LexUNION OF INDIA AND OTHERS versus ATIC INDUSTRIES LIMITED
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B D E ,. G H , UNION OF INDIA AND OTHERS v. ATIC INDUSTRIES LIMITED • Jwte 22, 1984 . . . [P.N. BHAGWATI, R.S. PATHAK AND !\MARENJ?RA NATH SEN, JJ.J Central Excise. and Salt Act, 1944-Clause (c) of sub-section (4) of section 4 as i( stood after its amendment·by sec. 2 of the Central Act 22 of 1973~ >-- ConsitUtationaJ validity of. · Central Excise and Salt Act, ·1944-The words "related person" occurriflC · in claitse (c) of sub·Section (4) of sec. 4 as it stood after it~ amendment by sec. 2 of the Central A.ct 22 of 1973-Dejinitton and applicability of. ' Bank Guarntee-Whether the High Court was right in directing the costs of /urilishing bank guarantee to be paid by the Revenue to (he assessee in cases wh.ere the demand for duty is quashed a~ unjustified. The reSpondent-assessee, a limited company, was engaged in the business of manufacturing dyes. Its 50 per cent share capital was held by Atul • products Ltd. and the remaining 50 per cent by Imperial Chemical Industries Ltd. London wHich also had a subsidiary company fully owned by it,"called ~mperial Chemical Industries (India) Pvt. Ltd. The Impenal Chemical Industries (India) pvt. Ltd, ceased to be a subsidiary company wholly owned_ by the Imperial Chemical Industries Ltd. London on 13th March 1978, since 60 per cent of the share capital of Imperial Cheniical Industries (India) Pvt. Ltd, was offered to the pub.lie in pursuance of the policy of the Government of India requiring ihat not more !ha~ 40o/o- of the share Capital of an ltdian co~pany · should be held by a for~ign sharehplder. ConSequent up<in this dilutiQn e· forcii&'n Shareholding, the name of Imperial Chemical Industries (lnQJa) Pvt. Ltd, was changed to Crescent Dyes and Chemicals Ltd. The assessee at all material times sold the large hulk of dyes rnanufac~ tured by it in wholesale to Atul Products Ltd. and Imperial Chemical Illdus~ tries (India) Pvt. Limited which subsequently ·came to be known as Crescent Dyes and chemicals Ltd. at a uniform price applicable alike to both these wholesale buyers and these wholesale· _buyers sold these dyes to dealers and consumers ·at a higller price which inter. alia. included the expenses incurred by • UNION v. ATIC INDUSTRIES 931 them as also their profit. The traCsactions between the assessee on the one A hand and Atul Products Ltd. and Crescent Dyes and Chemicals Limited on the other were as principal to principal and the wholesale price charged by the assessee to Atul Products Ltd and Crescent Dyes and. Chemicals Ltd. was the sole consideration for the sale and no ex:tra-crimmercial considerations entered in the det~rmination of such price. The aSsessee went on clearing the dyes manufactlired by it after payment of excise duty as per the price 1ist submitted by it on the basis of the wholesale price charged to Atul Products Ltd. and Crescent Dyes and Chemicals Ltd. as the same was approved by the Asst. Collector on 29th October, 1975. The Superintendent Of Central Excise, however, is~ued a notice to the assessee on 31st July: 1976 calling upon the assessee to show cause why the earlier decision approving the price list should not b"° reviewed and.the differential duty worked out on the basis of selling price charged by Atul Products Ltd. and Cresceat Dyes & Cheinicals Ltd. should not be recovered w.e.f. 1st October 1975 on the ground . that the assessee on the one hand and Atul Product~ Ltd. ~-nd Crescent Dyes and Chernicals Ltd. on the other 'vere· "related pe~sons" and the assessable value .of *'he dyes manufactured by the assessee was therefore liable to be calculated on the basjs of the price at which Atul Products L1d. and Crescent Dyes and Chemicals- Ltd. sold the Dyes to the dealers and the consumers. The assessee in its reply dated 31st . August 1976 pointed out that the assessee on the one hand and Atul Products ""' Ltd. and Crescent Dyes and Chemicals Ltd. on the other Were not "related persons" within the meaning of the definition of that term contained in clause (c) of sub·section (4) of section 4 of the amended Central Excise and Salt Act 1944. The Asstt. Collector was however not satisfied with the explanation offered by the assessee and viewed, his earlier order of approval of the price list and confirmed the demand Of differentia 1 duty which came to an aggregate amount of Rs 1, 17, 77, 737,65 with retrospective effect from 1st October, 1975· and directed th<:> ass
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