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of <h1>Related-party status of companies for Notification 71/78 exemption; tribunal finding reversed, entities held related; s.11A limitation bars duty recovery</h1> Whether the parties are 'related persons' for entitlement to exemption under Notification 71/78: SC, on findings of common directors, familial ... Benefit of exemption under Notification 71/78 - requirements of 'related person' - period of limitation u/s 11A - Suppression of fact - differential price in the classification list - Whether the respondent and M/s. International are related persons - Revenue to invoke the provisions of Section 11A of the Act? Held that:- It was found that the respondent and M/s. International were having common Directors and that they were relatives of one another; a further finding was also noted that both the companies were family concerns and were beneficiaries of their ventures and that the benefit of both the concerns are shared by members of one and thqse same family. From these findings, it is difficult to resist the conclusion that the respondent and M/s. International have a direct interest, in the business of each other and that the mutuality of interest between the two is apparent. Once the findings are accepted, the conclusion that there is mutuality of interest between the two concerns is inevitable. In this view of the matter, we set aside the finding of the Tribunal that the respondent and M/s. International are not related persons. As it is clear that the respondent had disclosed the correct facts including the price at which the goods were sold to related person and the difference in the price. In view of this declaration, it is futile to contend that there was any suppression of fact on the part of the respondent. The learned Attorney General does not seriously dispute this position. It follows that the larger period of limitation provided in Section 11A of the Excise Act is not available to the Revenue. We, therefore, confirm the conclusion arrived at by the Tribunal on this aspect. For the period April 11, 1978 to September 29, 1979 the show cause notice was issued on April 13, 1982 which is far beyond the period of six months, therefore, the Revenue is not entitled to claim any difference of duty. Appeal is allowed in part to the extent indicated above, in regard to 'related person' in other respect it is dismissed. Issues: (i) Whether the respondent and M/s. International are 'related persons' within the meaning of Section 4(4)(c) of the Central Excise Act, 1944; (ii) Whether the larger period of limitation under Section 11A of the Central Excise Act, 1944 is invocable by the Revenue in view of alleged suppression of facts by the respondent.Issue (i): Whether the respondent and M/s. International are 'related persons' within the meaning of Section 4(4)(c) of the Central Excise Act, 1944.Analysis: Section 4(4)(c) treats as a 'related person' one so associated with the assessee that each has a direct or indirect interest in the business of the other; mutuality of interest is required though degree may differ. The Tribunal had recorded findings of common directors, family relationship and that both companies were family concerns sharing benefits; these findings establish direct or indirect interest in each other's business. The Tribunal's contrary observation that no evidence of mutuality was produced is inconsistent with its acceptance of the adjudicating authority's findings.Conclusion: In favour of Revenue.Issue (ii): Whether the larger limitation period under Section 11A of the Central Excise Act, 1944 is available to the Revenue due to suppression of facts by the respondent.Analysis: The respondent disclosed in the statutory proforma the prices at which goods were sold to the related buyer and the differential price claimed for exemption under Notification 71/78; there was no suppression of material facts. In absence of suppression the extended period under Section 11A cannot be invoked by the Revenue; the show-cause notice issued beyond six months therefore does not entitle Revenue to claim the differential duty for the period in question.Conclusion: In favour of Assessee.Final Conclusion: The Court overturns the Tribunal's finding that the parties were not related, while upholding the Tribunal's conclusion that there was no suppression for the purpose of Section 11A; accordingly the appeal is allowed in part on the related-person issue and dismissed in other respects.Ratio Decidendi: A person is a 'related person' under Section 4(4)(c) if there is mutuality of interest, direct or indirect, in each other's business; findings of common directorship, family relationship and shared beneficiaries establish such mutuality, whereas voluntary disclosure of prices in statutory returns negates suppression and bars invocation of Section 11A.
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