ORDER
G.P. Agarwal, Member (J)
1. The captioned appeal which was originally a Review Petition before the Central Government and stands statutorily transferred to this Tribunal for disposal according to law, is directed against the Order-in Appeal No. 1231-CE/79 passed by the Appellate Collector of Central Excise, New Delhi and issued on 8.11.1979.
2. The respondents, M/s. Sitapur Plywood Mfg. Co., Sitapur, were issued Show Cause Notice to show cause as to why a penalty be not imposed upon them for violation of Rule 173C(2A) read with Rule 173-Q of Central Excise Rules, 1944 and Section 9 of the Central Excises and Salt Act, 1944, and why the duty short paid by them on all such goods which were supplied to their agents/distributors with effect from 5-7-1976 up to date be not recovered under Rule 10 of the said Rules, on the allegation that they have obtained approval on 5-7-1976 on the price list dated 5-3-1976 and 7-5-1976, and on subsequent price lists, on furnishing a false, misleading and erroneous declarations vide their letter dated 1st July, 1976, and the same declarations were furnished on subsequent price lists, inasmuch as that the distributors which in fact were related persons as defined under Section 74 of the said Act. In reply, the respondents, inter alia, submitted that all the transactions between the respondents and their so-called agents/stockists were on principal to principal basis and represented outright sale of the goods on full payment of their value and they have no interest in the business of each other. After the usual adjudication proceedings, the Adjudicating Authority confirmed the demand of duty on the differential value holding that the wholesale dealers of the respondents were related persons. Being dissatisfied, the respondents preferred their appeal. The Appellate Collector allowed the appeal holding that the wholesale dealers of the respondents were not the related persons. As such, the normal price should be fixed in accordance with Proviso (i) to Section 4(1)(a) of the Central Excises and Salt Act, 1944. Thereupon the Central Government, after examination of the case record, issued a Show Cause Notice to the respondents purporting to be under erstwhile Section 36(2) of the Central Excises and Salt Act, 1944, calling upon the respondent to show cause as to why the Appellate Collector’s Order be not set aside. In reply the respondents defended the order passed by the Appellate Collector.
3. Shri Lachman Dev, learned Consultant for the respondents at the outset raised a preliminary objection to the effect that the Show Cause Notice in question issued by the Central Government under erstwhile Section 36(2) of the Central Excises and Salt Act, was time-barred, being issued after the expiry of six months as provided under Section 11A of the Central Excises and Salt Act, 1944. In other words, he submitted that larger period of five years provided under the said Section 11A was not available. He, with the help of the decision rendered by the Special Bench of this Tribunal in the case of Military Dairy Farm v. Collector of Central Excise, 1985 (19) ELT 148, submitted that in the instant case Appellate Collector passed the impugned order on 8-11-1979 whereas the Show Cause Notice was issued on 31-10-1980 by the Central Government, and therefore, the Show Cause Notice was time-barred being issued after six months. During the course of the argument, he submitted that in the Show Cause Notice issued by the Assistant Collector, no allegation regarding the suppression of facts was made. We are afraid this contention has no force. A perusal of the Show Cause Notice would show that the respondents were charged for making the false and misleading declaration resulting in the assessments on the assessable value lower than what was liable under Rules. Thus, we hold that the Show Cause Notice was within time, and over- rules the preliminary objection raised by Shri Lachman Dev, learned Consultant for the respondents.
4. Shri V.M. Doiphode, learned SDR submitted that the respondents entered into agency agreement with various agents/stockists and that initially these agreements were for sale in separate demarcated territories, but certain words of the existing agreement relating to demarcation of territories were modified so as to indicate that there was no marked territories as is evident from the sale vouchers and invoices and also from Sub-clause (f) of Clause 2 of the agreement, which stipulated that the agent shall be responsible for all payments of the goods supplied to the customers, Government or private parties in their area, and that Clause 7 of the agreement provides that agent shall be responsible for payment of the expenses on freight etc., incurred by the Company for supply of goods either to the agents direct or to any other party in the agent’s territory, and that the amended Clause (c) of Clause 2 provides for over-riding commission. He also submitted that a close scrutiny of the agreement entered into between the respondents and their whoelsale dealers reveals that the following extra commercial controls were exercised over such agents and the agents could sell the goods in the market subject to the following conditions :
“1. The manufacturing Co. fixed rates for wholesale transaction and the agents were not permitted to sell the goods beyond such rates without the written permission of the company in writing.
2. The agents could not allow any discount to any purchase without prior permission of the company in writing.
3. The agents could not appoint any sub agent/stockist without the previous sanction of the company in writing.
4. Agents were to canvass for the orders for the purchase of the goods manufactured by the company.
5. Agents were to ensure that the payments are realised by the company.
6. The agents were to bear the freight and all other direct or without indirect charges and expenses and incurred by the company for supply of the goods either to the agents themselves or to any party in the agent’s territory.”
5. In reply, Shri Lachman Dev, learned Consultant submitted that the number of respondents’ wholesale dealers is in large and the respondents have at present 51 such wholesale dealers scattered all over the country and it would not be correct to hold such a large number of wholesale dealers as “related persons”; that the sales made to wholesale dealers are in the nature of sales at arms’ length and the lower price charged from them is not in consideration of any services rendered by them to the company; that the wholesale dealers have no demarcated territory and they are free to canvass orders anywhere; that they purchase the goods outright and the property in the goods passed on to them immediately on delivery; and that there is no mutual interest. From the impugned order passed by the Appellate Collector, we find that on the evidence available on the record, it was found as a fact by the Appellate Collector that the respondents have 51 wholesale dealers spread all over the country and that these wholesale dealers have no territory assigned to them and they are free to deal in goods of other manufacturers. These wholesale dealers also do not maintain any show room on account of the respondents nor render any after sale service. The Appellate Collector has further found that the sales to the wholesale dealers are in the nature of outright cash sales and property in the goods is passed on to the dealers immediately on delivery and there is no obligation on the respondents to receive back or replace damaged goods. He has further found that there is no evidence on record to show that the respondents and wholesale dealers have interest directly or indirectly in the business of each other.
6. After giving our due consideration to the arguments so advanced, we are of the view that there is no cogent evidence on record to take a contrary view than what the Appellate Collector has taken in the instant case. The circumstances pointed out by the learned SDR for the appellant as stated above, also do not change the complex of the case because the fact remains that such a huge number of wholesale dealers (51 in the instant case) spread all over the country, cannot be related persons, more particularly when there is no evidence on record to show that they (respondents and the wholesale dealers) have interest, directly or indirectly, in the business of each other. From the facts and circumstances stated by the learned SDR for the appellant, it cannot be concluded that they have interest in the business of each other. In the result, review notice issued by the Central Government is liable to be quashed. We accordingly, quash the review notice in question.