2022 (9) TMI 430 - AT - Central Excise

Tribunal: Mother Dairy & DCMPUs not related, duty demand unjustified. Appeals allowed, limitation period rejected.

The Tribunal ruled that M/s. Mother Dairy and the DCMPUs are not related persons under Section 4(3)(b) of the Central Excise Act. The re-determined value ... Valuation - manufacture of Co-Extruded Multi Layer Printed Plastic Film (PPF) - Revenue alleged that the price at which the PPF is sold to DCMPUs/associate members (dairies) is not normal transaction between the appellant and the dairies - price is the sole consideration for sale or not - related party transaction - inter-connected undertakings - mutuality of interest between the members and the GCMMF - HELD THAT:- Only if the parties are related in terms of Clause (ii), (iii), (iv) of Section 4(3)(b) of Central Excise Act, would they be treated as related persons. Analysis of the impugned order shows that the said order after reaching at the conclusion that the two namely, the appellant and the Dairies are inter-connected undertakings does not proceed further. The impugned order holds that since GCMMF holds control that both the appellants as well as Dairies, there is mutuality of interest between the appellant and the dairies. The impugned order hold that M/s. GCMMF has a decisive role to play in financial matter on which the price of products is done. The impugned order holds that as per bylaw no.5.2.9, it is incumbent on GCMMF to plan overall production programme for the federation and its members keeping in view the market strategy. Bylaw no. 5.2.13 casts obligation on M/s. GCMMF to purchase or assist in purchasing raw material, etc and manufacture or collaborate with someone when required and bylaw no. 5.2.19 authorizes GCMMF to advise the members on price fixation, price policy, public relations and allied matters. All the bylaws cited by the Commissioner shows some kind of control of GCMMF over the member unions/dairies and on the appellant however, there is not an iota of evidence to suggest that the appellant had any control over the dairies or vice-versa. There are no evidence to hold that the appellant and the dairies are related in terms of Section 4(3)(b) of Central Excise Act - appeal allowed. Issues Involved:1. Determination of whether M/s. Mother Dairy and the District Co-operative Milk Producers Union (DCMPUs) are related persons under Section 4(3)(b) of the Central Excise Act.2. Validity of the re-determined value under Section 4 of the Central Excise Act and the demand for differential duty.3. Applicability of previous judicial decisions and bylaws in determining the relationship between the parties.4. Invocation of the extended period of limitation for demanding duty.Issue-wise Detailed Analysis:1. Determination of Whether M/s. Mother Dairy and DCMPUs are Related Persons:The primary allegation by the revenue was that M/s. Mother Dairy and DCMPUs are related persons under Section 4(3)(b) of the Central Excise Act. The revenue relied on various provisions in the bylaws of the entities and the organizational structure of the cooperatives to assert that the two are inter-connected undertakings. The revenue argued that there is mutuality of interest between the members and GCMMF, and thus, the price at which the PPF is sold is not the sole consideration for sale. The Tribunal examined the definition of related persons under Section 4(3)(b) and concluded that merely being inter-connected undertakings is not sufficient to establish that the two are related persons. The Tribunal found no evidence to suggest that the appellant had any control over the dairies or vice-versa, thus rejecting the revenue's allegation.2. Validity of the Re-determined Value and Demand for Differential Duty:The revenue re-determined the value under Section 4 of the Central Excise Act and demanded differential duty, invoking Rule 8 and Rule 9 of the Central Excise Valuation Rules, 2000. The Tribunal analyzed the provisions and clarified that only if the parties are related in terms of Clause (ii), (iii), (iv) of Section 4(3)(b), would they be treated as related persons. Since the revenue failed to establish such a relationship, the Tribunal held that the re-determined value and the consequent demand for differential duty were not justified.3. Applicability of Previous Judicial Decisions and Bylaws:The appellant's counsel argued that a similar case involving M/s. Kaira District Co-Operative Milk Producers Union Ltd. and GCMMF was decided by the Hon'ble Gujarat High Court and the Hon'ble Apex Court, where it was held that the entities were not related persons. The Tribunal found that the relationship between the appellant and the dairies is identical to the relationship in the previous case. The Tribunal noted that the bylaws cited by the revenue did not indicate any mutuality of interest between the federation and the dairies. The Tribunal concluded that the ratio of law laid down by the Hon'ble Apex Court in the previous case is squarely applicable to the instant case.4. Invocation of the Extended Period of Limitation:The appellant argued that the invocation of the extended period of limitation was incorrect as the federation is a cooperative society engaged in the upliftment of farmers and agriculturists, and there was no intention to evade payment of duty. The Tribunal did not find any evidence of fraud or willful misstatement by the appellant and thus rejected the invocation of the extended period of limitation.Conclusion:The Tribunal held that M/s. Mother Dairy and the DCMPUs are not related persons under Section 4(3)(b) of the Central Excise Act. The re-determined value and the demand for differential duty were not justified. The Tribunal found that the previous judicial decisions and the bylaws did not indicate any mutuality of interest between the entities. The appeals were consequently allowed, and the extended period of limitation was not applicable.