Case: Kirloskar Cummins Limited Vs. Union of India

company. The learned counsel did not dispute that the subsidiary company of the assessee is a related person as contemplated by Section 4 (1) (c) of the Act. The expression "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 subsidiary company. It is not in dispute that the subsidiary company is wholly owned by petitioner No. 1 Company and therefore Shri Setalwad very rightly did not dispute the finding of the Assistant Collector that the subsidiary company was a related person. The complaint of Shri Setalvad is that the Assistant Collector was in error in holding that the price charged by the subsidiary company to their purchasers should be taken into consideration for determination of assessable value of engines. The submission of the learned counsel is correct and deserves acceptance.( 5 ) SECTION 4 of the Act, inter alia, prescribes that the duty of excise of excisable goods shall be determined with reference to value and such value shall be the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade and where the buyer is not a related person. Proviso (i) to Sec. 4 (1) sets out that where such goods are sold by the assessee at different prices to different classes of buyers, not being related persons, each such price shall be deemed to be the normal price of such goods in relation to each such class of buyers. The provisions of proviso (i) do not come into play in the facts of the present case as the engines were sold by the Company to individual buyers and to the subsidiary company which is undisputably a related person. The Assistant Collector relied upon provisions of Sec. 4 (1) (a) (iii) to hold that the price charged by the subsidiary company to their purchasers should be relevant for determining the assessable value. It is therefore necessary to set out proviso (iii) in its entirely. (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. Shri Setalvad complains, and in our judgment, with considerable merit that proviso (iii) is not attracted to the facts of the case because the engines are generally not sold by the assessee except to or through a related person. Shri Setalwad submits that out of the total production 90% are sold directly to wholesale dealers, while negligible quantity of engines i.e. 10% are sold through the subsidiary company. It is therefore obvious that proviso (iii) will not come into play because the engines are generally not sold by the assessee to or through a related person. Shri Desai, learned counsel appearing for the Revenue, made a brave attempt to urge that the 90% sale effected by the assessee is not a wholesale trade but the engines are sold on retail. We are unable to find any merit in the submission, because it is based on assumption and for which there is no foundation whatsoever. The expression "wholesale trade" has been defined under Section 4 (4) (e) of the Act and means sales to dealers, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail. The Assistant collector in the impugned order has specifically observed that the Company sells their goods in wholesale trade through two channels, first directly to wholesale dealers and secondly through the subsidiary company. In face of this clear-cut finding recorded by the Assistant Collector, it is impossible to accede to the submission of Shri Desai that the sales of the Company is not wholesale trade as prescribed under Section 4 (4) (e) of the Act. Shri Setalvad points out that most of the engines manufactured by the Company are sold to the industrial consumers and therefore the sales clearly fall within the expression "wholesale trade". In our judgment the Assistant collector was clearly in error in holding that the price charged by the subsidiary company to their purchasers should be taken into consideration for determining the assessable value. The price at the second stage of sale is not relevant and such assessment is not permissible under any of the provisions of Sec. 4 of the Act. In our judgment, the Asstt. Collector was in error in refusing to grant the claim of refund made by the Company under various applications.( 6 ) SHRI Desai made a faint attempt to urge that the grant of refund would amount to unjust enrichment and in support of the submission made reference to the averment made in paragraph 24 of the return dated July 18, 1985 sworn by Shreeram Shankar Risbood, Assistant Collector of central Excise. The only claim made in the return is that the claim for refund is barred by principles of unjust enrichment. We are unable to find any merit in this submission. The requirements for examination of defence of unjust enrichment are well set out in the decision of the Full Bench of this Court reported in 1990 (46) E. L. T. 23 (New India Industries Ltd. v. Union of India). Shri Desai very frankly and very rightly stated that the affidavit filed by the department does not satisfy the requirements set out by the decision. It is therefore not possible to refuse the claim of the petitioners on the ground of unjust enrichment. In our judgment, the petitioners are entitled to the relief sought.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The submission of the learned counsel is correct and deserves acceptance.( 5 ) SECTION 4 of the Act, inter alia, prescribes that the duty of excise of excisable goods shall be determined with reference to value and such value shall be the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade and where the buyer is not a related person. Proviso (i) to Sec. 4 (1) sets out that where such goods are sold by the assessee at different prices to different classes of buyers, not being related persons, each such price shall be deemed to be the normal price of such goods in relation to each such class of buyers. The provisions of proviso (i) do not come into play in the facts of the present case as the engines were sold by the Company to individual buyers and to the subsidiary company which is undisputably a related person. The Assistant Collector relied upon provisions of Sec. 4 (1) (a) (iii) to hold that the price charged by the subsidiary company to their purchasers should be relevant for determining the assessable value. It is therefore necessary to set out proviso (iii) in its entirely. (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. Shri Setalvad complains, and in our judgment, with considerable merit that proviso (iii) is not attracted to the facts of the case because the engines are generally not sold by the assessee except to or through a related person. Shri Setalwad submits that out of the total production 90% are sold directly to wholesale dealers, while negligible quantity of engines i.e. 10% are sold through the subsidiary company. It is therefore obvious that proviso (iii) will not come into play because the engines are generally not sold by the assessee to or through a related person. Shri Desai, learned counsel appearing for the Revenue, made a brave attempt to urge that the 90% sale effected by the assessee is not a wholesale trade but the engines are sold on retail. We are unable to find any merit in the submission, because it is based on assumption and for which there is no foundation whatsoever. The expression "wholesale trade" has been defined under Section 4 (4) (e) of the Act and means sales to dealers, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail. The Assistant collector in the impugned order has specifically observed that the Company sells their goods in wholesale trade through two channels, first directly to wholesale dealers and secondly through the subsidiary company. In face of thisfinding recorded by the Assistant Collector, it is impossible to accede to the submission of Shri Desai that the sales of the Company is not wholesale trade as prescribed under Section 4 (4) (e) of the Act. Shri Setalvad points out that most of the engines manufactured by the Company are sold to the industrial consumers and therefore the sales clearly fall within the expression "wholesale trade". In our judgment the Assistant collector was clearly in error in holding that the price charged by the subsidiary company to their purchasers should be taken into consideration for determining the assessable value. The price at the second stage of sale is not relevant and such assessment is not permissible under any of the provisions of Sec. 4 of the Act. In our judgment, the Asstt. Collector was in error in refusing to grant the claim of refund made by the Company under variousare unable to find any merit in this submission. The requirements for examination of defence of unjust enrichment are well set out in the decision of the Full Bench of this Court reported in 1990 (46) E. L. T. 23 (New India Industries Ltd. v. Union of India). Shri Desai very frankly and very rightly stated that the affidavit filed by the department does not satisfy the requirements set out by the decision. It is therefore not possible to refuse the claim of the petitioners on the ground of unjust enrichment. In our judgment, the petitioners are entitled to the relief sought.