ON Civil Appeal Nos
1938 39 of 1987
From the Order dated 1101985 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal Nos
ED SR T 141582 Al and 153384 A 357 MK Banerjee Solicitor General AK Ganguli and P Parmeshwaran for the Appellant
ATM Sampath for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
These are appeals under section 35Lb of the hereinafter called the Act 
The respondents TI Millers Ltd and TI Diamond Chain manufacture cycle lamps and automative chains
Both these goods are assessable under Item 68 of the Central Excise Tariff
The said respondents filed price lists for the sale of the goods through their distributors namely Ms TI and M Sales Ltd Ms Charmvel Agencies and Ms Ambadi Enterprises Pvt
Ltd quoting their price to the distributor as assessable value
However subsequently following the decision of the Madras High Court in a valuation case the respondents required that the price charged by them from buyers at the factory gate should be accepted as the assessable value and not the price to the distributors
The question is whether the price charged by the respondents from buyers at the factory gate should be accepted as the assessable value for the levy of duty under section 3 of the Act
The Assistant Collector found from the sales pattern of the respondents that the distributors were related persons  as per section 4 of the Act and the price at which the distributors sold the goods should therefore be the assessable value
The respondents went up in appeal before the Appellate Collector
The Appellate Collector held that in order to establish mutuality of business interests direct and indirect between manufacturer and buyer it should be shown that they have been promoting the business of each other in their own interest and that in the absence of such a finding in the Assistant Collector s order these could not be held to be related persons
Section 4 of the Act provides that where the duty of excise is chargeable on any excisable goods with reference to value such value should be determined on the basis of the normal price thereof that is to say the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyer is not a related person and the price is the sole consideration for the sale
We are not concerned for the purpose of these appeals with the provisos nor with sub section 2 or sub section 3 of section 4 of the Act
Sub section 4c of section 4 defines related person  to mean a person who is so 358 associated with the assessee that they have interest direct or indirect 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
The explanation provides that holding company  subsidiary company  and relative  have the same meanings as in the 
The words related person have been considered by this Court in Union of India and others vs Atic Industries Limited  Bhagwati J as the learned Chief Justice then was speaking for the Court held that the first part of the definition of related person in clause c of sub section 4 of section 4 defines related person to mean a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other
It is not enough the Court observed that the assessee has an interest direct or indirect in the business of the person alleged to be a related person has an innough that the person alleged to be a related person has an interest direct or indirect in the business of the assessee
To attract the applicability of the first part of the definition it was observed the assessee and the person alleged to be a related person must have interest direct or indirect in the business of each other
Each of them must have a direct or indirect interest in the business of the other
The quality and degree of interest which each has in the business of the other may be different the interest of one in the business of the other may be direct while the interest of the latter in the business of the former may be indirect
That would not make any difference so long as each has got some interest direct or indirect in the business of the other
In the notice issued by the Central Government seeking to review the Appellate Collector s order the Central Government indicated that there was an agreement existing between the respondents and their distributors according to which they were the company s distributors for the sale of their goods
Major portion of the sales were effected through Ms TI and M Sales Ltd who were the main distributors of Ms Tube Investments of India Ltd and its subsidiary companies and rest of the sales through the other two distributors
Ms Tube Investment of India was the holding company of Ms TI Millers Ltd The agreement between the assessee and the TI and M Sales Ltd was registered under the MRTP Act
The Government of India also found that there was a territorial earmarking for the operation of the distributors who also undertook advertisements and helped the sub dealers for maintaining show rooms in dealer s pre 359 mises
The distributors did not deal with competitor s goods
The Government of India also noted that the assessee granted mark up to the distributors to cover their establishment expenses travelling expenses advertisement and sundry expenses
On these grounds the Government of India tentatively considered that it was a fit case for reversing the order of the Appellate Collector who had held that the distributors were not related persons under section 4 of the Act
The question is whether the distributors in this case were related persons of the respondents and secondly whether the expenses incurred for maintaining the show room advertisements etc
should also be added to the assessable value
How the value should be computed has been examined by this Court in Union of India and others etc
vs Bombay Tyre International Ltd etc
  There Pathak J as the learned Chief Justice then was held that the definition of the words related person did not suffer from any constitutional infirmity
This Court reiterated that on a true construction of its provisions in the context of the statutory scheme the old section 4a should be considered as applicable to the circumstances of the particular assessee himself and not of manufacturers generally
The Court further reiterated that pursuant to the old section 4a the value of an excisable article for the purpose of the excise levy should be taken to be the price at which the excisable article is sold by the assessee to a buyer at arm s length in the course of whole sale trade at the time and place of removal
Where however the excisable article is not sold by the assessee in wholesale trade but for example is consumed by the assessee in his own industry the case is one where under the old section 4a the value must be determined as the price at which the excisable article or an article of the like kind and quality is capable of being sold in wholesale trade at the time and place of removal
This Court analysed the position under the Central Excise and Salt Act 1944 as amended by Act XXII of 1973 that if the price at which the excisable goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal as defined in sub section 4b of section 4 is the basis for determination of excisable value provided of course the buyer is not a related person within the meaning of sub section 4c of section 4 and the price is the sole consideration for the sale that would be the value
The proposition is subject to the terms of the three provisos to subsection 1a of section 4
Where the wholesale price of any excisable goods for delivery at the place of removal is not known and the value thereof is determined with reference to the wholesale price for delivery at a place other than the place of removal the cost of transportation from the place of removal to the place of delivery should be 360 excluded from such price
It was further held that these principles could not apply where the tariff value had been fixed in respect of any excisable goods under sub section 2 of section 3
The Court also dealt with the interpretation of definition of related person 
The Court further held that the expenses incurred on account of the several factors which have contributed to its value upto the date of sale which apparently would be the date of delivery are liable to be included
Consequently where the sale is effected at the factory gate expenses incurred by the assessee upto the date of delivery on account of storage charges outward handling charges interest on inventories stocks carried by the manufacturer after clearance charges for other services after delivery to the buyer namely after sales service and marketing and selling organisation expenses including advertisement expenses marketing and selling organisation expenses and after sales service promote the marketability of the article and enter into its value in the trade
Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot on the same grounds be deducted
The assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold
The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery
The new section 44di has made express provision for including the cost of packing in the determination of value for the purpose of excise duty
The review application by the change of law was forwarded to the Tribunal
It was contended before the Tribunal on behalf of the appellant that the distributors were related persons in terms of the judgment of this Court in Bombay Tyre International case supra
Our attention was drawn to a letter dated 10th September 1981 from the respondents to the Assistant Collector that the mark up allowed to the distributors was to cover their establishment expenses advertisement travelling expenses and he pointed out that this mark up included certain elements which have to be included in the assessable value
The Tribunal held that according to the judgment of this Court in Bombay Tyre International case supra where the sale is effected at the factory gate expenses incurred on account of charges for services after delivery to the buyer namely after sale service and marketing and selling organisation expenses including advertisement expenses could not be deducted from the assessable value
It was further urged 361 on behalf of the appellant that other features like division of territory amongst the distributors and the marginal quantity of direct sales otherwise as well as the fact that the distributors did not deal in competitor s goods clearly indicated that these are related persons
Learned Counsel drew our attention to the meaning of the term ordinarily  given in KG Iyer s Judicial Dictionary at page 704 and explained that it meant habitually  or usually  or normally 
In this case ordinarily sales are only through distributors and the sales are made by them on behalf of the manufacturer
Learned Counsel pointed out that this was a case where it was an extension of the manufacturer s self to the point of sale by the distributor
Learned Counsel for the revenue urged that it was a case of indirect relationship and came within the ratio of the aforesaid decision of this Court in Bombay Tyre International case supra
In this case it was highlighted that manufacturer had interest in the buyer who were their distributors and the distributors were only charging limited commission maintained showrooms and did not deal in the products of competitors of the manufacturer
It was further contended that sales of their products as original equipment could not be considered as sales in the ordinary course of wholesale trade
It was further highlighted that the norm of inter connected undertakings found in MRTP Act is not relevant to decide related persons  in the Act
It was further argued that mere area restriction is not relevant for proving mutuality of interests but it has to be shown that the sale was not at an arms length and but a principal to principal transaction
It appears from the letter dated 10th September 1981 from the appellants to the Department that the distributors paid for their own advertisements
In some case the manufacturer might release advertisements through the distributors
It was also urged that even a sole distributor could be an independent buyer on behalf of the manufacturer and the distributor and in this connection reliance was placed on the observations of this AK Roy s case SC
After sales service undertaken by the distributors was more in the nature of replacement of defective goods sold which any manufacturer was bound to do and that is a normal essential service of a distributor
Regarding the mark up  allowed by the manufacturer to the distributor as indicating special relationship it was contended that it was provided for in the context of the requirement to indicate maximum selling price to be marked on the goods and in fact it was in this context that the appellants had made a reference to the MRTP Commission
The Tribunal held that the distributors were not related persons and in the light of the observations of this Court in Atic In 362 dustries case supra set out hereinbefore
We are of the opinion that what was necessary to find out was whether the buyer is holding company or subsidiary company or relative of the manufacturer
From the explanation of the relationship furnished in this case such is not the position
It appears that the link between the respondents TIMiller Ltd company and TI  M Sales Ltd is the main distributors of Ms Tube Investments of India Ltd who are the holding company of the respondents
This relationship does not satisfy the criteria for establishing the related persons concept
These were limited companies at the material time and it will be difficult to say that a limited company has any interest direct or indirect in the business carried on by one of its shareholders
It has been explained that the mark up in the price was allowed in connection with the requirement to display the maximum sale price
The sales pattern shows also sales to other than distributors and it is not restricted only to the appointed distributors of TI India Limited
In the premises the Tribunal s upholding the order of the Appellate Collector was right and correct
In the background of the facts mentioned hereinbefore and in the light of the decisions of this Court in Bombay Tyre International and Atic Industries cases supra we are of the opinion that the Tribunal was right and there is no cause for interference with the order of the Tribunal
In the premises we decline to admit the appeals
HSK Appeals dismissed


Summary:
 Four agreements were entered into between the respondent and the appellant Union of India through the Executive Engineer Northern Railway followed by a supplementary agreement
All the four contracts were executed and completed by the respondent on diverse dates
The respondent accepted four final bills and gave no claim declaration in respect of the four contracts
Thereafter the respondent wrote to the Additional Chief Engineer RENR that Rs191137 were due on account of work executed and asked for a reference of the dispute to the Arbitrator
A reply was sent to the respondent that there was no dispute between the parties and no question of appointment of any Arbitrator arose
The respondent then filed an application in the Court of Civil Judge for the appointment of an Arbitrator under Section 20 of the the Act 
The application was dismissed as being barred by limitation
An appeal from the decision of Civil Judge was allowed by the High Court
The appellants then moved this Court for relief by this appeal
Dismissing the appeal the Court  HELD The sole question involved in this appeal was whether the Civil Judge was right in dismissing the application and whether the application under section 20 was within time
404H It is well settled in view of the decision of this Court in Kerala State Electricity Board Trivendrum vs TPKK Amsom and Besom Kerala  that Article 137 would apply to any petition or application filed under any Act in a Civil Court
The words any other application this Court held under Article 137 cannot be read on the principle of ejusdem generis to be applications under the Civil Procedure Code other than those mentioned in Part I of the third division
405A B 403 There are two aspects of the matter
One is whether the claim made in the arbitration is barred by limitation under the relevant provisions of the limitation Act and secondly whether the claim made for application under section 20 is barred
To be a valid claim for reference under section 20 of the  it is necessary that there should be an arbitration agreement and secondly differences must arise to which the agreement in question applied and thirdly that must be within time as stipulated in section 20 of the Act
In this case there was an arbitration agreement as found by the High Court covering the disputes
It was also obvious that differences had existed
There was assertion of claim and denial of it
As such the dispute was liable to be referred to arbitration in terms of the agreements between the parties
The question was whether there was a valid claim under section 20 of the Act to be referred in accordance with law
407C E G H In view of the well settled principles it would be entirely wrong to mix up the two aspects namely whether there was any valid claim for reference under Section 20 of the Act and secondly whether the claim to be adjudicated by the arbitrator was barred by lapse of time
The second is a matter which the arbitrator would decide unless on admitted facts a claim is found at the time of making an order under Section 20 of the Act to be barred by time
To be entitled to ask for a reference under section 20 of the Act there must be entitlement to money and a difference or a dispute in respect of the same
It is true that on completion of work the right to get payment would normally arise and it is also true that on settlement of the final bill the right to get further payment gets weakened but the claim subsists and whether it does subsist is a matter which is arbitrable
In this case the claim for reference was made within three years commencing from April 16 1976 and the application was filed on December 18 1976
408A D The High Court was right in this case
See in this connection the observations of this Court in Major Retd Inder Singh Rekhi vs DDA  The appeal failed
408D Kerala State Electricity Board Trivandrum vs TPKK Amsom and Besom Kerala   Wazirchand Mahajan  Anr
vs Union of India   Mohd Usman Military Contractor Jhansi vs Union of India Ministry of Defence  Jiwnani Engineering Works P Ltd vs Union of India and Major Retd Inder Singh Rekhi vs DDA  referred to 404