UNION OF INDIA Vs. PLAYWORLD ELECTRONICS PRIVATE LIMITED

JUDGEMENT

(1.) This is an appeal by special leave from the judgment and order of the High Court of Delhi dated 12th January, 1988.

(2.) The respondent company manufactured wireless receiving sets, tape recorders, tape players which were assessable under Tariff Items 33A and 37AA of the Central Excise Tariff and it had filed classification list and price lists in respect of the said goods. On verification of the said lists. it was found that goods were unbranded and on investigation it was alleged to have come to the notice of the Department that the respondent company was engaged in the manufacture of wireless receiving sets and tape recorders in the brand name of "Bush". From the documents filed by the respondent, according to the appellants, it was revealed that the respondent manufactured their entire products in the brand of "Bush" from the very beginning and were selling the same exclusively to M/ s. Bush India Limited or its authorised wholesale dealers only. This fact was nowhere mentioned by the respondent in its price list or its classification lists and this, according to the appellants, amounted to wilful suppression of facts with the intention to evade payment of central excise duty. Certain enquiries were made and to safeguard the interest of revenue the respondent was requested time and again to observe the provisions of R. 9B of the Central Excise Rules, 1944 and execute B-13 surety bond. However, it is stated that respondent evaded the execution of the said bond which was, according to the appellants, done deliberately. Thereafter, on 4th January, 1985, a Show Cause Notice was issued for the period 1st April, 1983 to 30th November, 1984 requiring the respondent to show cause as to why M/s. Bush India Limited should not be treated as a related person and a favoured buyer of the respondent company for the purpose of determination of wholesale cash price and as to why the concessional rate of duty under notification No. 358/77CE should not be denied to the respondent and as to why the differential duty in respect of the goods cleared during the period should not be recovered. While the adjudication on the basis of the Show Cause Notice was pending, the respondent company was again requested to execute the surety bond in July. 1984. Respondent company thereafter filed a writ petition in the High Court of Delhi under Art. 226 of the Constitution praying for quashing of the Show Cause Notice and the communication dated 11th July, 1984 and for mandamus to allow it to clear the goods on the basis of the price at which the goods were sold by it allowing the benefit of the relevant notification. The High Court by the order dated 12th January, 1987 held that the value of the goods manufactured by the respondent company was the price charged by it from M/s. Bush India Ltd. and not the market value at which M/s. Bush India Ltd. sold the goods to its wholesalers. In the premises, it was held that there was no misdeclaration of the value and the Show Cause Notices were quashed. In passing the impugned order, the High Court followed its decision in C.W. 197 / 85. It is, therefore, necessary to refer to the said decision of the High Court. The said decision challenged the notice dated 31st December, 1984 and a demand notice of the same date. It was contended on behalf of the petitioner in that case, who is the respondent in the instant appeal that the said respondent merely manufacture the aforesaid items for Bush India and after manufacturing those, it sells those to M/s. Bush India Ltd. It was contended that for the purpose of finding out the price for payment of excise duty, only the price which was charged by the respondent from Bush India Limited could be taken into account and the price at which M/s. Bush India Ltd. further sold those goods in the market was not the price which was to be taken for the excise duty. It was contended that Bush India Ltd. was not a related person of the respondent within the meaning of S. 4(4)(c) of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act) and reliance was placed on the decision of this Court in Union of India v. Bombay Tyre International Ltd., (1984) 1 SCR 347. On the merits of the case, reliance was also placed on certain decisions of this Court as well as the decision of the Delhi High Court. The High Court found that the case of the respondent was directly covered by all these decisions. In the premises, the High Court quashed the said Show Cause Notices and the demand notice. The question, therefore, is whether the High Court was right in the view it took.

(3.) Unfortunately, in the instant case,apart from the facts recorded hereinbefore, there is no other fact. Learned Counsel apearing for the revenue, Shri A. Subba Rao contended before us that the High Court was in error in not realising that in the facts and the circumstances of this case, it was an arranged affair and really M/s. Bush India Ltd. was a related person and as such the price charged from it, could not represent the correct assessable value for the purpose of excise duty.