2006 (3) TMI 308 - SC - Central Excise

Supreme Court upholds Tribunal's decision on related persons & pricing under Central Excise Act

COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD Versus XEROGRAPHIC LTD.

The Supreme Court dismissed the appeal, upholding the Tribunal's decision that M/s Murphy (India) Limited and M/s Mecotronics (P) Limited were related ... Related person- valuation- a show cause notice issued by the Collector of Central Excise, respondent and the afore-mentioned two companies were asked to show cause against various charges. It was alleged that the respondent was evading excise duty by under-valuing the goods. The adjudicating authority held that the respondent and the two afore- mentioned companies were 'related persons' and the price at which the photo copiers manufactured by the respondent were sold by the afore-mentioned two companies in the market would be the normal price for the purposes of arriving at the assessable value of the goods in the hands of the respondent. The Tribunal rejected the contention of the respondent that the two afore-mentioned companies were not 'related persons'. Held that- Contention raised by the respondent that its sale to the distributors were on retail basis has also not been refuted by the department. Counsel for the appellant has also failed to show that the price at which the goods were sold to the 'related persons' was not the normal price at which the goods were being sold through any other distributor or dealer or was less than the market price at which it was being sold in the market or that there was any extra commercial consideration in fixing the normal value. Thus, the finding recorded by the Tribunal is a pure finding of fact which does not call for interference. Thus there is no merit in the appeal. Issues:1. Interpretation of Section 4(4)(c) of the Central Excise Act, 1944 regarding 'related persons.'2. Allegation of evasion of excise duty by under-valuing goods.3. Determination of normal price for excisable goods.4. Application of the third proviso to Section 4(1)(a) in relation to related persons.5. Challenge to the Tribunal's findings on related persons and normal pricing.6. Consideration of extra commercial factors in pricing.Analysis:1. The case involved a dispute regarding the interpretation of Section 4(4)(c) of the Central Excise Act, 1944, defining 'related persons.' The Tribunal found M/s Murphy (India) Limited and M/s Mecotronics (P) Limited to be related persons of the respondent. The appellant failed to challenge this finding, leading to its finality.2. The appellant was accused of evading excise duty by under-valuing goods. The adjudicating authority alleged that the respondent and the related companies were involved in transactions not on a principal-to-principal basis, impacting the assessment of excise duty.3. The determination of the normal price for excisable goods was crucial in this case. The Tribunal concluded that the sales made by the respondent to the related companies were on a retail basis and that the price list had been regularly approved by the proper officer, justifying the limitation aspect raised by the respondent.4. The application of the third proviso to Section 4(1)(a) was significant in assessing the relationship between the respondent and the related companies. The conditions of mutuality of interest, relation as per Section 4(4)(c), and pricing below the normal value due to extra commercial considerations were considered.5. The appellant contested the Tribunal's findings on related persons and normal pricing but failed to provide evidence of any extra commercial consideration in fixing the normal price. The Tribunal's factual findings were upheld as not warranting interference.6. The consideration of extra commercial factors in pricing was a key aspect of the case. The department could not establish any such factors, and the appellant's arguments regarding normal pricing and market rates were insufficient to challenge the Tribunal's decision.In conclusion, the Supreme Court dismissed the appeal, finding no merit in the arguments presented and upholding the Tribunal's decision on related persons and pricing.