as to why that part of the order of the Appellate Collector be not set aside. In reply, the respondents M/s. Rakesh Bulb Industries justified the deduction as held by the Appellate Collector. This Review Notice also now stands statutorily transferred to this Tribunal to be dealt with as an appeal.
III. E/APPEAL No. 417/85`A’
The respondents, M/s. Rakesh Bulb Industries filed their price lists on 6.9.1982 in Part IV of the proforma meant for sale to or through a “related person”. The price list for the bulbs listed at Sl. No. 1 to 15. In Col. No. 6/8 of this price list the respondents had declared the prices at which the goods were sold by the “related person” to dealers and had claimed the deduction therefrom on account of (i) Discount -20%, (ii) Post manufacturing/non-manufacturing/selling expenses and secondary packing etc. under 14 heads – 9.79%, (iii) Sales-tax as per M.S. Sales Tax Act – 12% and (iv) Excise Duty. As some of the deductions in the eye of the Department were not admissible, a Show Cause Notice calling upon the respondents to show cause as to why the deductions claimed on account of various heads including post manufacturing expenses and secondary packing should not be determined accordingly and as to why the duty be not recovered on such charges. In reply, the respondents inter alia, submitted that they had filed their price list in Part IV because the Learned Appellate Collector had held in his earlier order-in-appeal No. 521/PN-51/82 dated 16.4.1982 that their selling agents M/s. United Commercial Corporation were a “related person” and that the Hon’ble Supreme Court had, in its recent judgment held that for a distributor to be a “related person”, he must be a relative of the manufacturer in terms of the definition of “relative” in the Companies Act, and that therefore, impersonal bodies like partnership concerns cannot be considered as “related person”, and that the Supreme Court’s decision on the issue of “related person” clearly supersedes the said order dated 16.4.1982 passed by the Appellate Collector in their case. However, the Assistant Collector held that the respondents and the said M/s. United Commercial Corporation are a “related person” and informed the respondents that prices declared in Col. 6 will be taken as the normal price of the goods in the course of wholesale trade and discount of 20% as declared in Col. No. 12 of the price declaration shall be allowed for deduction where it is actually passed on by the United Commercial Corporation to their customers and the price lists will be accordingly approved and forwarded in due course. Against this order, the respondents filed an appeal before the Collector (Appeals) of Central Excise, Bombay, who vide his impugned order dated 19.11.1984 allowed the appeal holding that the respondents and the said M/s. United Commercial Corporation are not a “related person”. Hence the present appeal.
2. Since in ail the aforesaid appeals common question of law was involved between the same parties, they requested that all the appeals be heard together. Consequently, all the appeals were heard together and are disposed of by this common order.
3. We have heard Shri N.D. Khosla, learned consultant and Shri V.M. Doiphode, learned SDR for the parties.
4. The first question that is to be decided in all the appeals is whether M/s. Rakesh Bulb Industries and M/s. United Commercial Corporation are a “related person” and hence duty shall be paid on the value determined with reference to the price charged by a “related person” which is M/s. United Commercial Corporation. As regards this contention, Section 4(4)(c) of the Central Excises & Salt Act itself defines as to who is a “related person”. Section 4(4)(c) of the Act defines the “related person” as follows :
“(c) ‘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 may be distributor of such distributor.
Explanation – In this clause ‘holding company’, ‘subsidiary company1 and ‘relative’ have the same meanings as in the Companies Act, 1956 (1 of 1956).”
The Companies Act, 1956 defines ‘Relative’ as follows :
“2. In this Act, unless the context otherwise requires –
x x x x x
(41) ‘relative’ means, with reference to any person, any one who is related to such person in any of the ways specified in Section 6, and no others;
x x x x x
6. MEANING OF RELATIVE – A person shall be deemed to be a relative of another if, and only if,
(a) they are members of a Hindu Undivided family; or
(b) they are husband and wife; or
(c) the one is related to the other in the manner indicated in Schedule 1A
X X X X X
SCHEDULE 1A
[See Section 6(c)]
LIST OF RELATIVES
1. Father
2. Mother (including step mother)
3. Son (including step son)
4. Son’s wife
5. Daughter
6. Father’s father
7. Father’s mother
8. Mother’s mother
9. Mother’s father
10. Son’s son
11. Son’s son’s wife
12. Son’s daughter
13. Son’s daughter’s husband
14. Daughter’s husband
15. Daughter’s son
16. Daughter’s son’s wife
17. Daughter’s daughter
18. Daughter’s daughter’s husband
19. Brother (including step brother)
20. Brother’s wife
21. Sister (including step sister)
22. Sister’s husband.”
5. In the instant case it is an admitted fact that Rakesh Bulb Industries is a partnership firm consisting of four partners who are real brothers and United Commercial Corporation is also a partnership firm consisting of five partners, four out of these five partners are the same as those of M/s. Rakesh Bulb Industries and the fifth partner is none other than the mother of the four brothers. In the presence of these facts it was not contested by the appellants M/s. Rakesh Bulb Industries either before the authorities below or before us that all the partners of M/s. Rakesh Bulb Industries, Pune, were relatives of the partner of M/s. United Commercial Corporation within the meaning of the term as in the Companies Act. Thus, the contention of the learned consultant for the appellants, M/s. Rakesh Bulb Industries that both the firms are independent for income tax, sales tax or registration purpose and therefore should not be treated as a ‘related person1 within the meaning of Section 4(4)(c) of the Central Excises & Salt Act cannot be accepted. For, when one talks of father, mother, son etc. with reference to human affairs, the reference is to relationship between human beings. A firm cannot be a father or mother of another firm. To insist that two firms should be so related and not the individual partners comprising them, as the appellants contended, is to ask for the inpossible. This contention, if accepted, would render the later part of the Section 4(4)(c) nugatory except in relation to two proprietary units. We find no warrant for saying that two units owned by mother and son, respectively are ‘relatives’, but two firms owned by four real brothers, on the one hand, and by these four brothers and their mother, on the other, are not ‘relatives’. The relationship of the mother and son etc. has got to be determined in relation to the individual partners comprising the two firms. By that test, we hold that M/s. United Commercial Corporation were a ‘relative1 of the appellants M/s. Rakesh Bulb Industries as held by this Tribunal in the case of Pilco Pharma Kanpur v. Collector of Central Excise, Kanpur 1987 (29) ELT 523.
6. It is no longer in dispute that the appellants M/s. Rakesh Bulb Industries sell all the electric bulbs manufactured by them to M/s. United Commercial Corporation. They were, therefore a ‘relative and a distributor of the assessee’ within the meaning of Section 4(4)(c).
7. On the facts of the case we also find justification for classifying M/s. United Commercial Corporation as a ‘related person’ of the appellants M/s. Rakesh Bulb Industries even according to the test laid down in the first part of the definition in Section 4(4)(c) inasmuch as M/s. United Commercial Corporation is so associated with the appellant M/s. Rakesh Bulb Industries that they are interested, directly or indirectly, in the business of each other. In the present case, the partners of the manufacturing firm M/s. Rakesh Bulb Industries, and the partners of the buying firm, United Commercial Corporation are one and the same except that in the firm of buyers, viz., United Commercial Corporation there is one additional partner who is the mother of the remaining partners. The manufacturers and the buyers are therefore one and the same and it cannot be imagined that there is no financial interest in themselves or the mother has no financial interest in her sons’ business, which consists of both manufacturing and buying. No additional evidence is required to establish that appellants Rakesh Bulb Industries would strive hard to promote the business of United Commercial Corporation or vice versa because they will be doing it all for themselves. In this view of the matter we are fortified by the recent judgment of the Hon’ble Supreme Court rendered in the case of Mohan Lal Maganlal Bhavsar v. Union of India, 1986 (23) ELT 3 (SC). In that case there were two separate partnership firms – the manufacturing firm and the chief distributor firm. The three partners of the manufacturing firm along with the son of each of them were also partners of the chief distributor firm. From this fact the Hon’ble Supreme Court observed that there was ‘identity of interest’ between the two firms. The Supreme Court on these facts, inter alia, concluded that the to firms could not be said to be an independent party and the prices at which the goods were sold by the manufacturing firm to the distributor firm could not be taken to be the real value of the goods.
8. As regards the contention of the learned SDR for the appellants in Appeal No. 1449 of 82-A that the order of the Appellate Collector dated 16.4.1982 insofar as it relates to the deduction on account of cost of secondary packing, if any, is not correct because Section 4(4)(d) (i) does not make any distinction between the primary and secondary packing, it would suffice to say that from the judgments of the Supreme Court in Union of India and Ors. etc. etc. Bombay Tyres International, Ltd. etc. etc. 1983 ELT 1896; Union of India and Ors. v. Godfrey Phillips India Ltd., and Ors. 1985 (22) ELT 306 and Asstt. Collector of Central Excise and Ors. v. M.R.F. Ltd., and Ors. 1987 (27) ELT 553 (SC), it is clear that cost of only such packing can be excluded as is not generally used for putting the goods into wholesale market but is specially provided at the request of certain customers solely for the sake of safety of the goods during transport. The secondary packing used by M/s. Rakesh Bulb Industries, that is, the carton, does not pass this test. The goods manufactured and sold by them are electric bulbs which are a very fragile and delicate commodity. Their initial packing is just not adequate to protect them against breakage during storage, handling and normal marketing operations, what to talk of long distance transport. The carton is absolutely essential for protection of the goods even for local or short distance deliveries. It is not for nothing that their goods are invariably sold in the wholesale market in carton packing. M/s. Rakesh Bulb Industries sought benefit under the rule of promissory estoppel. However, they failed to show us any trade notice or public notice in which the promise of exclusion of the cost of secondary packing was held out. All that was produced before us was an advice of the Ministry of Law which was internally circulated by the Collector to his Assistant Collectors. It was not a public document in which any promise was made to the public. No question of promissory estoppel, therefore, arises. In the circumstances, we allow this appeal, set aside that portion of the Appellate Collector’s order which permitted exclusion of the cost of secondary packing and order that such cost shall be included in the assessable value of the goods.
9. In the light of the foregoing discussions, we conclude that the appellants Rakesh Bulb Industries and United Commercial Corporation are a “related person’ and therefore, according to Section 4, ibid, itself even in the case of ‘related person’ cost of actual transportation from the appellants premises to the ‘related person1 and also actual transportation expenses, if any, incurred and included in the ‘related persons’ prices are eligible for deduction for the purpose of determining the assessable value. Similarly, amount of duty of excise, sales tax and other taxes such as octroi etc., if any, incurred in relation to these goods whether by the appellants or the ‘related person1 has to be excluded while computing the assessable valuer
10. Accordingly, in conclusion :
I. Appeal No. 1171 of 1982-A filed by the appellants M/s. Rakesh Bulb Industries is dismissed, being devoid of any merits.
II. Appeal No. 1449 of 1982-A of the Collector is allowed.
III. Appeal No. 417/85-A filed by the Collector of Central Excise is allowed. The impugned order passed by the Collector (Appeals) is set aside and the order dated 23.11.1983 passed by the Assistant Collector of Central Excise, Pune is restored.