2018 (2) TMI 1231 - AT - Central Excise

Tribunal allows appeals, finding no relation between parties under Central Excise Act

Black Gold Profiles Pvt Ltd. Versus CCE, C&ST, Visakhapatnam

Black Gold Profiles Pvt Ltd. Versus CCE, C&ST, Visakhapatnam - 2018 (364) E.L.T. 547 (Tri. - Hyd.) Issues Involved:1. Whether the appellant and the two buyer firms are related persons or inter-connected undertakings.2. Interpretation of Section 4 of the Central Excise Act, 1944, read with Section 2(g) of the MRTP Act, 1969.3. Applicability of transaction value for the purpose of Section 4 of the Central Excise Act, 1944.4. Validity of the differential duty demand, interest, and penalties imposed.5. Consideration of time-bar under Section 11A of the Central Excise Act, 1944.Detailed Analysis:1. Related Persons or Inter-connected Undertakings:The primary issue was whether the appellant (M/s Black Gold Profiles Pvt. Ltd) and the two buyer firms (M/s A.S. Steel Traders and M/s Sri Vijaylaxmi Steel Traders) are related persons or inter-connected undertakings. The department alleged that the appellant and the two firms are related due to mutual interest and lower prices adopted for these firms compared to independent customers. The adjudicating authority and the lower appellate authority upheld this view, considering the shareholding pattern and the relationship between partners and their close relatives.2. Interpretation of Section 4 of the Central Excise Act, 1944, and Section 2(g) of the MRTP Act, 1969:The core issue was the interpretation of 'related person' under Section 4 of the Central Excise Act, 1944, read with the definition of 'inter-connected undertakings' in Section 2(g) of the MRTP Act, 1969. The authorities examined whether the shareholding of close relatives of the partners can be added to the shareholding of the partners themselves to determine if the partners hold not less than 50% of the shares of the body corporate. The adjudicating authorities concluded that the partners and their close relatives together held more than 50% of the share capital, thereby satisfying the criteria of inter-connected undertakings.3. Applicability of Transaction Value:The appellant argued that the two buyer firms are not related persons or inter-connected undertakings, and therefore, the sale price to these buyers should not have been rejected. The department, however, held that the lower selling prices extended by the appellant to the two related firms could not be accepted as the transaction value. The Tribunal found that the combined shareholding of the concerned partners in each firm did not reach the 50% benchmark required to be considered inter-connected undertakings and related persons under Section 4 of the Central Excise Act.4. Validity of Differential Duty Demand, Interest, and Penalties:Various show cause notices were issued proposing a demand of differential duty, education cess, interest, and imposition of penalties under different provisions. The adjudicating authority confirmed the proposed demand along with interest and penalties. The Tribunal, however, set aside the impugned orders, concluding that the entities were not related persons, and hence, the differential duty demand, interest, and penalties were not sustainable.5. Consideration of Time-bar under Section 11A:The appellant contended that the demands were time-barred as they were regularly assessed to duty, filed returns, and corresponded with the authorities. The first show cause notice invoking a larger period did not allege fraud, collusion, wilful misstatement, suppression, or contravention of law. The Tribunal did not specifically address the time-bar issue in the final decision, as the primary ground for setting aside the orders was the incorrect interpretation of related persons.Conclusion:The Tribunal allowed the appeals, setting aside the impugned orders and concluding that M/s Black Gold Profiles Pvt. Ltd and the two buyer firms were not related persons under Section 4 of the Central Excise Act, 1944. Consequently, the differential duty demand, interest, and penalties imposed were not sustainable. The appeals were allowed with consequential benefits as per law.