ORDER
K.L. Rekhi, Member (T)
1. This order is made by us in compliance with the direction dated 24-6-1986 of the Hon’ble High Court of Madras in writ petition No. 1202 of 1980 which had been filed by the respondents against the order-in-revision No. 119 of 1979, dated 17-2-79 passed by the Government of India pursuant to the aforesaid revision show cause notice. The Hon’ble High Court allowed the writ petition, quashed the Government of India’s order-in-revision and directed this Tribunal to dispose of the matter afresh in the light of the Supreme Court judgments relating to the concept of ‘related person’ under Section 4(4)(c) of the Central Excises and Salt Act, 1944.
2. During the hearing today, the learned representative of the department maintained that the main dealers of the respondents were related persons because of the terms of the agreement entered into between the respondents and the main dealers. We re-produce below from the revision show cause notice the substance of the particular provisions of the agreement to which objection is taken by the department :
“That as per the agreement executed between the party and the main dealers, such main dealers have been assigned defined territories and functions. They have been prohibited in dealing in competitive goods, and have not been allowed free hand regarding appointment of dealers. They have been required to maintain a minimum staff, a show room and service station, and have been made responsible for proper publicity for promotion of sale of the goods.”
3. We invited attention of the learned representative of the department to the various Hon’ble Supreme Court judgments which have been cited in the judgment of the High Court of Madras aforesaid, namely :-
(1) 1983 (14) E.L.T. 1896 (S.C.) – U.O.I. v. Bombay Tyres International.
(2) 1984 (17) E.L.T. 323 (S.C.) – U.O.I. v. Atic Industries Ltd.
(3) 1986 (23) E.L.T. 8 (S.C.) – Moped India Ltd. v. Asstt. Commr.
The learned representative of the department had nothing more to say except to reiterate his contention that as per the agreement the main dealers were related persons of the respondents. In reply to our query, he stated that there were as many as 89 main dealers of the respondents.
4. The respondents rested their case on the Supreme Court judgment aforesaid in the case of Moped India Ltd.
5. We agree with the respondents that according to the ratio of the Supreme Court judgments referred to above, particularly in the case of Moped India Ltd., the main dealers of the respondents could not be called their related persons. The terms of the agreement to which the objections have been taken by the department did not amount to mutuality of interest between the respondents and their main dealers. We, therefore, hold that the main dealers of the respondents were not related persons within the meaning of Section 4(4)(c). However, it appeared to us that the price charged by the respondents from the main dealers was not the sole consideration for the sale inasmuch as the main dealers performed certain services (after sale service during the warranty period and advertisement and publicity of the respondents’ goods) for the respondents which amounted to payment in kind to the respondents. The money value of such payment has to be quantified by the Asstt. Collector and added to the assessable value in accordance with Rule 5 of the Central Excises (Valuation) Rules, 1975. We put it to the respondents that the Supreme Court had held in their judgment in the case of Bombay Tyres International that advertisement charges and after sale service charges during the warranty period were essential for putting the goods into the market and that such charges were includible in the assessable value. The respondents stated that they would have no objection to such charges, if any, incurred by their main dealers being added to the assessable value. They also undertook to supply all the necessary data to the Asstt. Collector in order to enable him to quantify these charges so that the assessable values could be approved expeditiously.
6. In the result, we dispose of this appeal in terms that the sale price of the respondents to their main dealers plus money value of the costs incurred, if any, by the main dealers on account of advertisement/publicity and after sale service during the warranty period should form the basis of assessment. The Asstt. Collector should work out the assessable values on these lines expeditiously and thereafter grant the consequential refund to the respondents.