Good question kauldheeraj.
I think this can be explained in two ways:
First each position has to be different only if an arrangement is considered the same when people are sitting in the same position relative to each other.
For example, Suppose the 7 people sat in the arrangement
1 - ABCDEFG
This would be the same as the arrangements
2 - BCDEFGA
3 - CDEFGAB
4 - DEFGABC
5 - EFGABCD
6 - FGABCDE
7 - GABCDEF
Since 7! would include all the arrangements from above, which are all the same, 7! should be divided by the number of the arrangements that are same. So the number of arrangements of 7 people around a round table is equal to 7!/7.
This approach goes nicely with the formula for the arrangements of n objects around a round table the formula is:
(n-1)!
Another way to justify 6! over 7!,and my preferred method, is to imagine yourself as someone coming to a dinner party that will be attended by 7 people. It comes time to sit down at a round table. How many choices of places to sit does each person have?
It seems as though the first person to sit down would have 7 choices of places to sit, but since positions are defined by where someone sits relative to another person, the first person who sits down has no choice in who he or she sits next to, because none of the position have been defined yet.
Once that first person sits down, however, all the other guests can choose their position relative to the position the first person's position. So the second person to sit down will have 6 choices of places. The third person to sit down will have 5 choices of places. The fourth person will have 4 choices of places...
What you end up with is the arrangements of the 6 remaining guests:
6X5X4X3X2X1=720.
I like this explanation because it seems to go well with the experience of attending a dinner party or being a kid at a school cafeteria. When a group of people attempt to sit down at a table it always a bit confusing to figure out where everyone should sit relative to each other. However, once one person just sits down it is easier for everyone else to take a decision on where to sit.
I hope this helps.