FLASH LABORATORIES LTD. versus COLLECTOR OF CENTRAL EXCISE, NEW DELHI.

Citation: [2002] SUPP. 5 S.C.R. 698 · Decided: 20-12-2002 · Supreme Court of India · Bench: M.B. SHAH · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
FLASH LABORATORIES LTD. 
V. 
COLLECTOR OF CENTRAL EXCISE, NEW DELHI. 
DECEMBER 20, 2002 
(M.B. SHAH, K.G. BALAKRISHNAN AND D.M. 
DHARMADHIKARI, JJ.] 
Central Excise Act, 1944; Sections 4(/)(a) & 4.(4)(c): 
Valuation of excisable goods-Exception to general concept of sale-
Applicability of-Held, since appellant-company is selling goods at lowl!r 
price to its holding company and ano~her subsidiary company, there exists a 
business interest-Holding company incurring expenditure on promotion of 
sale of product-They pre related persons-Section 4( 4)(c) attracted-Tribunal 
D rightly confirmed demand of differential amount of duty-Central Excise Tariff 
Act, 1985-Chapter heading 3306. 
Appellant company-assessee was selling certain goods to its holding 
company and another subsidiary company of holding company. Appellant 
was paying excise duty on the goods at the selling price. Revenue 
E authorities noticed that there existed a business relationship amongst 
assessee, holding company and another subsidiary company and goods 
were being sold by assessee at lower price to evade payment of proper 
excise duty. A show cause notice was served and after affording an 
opportunity of hearing, differential amount of duty was confirmed against 
F the assessee. In other pending matter of the appellant-company, after 
following the decision, demand of differential amount of.duty was 
confirmed. Hence these appeals. 
G 
It was contended for the assessee that appellant-company was not 
the related person to its holding and another subsidiary company. 
Dis.missing the appeals, the Court 
HELD: 1.1. Section 4 of the Central Excise Act, 1944 deals with 
valuation of excisable goods for purposes of charging of duty of excise and 
as per Section 4(1)(a), the value shall be deemed to be the normal price 
H thereof, the price at which such goods are ordinarily sold by the assessee 
698 
FLASH LABORATORIES LTD. v. C.C.E. 
699 
·'-
to a buyer in the course of wholesale trade for delivery at the time and A 
place of removal where the buyer is not a related person and the price is 
the sole consideration for the sale. Section 4(4)(c) is an exception to the 
general concept of sale. {701-F, G{ 
1.2. The definition of "related person" shows that when an assessee 
is so closely associated with another person, directly or indirectly, in the B 
business, then they are "related persons". The definition further shows 
that the holding company and subsidiary company have got special 
significance. It is clear from the definition that there must be mutuality 
of interest between the two persons. {702-B, C{ 
1.3. In the instant case, the appellant-company is a subsidiary C 
company of a company which also have another subsidiary company. Sixty 
per cent of the products manufactured by the appellant are sold .to holding 
company and forty per cent of the products are sold to its another 
subsidiary company. According to the respondent, the appellant and other 
subsidiary company could be treated as "related person" within the D 
meaning of Section 4(4)(c) of the Act. {701-D, Fl 
1.4. Having regard to th~ ruling and plain meaning of the definition 
of "related person", it is to be noticed that the appellant is a subsidiary 
company of a company which have another subsidiary company. 
Therefore, the relationship between the appellant and another subsidiary E 
·company though indirect they have mutual interest in the business of each 
other. The facts and circumstances of the case show that there is mutuality 
of interest between the three companies as sixty per cent of the products 
of the appellant are sold to holding company and the remaining forty per 
cent of the total product is being sold to another subsidiary company. F 
Moreover, holding company is incurring the expenses for sales promotion 
and advertisement for the sale of the appellant's product. In the connected 
1;1ppeal, no other materials are placed to show that the finding of the 
Tribunal is not correct. Besides, the appellant had paid the excise duty 
pursuant to these notices and the same must have been passed on to the 
consumers. Hence the appellant is not entitled to seek any relief. 
G 
{703-D-F; 704-B-C{ 
Union of India and Ors. v. Atii:; Industries Limited, 1198413 SCC 575, 
relied on. 
Union of India v. Bombay Tyre International, 119841 1 SCC 467, H 
700 
SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R. 
A referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No .. 5619 of 

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