M/S BILAG INDUSTRIES P. LTD. & ANR.versusCOMMR. OF CEN. EXC. DAMAN & ANR.

618                      [2023]REPORTS
               SUPREME COURT    3 S.C.R. 618                 [2023] 3 S.C.R.


A                 M/S BILAG INDUSTRIES P. LTD. & ANR.
                                         v.
                  COMMR. OF CEN. EXC. DAMAN & ANR.
                     (Civil Appeal No (s). 9195-9196 of 2010)
B                               MARCH 22, 2023
           [S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
             Central Tariff Act, 1985 – s. 4(4)(c) – In BIL, AgrEvo SA held
      51% of the share capital initially (which was increased to 74%
      subsequently) and it continued to hold more than 51% – BIL thus
C
      became a subsidiary of AgrEvo SA – AgrEvo SA held 100% shares
      in Aventis CropScience (India) Ltd – Therefore, both BIL and Aventis
      CropScience (India) Ltd. became subsidiaries of AgrEvo SA (the
      name of which was changed to Aventis Crop Science SA around
      March 2000) during the relevant period – The dispute in this case
D     arose as regards value of Esbiothrin – BIL was selling its
      manufactured products to various bulk formulators including
      Aventis CropScience (India) Ltd – The Esbiothrin purchased from
      BIL was sold by Aventis CropScience (India) Ltd., to various end-
      consumers – According to the CESTAT, these transactions between
      the foreign company (AgrEvo SA, later known as Aventis
E
      CropScience SA) and two Indian subsidiaries was a combined
      operation by which both benefited – Therefore, the price at which
      BIL sold the goods to Aventis Crop Science (India) Ltd., was to be
      treated as sales to a “related person” – Whether the price at which
      the appellant-BIL sold its products to the buyer, should be treated
F     as a transaction with a “related person” u/s. 4(4)(c) of the Central
      Excise Act, 1944 – Held: In the instant case, undoubtedly AgrEvo
      SA/Aventis CropScience SA holds the entire shareholding in Aventis
      CropScience (India) Ltd. (the buyer) – It also is a shareholder in
      BIL – All of the latter’s products are sold to Aventis CropScience
      (India) Ltd. – However, this does not show that BIL has any business
G
      interest or interest in the affairs of Aventis CropScience (India) Ltd.,
      nor, conversely, that Aventis CropScience (India) Ltd has any such
      interest, direct or indirectly in BIL – The revenue’s concern in
      examining whether the parties were related might be justified;
      however, it could not have concluded that such relationship, as is
H     contemplated by Section 4(4)(c) could have been inferred, without
                                          618
 M/S BILAG INDUSTRIES P. LTD. v. COMMR. OF CEN. EXC.                     619
                      DAMAN

applying the proper test – Additionally, the revenue had the materials   A
before it, in the form of documents which indicated the mark up
towards profit margin, and other objective evidence to compare, if
indeed, the cost of the goods sold, were depressed, or were
comparable to the market price of the same or similar goods – There
is no finding that the price of the goods was lower than what was
                                                                         B
the price of those goods, in the market – Therefore, the impugned
order cannot be sustained – Appeals allowed.
      Union of India & Others v. Atic Industries Ltd. [1984]
      3 SCR 930; Union Of India & Ors v. Hind Lamp Ltd.
      [1989] 2 SCR 1023; Commissioner of Central Excise,
      Hyderabad v. Detergents India Ltd. [2015] 6 SCR 886;               C
      Commissioner of Central Excise, Chandigarh v. M/s
      Kwality Ice Cream Co. [2010] 14 SCR 409 – relied on.
      Commissioner of Central Excise, Aurangabad v.
      Goodyear South Asia Tyres Pvt. Ltd. & Ors. (2015) 11
      SCC 646; Supreme Washers Pvt. Ltd. v. Commissioner                 D
      of Central Excise, Pune (2003) 1 SCC 142 – referred
      to.
                       Case Law Reference
[1984] 3 SCR 930                relied on               Para 8
[1989] 2 SCR 1023               relied on               Para 8           E
[2015] 6 SCR 886                relied on               Para 8
[2010] 14 SCR 409               relied on               Para 8
(2015) 11 SCC 646               relied on               Para 14
(2003) 1 SCC 142                relied on               Para 16
                                                                         F
      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9195-
9196 of 2010.
      From the Judgment and Order dated 23.04.2010 of the Customs,
Excise & Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad
in Appeal Nos.E/282 & 281 of 2007.
                                                                         G
      V. Sridharan, Sr. Adv., Ms. Charanya Lakshmi Kumaran,
Ms. Apeksha Mehta, Ms. Neha Choudhary, Ms. Falguni Gupta,
R. Parthasarathy, Advs. for the Appellants.
      N. Venkataraman, ASG, Arihit Prasad, Sr. Adv., Chandrashekhar
Bharti, Ms. B. Sunita Rao, Ms. Ruchi Gaur Narula, Vivasvan Guatam,
B. Krishna Prasad, Advs. for the Respondents.                            H
620               SUPREME COURT REPORTS                         [2023] 3 S.C.R.


A              The Judgment of the Court was delivered by
               S. RAVINDRA BHAT, J.
             1. The question which arises for consideration in these appeals,
      directed against an order of the Customs, Excise and Service Tax
      Appellate Tribunal1 (hereafter ‘CESTAT’ or ‘tribunal’) is whether the
B     price at which the appellant M/s Bilag Industries Ltd., Vapi (hereafter
      ‘BIL’) sold its products to the buyer, should be treated as a transaction
      with a “related person” under Section 4(4)(c) of the Central Excise Act,
      1944 (hereafter “the Act”).
             2. BIL was incorporated as Mitsu Industries Ltd. (hereafter ‘MIL’)
C     in 1992; it was formed by members of the Bilkhias family who were its
      major shareholders/promoters. MIL used to manufacture pesticides,
      insecticides and their intermediaries classifiable under Chapter 38, Central
      Tariff Act, 1985 (hereafter ‘CETA’). These fell under the broad category
      of pyrethroid products. Besides other products like Cypermethrin and
D     alpha Cyermethrin, MIL manufactured Allethrins, Deltamethrin, and
      intermediates for the entire range of products. Before July 1999, MIL
      did not manufacture Esbiothrin and Esbiol (falling under the product group
      of Allethrins).
             3. On 16.02.1998, AgrEvo GmbH and MIL signed a Letter of
E     Intent, and on 22.11.1998 they signed a letter of Memorandum of
      Understanding (‘MOU’) expressing their intention to form a joint venture
      for research, manufacture, and sale of mainly synthetic pyrethroids
      products and their intermediates. Thereafter, MIL, AgrEvo GmbH, and
      AgrEvo SA entered into a Joint Venture Agreement (JVA) on 03.07.1999.
      This was for the purpose of researching, developing and manufacturing
F     agrochemicals and environmental health products. MIL agreed to first
      transfer its entire non-pyrothroid business to another company, namely,
      Mitsu Pesticides Ltd.
            4. On the date of closing of the JVA, MIL’s name was changed to
      M/s Bilag Industries Ltd. (‘BIL’). At the time of formation of the joint
G     venture, AgrEvo SA held 51% of the share capital in BIL and the balance
      share capital in BIL was held by the Bilakhias family. Further to the
      JVA, a Technology and Know-How Licence Agreement (dated
      13.07.1999) was entered into by AgrEvo SA and MIL. In terms of this
      licence agreement, the necessary process and know-how to manufacture
      1
H         Dated 23.04.2010 in Order No. 330-337/WZD/AHB/20210
 M/S BILAG INDUSTRIES P. LTD. v. COMMR. OF CEN. EXC.                         621
            DAMAN [S. RAVINDRA BHAT, J.]

Esbiothrin and Esbiol as per the specifications provided by AgrEvo SA        A
was transferred to BIL. In terms of this agreement, AgrEvo SA had
agreed to licence BIL to manufacture the allethrin molecules (i.e.,
Esbiothrin and Esbiol products) conforming to AgrEvo SA’s
specifications. Thus, as a JV partner, AgrEvo SA invested a certain
amount as capital in BIL and also brought the technical know-how for
                                                                             B
the Joint Venture Company (BIL) to manufacture Esbiothrin and Esbiol
products. In terms of the JVA, it was agreed that three members of the
Bilakhias family (who were directors of MIL), were to be paid non-
compete fee of ` 25.51 crores as conforming parties to the JVA. This
non-compete fee bound the Bilakhias to not compete with the JVA after
it came into force, i.e., from 03.07.1999.                                   C
       5. BIL had been selling its manufactured products to various bulk
formulators including Rhone Poulenc Agro Chemicals India Ltd./ Aventis
CropScience (India) Ltd. The Esbiothrin purchased from BIL had been
sold by Aventis CropScience (India) Ltd., to various end-consumers.
Other products purchased from BIL were used by Aventis CropScience           D
(India) Ltd., for formulation. The price at which the goods manufactured
by BIL and sold to AgrEvo SA on export was based on supply agreement
dated 03.07.1999. According to the supply agreement, BIL agreed to
sell deltamethrin product at a particular price for different periods from
April 1999 to March 2003. The price was to be arrived at on the basis of
actual cost of production plus profit margin as mentioned in the table in    E
Annexure 3.1(a) of the supply agreement dated 03.07.1999. Similarly,
the allethrin products (Esbiothrin) were also agreed to be sold by BIL to
AgrEvo SA at the actual cost plus mark up of 35% in 1999-2000, 30% in
2000-2001 and 25% in 2002-2003. Esbiothrin products were sold by
AgrEvo SA outside India. BIL arrived at the price in the same manner         F
for its sale to AgrEvo (India) Ltd. / Aventis CropScience (India) Ltd.
within India. Certain changes in share holding patterns of foreign
companies occurred later; however, they are not relevant for the purposes
of deciding this case.
      6. What is relevant for this case is that in BIL, AgrEvo SA held       G
51% of the share capital initially (which was increased to 74%
subsequently) and it continued to hold more than 51%. BIL thus became
a subsidiary of AgrEvo SA. AgrEvo SA held 100% shares in Aventis
Crop Science (India) Ltd. Therefore, both BIL and Aventis Crop Science
(India) Ltd. became subsidiaries of AgrEvo SA (the name of which was
                                                                             H
622            SUPREME COURT REPORTS                          [2023] 3 S.C.R.


A     changed to Aventis CropScience SA around March 2000; both names
      are used interchangeably hereafter) during the relevant period. The
      dispute in this case arose as regards value of Esbiothrin. During the
      period between 19.04.2000 - 23.05.2001, BIL sold the goods to Aventis
      CropScience (India) Ltd., who sold the same to end customers. For this
      period, the revenue proposed to treat the price at which Aventis Crop
B
      Science (India) Ltd. sold the product to the end customers as the
      assessable value ignoring the transaction cost. The duty demand was
      ` 1,68,81,685/- for that period. An amount of ` 2,39,54,913/- was
      demanded on the ground that AgrEvo SA/ Aventis CropScience SA had
      recovered a sum of ` 14,97,18,205/- through its 100% owned subsidiary
C     Aventis CropScience (India) Ltd. towards expenses incurred for
      advertising, publicity, marketing and selling expenses, storage, outward
      handling, servicing, warranty, etc., in terms of the agreement entered
      into with Sumitomo on the ground that since AgrEvo SA/ Aventis
      CropScience SA was the holding company of BIL, the amount paid by
      Sumitomo to AgrEvo SA/ Aventis CropScience SA should be treated as
D
      additional consideration and added to the value of the goods manufactured
      and cleared to BIL. An amount of ` 5,95,97,434/- was demanded as
      differential duty on Esbiuothrin during the period 09.06.2001 to
      25.03.2004, on the ground that the price at which the goods were sold to
      end customers by Sumitomo should be the basis for determination of
E     assessable value and that the sale by BIL to Aventis CropScience (India)
      Ltd. was to a “related” person. The order in original was appealed by
      BIL, to the CESTAT.
             7. By the impugned order, the CESTAT noted that BIL had
      developed a process of manufacture of Esbiothrin which did not reach
F     the final stage. Before that, AgrEvo SA, the foreign company became
      aware that a competitor was emerging, and it entered into a JVA. The
      result was that BIL stopped development of the process. It obtained
      know-how of the complete manufacturing process as well as the right to
      manufacture the product and then, sold the whole product to a subsidiary
      of AgrEvo SA. In return, BIL received technical know-how free of cost
G     as well as an existing marketing set up developed by a subsidiary
      company of AgrEvo SA, at no cost. BIL was also assured of sale of the
      product and a level of profit for the manufacturing activities undertaken
      by it. It was free to develop other products. The shareholders of the
      private company, Bilakhias family members also got a lumpsum non-
H     compete fee. In return, AgrEvo SA and the Indian subsidiary ensured
    M/S BILAG INDUSTRIES P. LTD. v. COMMR. OF CEN. EXC.                        623
               DAMAN [S. RAVINDRA BHAT, J.]

that there were no competitors. The market established by them was             A
intact. Furthermore, the product price at which they sold, needed no
revision. The marketing set up and the consumers identified by them
would remain intact in the absence of any competitor. According to the
CESTAT, these transactions between the foreign company (AgrEvo SA,
later known as Aventis CropScience SA) and two Indian subsidiaries
                                                                               B
was a combined operation by which both benefited. Therefore, the price
at which BIL sold the goods to Aventis Crop Science (India) Ltd., was
to be treated as sales to a “related person”.
       8. Mr. V. Shridharan, learned senior advocate appearing on behalf
of BIL, submitted that the impugned order is erroneous. He submitted
that the test applied consistently by this court to decide if an entity was    C
“related” to another has been whether the seller has an interest in the
business and affairs of the buyer; and likewise, whether the buyer has
an interest in the business of the seller. Even if one were present, in the
absence of the other, there would be no relationship, for the purpose of
Section 4(4)(c) and the transaction should be treated as one at arm’s          D
length. Learned counsel relied on the decisions of this court, reported as
Union of India & Others v. Atic Industries Ltd.2, Union Of India &
Ors v. Hind Lamp Ltd.3, Commissioner of Central Excise, Hyderabad
v. Detergents India Ltd. 4, and Commissioner of Central Excise,
Chandigarh v. M/s Kwality Ice Cream Co.5. It was argued that the
synergies in production, achieved by the creation of the JVA, optimised        E
the development and resources of the JV partners; the sale by BIL (the
assessee), to Aventis CropScience (India) Ltd. (the buyer), another
subsidiary of AgrEvo SA/Aventis CropScience SA did not result in BIL
being deemed to have an interest in its business or affairs; likewise,
Aventis Crop Science (India) Ltd. did not have any interest in BIL’s           F
business.
       9. Mr. Arijit Prasad, learned senior counsel appearing for the
revenue, pointed out that business relationships, and interest of one entity
in the affairs or business of another cannot be placed in a straitjacket.
The formation of the JVA and BIL, in which the foreign company AgrEvo          G
SA/Aventis CropScience SA is a major shareholder, was for the purpose
of ensuring that the products manufactured reached its overseas markets,
2
  [1984] 3 SCR 930
3
  [1989] 2 SCR 1023
4
  [2015] 6 SCR 886
5
  [2010] 14 SCR 409                                                            H
624            SUPREME COURT REPORTS                        [2023] 3 S.C.R.


A     through the medium of its subsidiary, Aventis CropScience (India) Ltd.,
      which was owned to the extent of 100% by AgrEvo SA/Aventi
      CropScience SA. These clearly showed a real and live interest in the
      businesses of the buyer in each other. He therefore, submitted that the
      CESTAT’s order should not be interfered with.
B           Analysis and Reasoning
            10. The relevant part of Section 4 of the Act reads as follows:
            “4. Valuation of excisable goods for purposes of charging of
            duty of excise- (1) Where under this Act, the duty of excise is
            chargeable on any excisable goods with reference to their
C           value, then, on each removal of the goods, such value shall-
            (a) in a case where the goods are sold by the assessee, for
            delivery at the time and place of the removal, the assessee
            and the buyer of goods are not related and the price is the
            sole consideration for the sale, be the transaction value;
D
            (b) in any other case, including the case where the goods are
            not sold, be the value determined in such manner as may be
            prescribed.
            Explanation. - For the removal of doubts, it is hereby declared
            that the price-cum-duty of the excisable goods sold by the
E
            assessee shall be the price actually paid to him for the goods
            sold and the money value of the additional consideration, if
            any, flowing directly or indirectly from the buyer to the
            assessee in connection with the sale of such goods, and such
            price-cum-duty, excluding sales tax and other taxes, if any,
F           actually paid, shall be deemed to include the duty payable on
            such goods.
            (2) Where, in relation to any excisable goods the price thereof
            for delivery at the place of removal is not known and the
            value thereof is determined with reference to the price for
G           delivery at a place other than the place of removal, the cost
            of transportation from the place of removal to the place of
            delivery shall be excluded from such price.
            (3) The provisions of this section shall not apply in respect of
            any excisable goods for which a tariff value has been fixed
H           under sub-section (2) of section 3.
 M/S BILAG INDUSTRIES P. LTD. v. COMMR. OF CEN. EXC.                        625
            DAMAN [S. RAVINDRA BHAT, J.]

      (4) For the purposes of this section-                                 A
      (a) “assessee” means the person who is liable to pay the duty
      of excise under this Act and includes his agent;
      ***********                                 **********
      (c) “related person” means a person who is so associated              B
      with the assessee that they have interest, directly or indirectly
      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 the assessee, and any
      sub-distributor of such distributor.”
                                                                            C
       11. In Atic Industries (supra), this court examined the expression
“related person”:
      “What the first part of the definition requires is that the person
      who is sought to be branded as a related person” must be a
      person who is so associated with the assessee that they have          D
      interest, directly or indirectly, in the business of each other. It
      is not enough that the assessee has an interest, direct, or
      indirect in the business of the person alleged to be a related
      person nor is it enough that the person alleged to be a related
      person has an interest, direct or indirect, in the business of
      the assessee. It is essential to attract the applicability of the     E
      first part of the definition that the assessee and the person
      alleged to be a related person must have interest, direct
      indirect, in the business of each other. Each of them must
      have a direct or indirect interest in the business of the other.
      The equality and degree of interest which each has in the             F
      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. Now,
      in the present case, Atul Products Limited has undoubtedly            G
      interest in the business of the assessee, since Atul Products
      Limited holds 50 per cent of the share capital of the assessee
      and has interest as shareholder in the business carried on by
      the assessee. But it is not possible to say that the assessee has
      any interest in the business of Atul Products Limited. There
                                                                            H
626            SUPREME COURT REPORTS                          [2023] 3 S.C.R.


A           are two points of view from which the relationship between
            the assessee and Atul Products Limited may be considered.
            First, it may be noted that Atul Products Limited is a
            shareholder of the assessee to the extent of 50 per cent of the
            share capital. But we fail to see how it can be said that a
            limited company has any interest, direct or indirect, in the
B
            business carried on by one of its shareholders, even though
            the shareholding of such shareholder may be 50 per cent.
            Secondly, Atul Products Limited is a wholesale buyer of the
            dyes manufactured by the assessee but even then, since the
            transactions between them are principal to principal, it is
C           difficult to appreciate how the assessee could be said by virtue
            of that circumstance to have any interest, direct or indirect, in
            the business of Atul Products Limited. ‘Atul Products Limited
            buys dyes from the assessee in wholesale on principal-to-
            principal basis and then sells such dyes in the market. The
            assessee is not concerned whether Atul Products Limited sells
D
            or does not sell the dyes purchased by it from the assessee
            nor is it concerned whether Atul Products Limited sells such
            dyes at a loss. It is impossible to contend that the assessee
            has any direct or indirect interest in the business of a wholesale
            dealer who purchases dyes from it on principal to principal
E           basis. The same position obtains in regard to Crescent Dyes
            and Chemicals Limited. Perhaps the position in regard to
            Crescent Dyes and Chemicals Limited is much stronger then
            that in regard to Atul Products Limited. Crescent Dyes and
            Chemicals Limited is not even a shareholder of the assessee
            and it has, therefore, no interest direct or indirect in the
F
            business of the assessee.”
            12. In the subsequent decision Hind Lamp Ltd. (supra), the same
      principle was echoed:
            “It is not enough that the assessee has an interest, or indirect
G           in the business of person alleged to be a related person nor
            is it enough 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,
            the assessee and the person alleged to be a related person
            must have interest direct or indirect in the business of each
H
 M/S BILAG INDUSTRIES P. LTD. v. COMMR. OF CEN. EXC.                         627
            DAMAN [S. RAVINDRA BHAT, J.]

      other. Each of them must have a direct or indirect interest in         A
      the business of the other. The quality and degree of interest
      which each must have 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. After analysing the facts, this Court
                                                                             B
      came to the conclusion that there was no relationship.”
       13. In Detergents India Ltd. (supra), this court examined both
parts of the definition in Section 4(4)(c) and observed as follows:
      “Section 4(4)(c) is in two parts. The first part requires the
      department to apply a de facto test, whereas the second part           C
      requires the application of a de jure test. “Relative” in the
      Companies Act, 1956 is defined as follows:
      *****************                           ***************
      A reading of the definition of “relative” would show that the
      relative need not be a person who is so associated with the            D
      Assessee that they have mutual interest in each other ’s
      businesses. If that were the case, the expression “relative” in
      the second part would be otiose inasmuch as a relative would
      be subsumed within “person” in the first part. Thus,
      “relatives” would also be “persons” who are so associated              E
      with the Assessee that they have a mutual interest in each
      other’s businesses. The legislature by application of a de jure
      test has extended the meaning of “related persons” to include
      the entire list of relatives per se without more as related persons.
      Similarly, holding companies and subsidiary companies by
      virtue of the exercise of control by a holding company over a          F
      subsidiary company are similarly included by application of
      a de jure test.
      We have indicated that the Assessee argued that the price
      paid by Shaw Wallace and Company for the same/similar
      products as was sold by unrelated entities to it was even lower        G
      than the price paid by Shaw Wallace to Detergents India Ltd.
      This being the case, it is clear that on facts here there is no
      “arrangement” between Shaw Wallace and Detergents India
      Limited to depress a price which is otherwise at arm’s length.
      Though this fact is pleaded expressly before the Commissioner
                                                                             H
628               SUPREME COURT REPORTS                      [2023] 3 S.C.R.


A              as pointed out above, the Commissioner’s order does not
               contain any finding based on this fact.”
             14. The decision in Commissioner of Central Excise,
      Aurangabad v. Goodyear South Asia Tyres Pvt. Ltd. & Ors. 6 is
      instructive. The assessee, a JV entity of Goodyear and CEAT (both of
B     whom had equal share in it), had borrowed substantial sums of money
      from both Goodyear and CEAT. Later, CEAT transferred its entire
      shareholding to Goodyear. The revenue alleged that the assessee and
      Goodyear were related persons, which was negatived by this court:
               “7. The expression ‘in the business of each other’ clearly
C              denotes that interest of the two persons have to be mutual,
               i.e., in each other, in order to treat them as related persons.
               8. We find from the order of the Member Judicial that only on
               the ground that the two companies had given a loan of Rs.
               85.66 crores to the Assessee company, was treated as sufficient
D              to establish the relationship between the Assessee and the
               buyers. That only shows one way traffic whereas requirement
               is that of two way traffic. The other Member, in our opinion,
               aptly held that this cannot be the factor which would show
               the mutuality of interest…”

E            15. In Kwality Ice Cream (supra) again, the court underlined the
      interdependence and mutuality of business interests of the two entities,
      viz. the assessee and the buyer:
               “On analysis of the decisions referred to herein above, it
               appears what is important is that each of the parties involved
F              should have an interest, whether direct or indirect in the
               business of each other. The following are the relevant clauses
               of the agreement between M/s. Kwality Ice Cream and BBLIL/
               HLL based on which and applying the principles referred to
               herein above, a view is required to be taken as to whether
               they are ‘related persons’.
G
               *************                            *************
               What is of importance is certain interdependence and
               reciprocity beyond the relationship of either a distributor or

      6
H         (2015) 11 SCC 646
    M/S BILAG INDUSTRIES P. LTD. v. COMMR. OF CEN. EXC.                          629
               DAMAN [S. RAVINDRA BHAT, J.]

         manufacturer so as to consider as to whether the parties are            A
         ‘related persons’. On the facts it is noticed, essentially the
         relationship between M/s. Kwality Ice Cream and BBLIL/HLL
         is one sided and the facts do not suggest that each one of
         them have interest direct or indirect, in the business of each
         other.”
                                                                                 B
       16. On the other hand, if one were to consider what constitutes
inter-relationship, the decision in Supreme Washers Pvt. Ltd. v.
Commissioner of Central Excise, Pune7, is instructive. The assessee
and the buyer were involved in common procurement of raw material;
they had common stock accounting and planning and interdependence
in manufacturing operations. This court held that holding common stock           C
of raw material and semi-finished goods, with common use of machinery
between the three units, with common marketing arrangements and free
flow of finance between the three units, cumulatively established the
assessees’ inter relationships and interdependence of all three units with
each other.                                                                      D
       17. In the present case, undoubtedly AgrEvo SA/ Aventis
CropScience SA holds the entire shareholding in Aventis CropScience
(India) Ltd. (the buyer). It also is a shareholder in BIL. All of the latter’s
products are sold to Aventis CropScience (India) Ltd. However, this
does not show that BIL has any business interest or interest in the affairs      E
of Aventis CropScience (India) Ltd., nor, conversely, that Aventis
CropScience (India) Ltd has any such interest, direct or indirectly in
BIL. The revenue’s concern in examining whether the parties were
related might be justified; however, it could not have concluded that
such relationship, as is contemplated by Section 4(4)(c) could have been
inferred, without applying the proper test. Additionally, the revenue had        F
the materials before it, in the form of documents which indicated the
mark up towards profit margin, and other objective evidence to compare,
if indeed, the cost of the goods sold, were depressed, or were comparable
to the market price of the same or similar goods. There is no finding that
the price of the goods was lower than what was the price of those                G
goods, in the market.
      18. In view of the foregoing discussion, it has to be concluded that
the revenue’s decision in rejecting the value at which the goods were

7
    (2003) 1 SCC 142                                                             H
630             SUPREME COURT REPORTS                          [2023] 3 S.C.R.


A     sold, by treating the assessee as a related person, was erroneous. For
      the same reasons, it is held that the impugned order cannot be sustained;
      it is set aside. The appeals are allowed, but in the circumstances, without
      any order on costs.


B     Ankit Gyan                                                  Appeals allowed.
      (Assisted by : Mahendra Yadav, LCRA)




C




D




E




F




G




H