TaxTMI 
TaxTMI 
2004 (10) TMI 490
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Appellant No. 2, on the basis of purchase order raised by the Appellant No. 2 from their Head Office at Mumbai; that it is the case of the Revenue that Appellant No. 2 had raised purchased orders in favour of the Appellant No. 1 at a lesser price than the original contracted price and that both the Appellants have cross share holdings, have common directors, common authorized signatory for operation of bank accounts, common funding, common marketing and common management control; that they are related persons having interest directly or indirectly in the business of each other attracting provisions of Proviso (iii) to Section 4(1)(a) of the Central Excise Act; that consequently the correct price would be the price at which the goods are ordinarily sold by the Appellants No. 2; that it is also the case of the Revenue that they had paid duty on base pipes whereas the contract was for gunited, epoxy painted or tapecoated MS Pipes and no duty had been paid on subsequent value additions on account of epoxy painting and guniting. 3.1 The learned Advocate submitted that both the Appellants No. 1 and 2 are not related person as companies are independent legal entities; that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en placed on the following decisions : (i) CCE, v. Vikrama Engineering Co. - 1989 (39) E.L.T. 143. (ii) Kirloskar Cummins Ltd. v. Union of India - 1991 (51) E.L.T. 325 (Bom.) wherein the Bombay High Court has held that proviso (iii) is not attracted because the goods are generally not sold by the assessee except to or through related person. 3.3 He also contended that their case is squarely covered by the law laid down by the Supreme Court in the case of Alembic Glass Industries Ltd. v. CCE & Cus., 2002 (143) E.L.T. 244 (S.C.) in which the assessee and its purchaser were holding some share in each other and having common Chairman and the three Directors, the Supreme Court has held that "the shareholders of a public limited company do not, by reason only of their shareholding, have an interest in the business of the company. Equally the fact that two public limited companies have common Directors does not mean that the one company has an interest in the business of the other. It is therefore, not possible to uphold the conclusion of the Tribunal that the assessee a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Co. Ltd. is also accordingly not liable to any penalty under Rule 209A of the Rules. 5. Countering the arguments, Shri R.C. Sankhla, learned Senior Departmental Representative, submitted that both M/s. Mukut Pipes Ltd. and M/s. Surindra Engg. Co. Ltd. are related persons as both of them have cross shareholding Chairman, Managing Director and Directors are common and also close relatives having blood relations, the authorized signatory of these companies for operation of bank accounts is common, employees are inter transferable within the group companies and the marketing is being controlled from their corporate office; there is common funding among group companies including the Appellants No. 1 and 2; that the Appellant No. 1 supply the goods to Appellant No. 2 at lower price as compared to independent buyers; that Mukut Pipes Ltd. was formed as closely held company by Shri Bhupinder Singh Ahluwalia and his two sons Rajinder Singh and Kuljinder Singh as Directors and person acting in concert hold 60.54% of the total paid up share capital of the company; that Appellant No. 2 enters into agreement with various buyers and the orders so obtained are split up among the Group Com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting who had paid interest free advances to the Appellants, expenses towards sale promotion activities, after sales services and maintenance of office were borne by the marketing company. (iii) Nirlex Spares (Pvt.) Ltd. v. CCE, Rajkot - 2001 (133) E.L.T. 161 (T) wherein the marketing company was held to be a related person of the Appellant when mutuality of interest was clearly indicated through supply of entire production to marketing company, Supervision and making of all drawings of the new product by a director of the marketing Co., looking after sales promotion activities and incurring expenditure on advertisement and office expenses and other financial transactions between the two, etc. 6. Regarding epoxy painting charges, the learned Senior Departmental Representative, submitted that the Appellant No. 1 had discharged the duty on bare pipes at a price not quoted in the rate contract and no duty has been paid on subsequent value addition on account of epoxy painting; that the contract rates were inclusive of Excise Duty for cement lined, guinted, epoxy painting or tape coated MS pipes; that moreover the Excise duty is payable on the goods in the State i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng company", "subsidiary company" and "relative" have the same meaning as in the Companies Act, 1956 (1 of 1956)." 8.1 It has been contended by the learned Advocate that the Proviso (iii) to clause (a) of sub-section (1) of Section 4 of the Central Excise, which provides for treating the price at which the related person sells the goods to be the normal price for the purpose of levying the duty, is not applicable to the facts of the present matter since the Appellants No. 1 has not so arranged that the goods manufactured by them are generally not sold by them in the course of wholesale trade except to or through a related person. In support of his contention, he has submitted that M/s. Mukut Pipes Ltd. has only sold 18% of their total sale to M/s. Surindra Engineering Co. Ltd. and majority of the sales by the Appellant No. 1 was to independent buyers. This factual submission has not been controverted by the Revenue. The language of Proviso (iii) to Section 4(1)(a) of the Act clearly shows that it applies only where all the goods are sold to or through a related person. If some of the goods are also sold to persons other than the related persons, this Proviso will not be app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellants have not disputed the facts that both the companies have common authorized signatory for operating the bank accounts and the payments were made from one company's account to another Company's account. The learned Senior Departmental Representative has drawn our attention to the allegation contained in Para 9.4 (b) of the show cause notice wherein it is charged that a common fund exists in Punjab & Sind Bank, Fort Branch, Mumbai which can be utilised by either of companies as per requirements by advising the Bank regarding transfer of funds from/to two accounts. Funds were also transferred as per General Ledger Account maintained by the Appellant No. 2 which have not been proved to be commercial transactions by the Appellants. It is also the case of the Revenue that similar facility is available in Punjab National Bank, Rajpura where both the Appellants No. 1 and 2 maintain their accounts and transfer of fund is undertaken between them. Exhibit 'L-1' to the show cause notice contained some transfer of funds entries between the two accounts of Punjab & Sind Bank, Mumbai Accounts of Punjab National Bank, Rajpura were also attached with the show cause notice as Exhibit No. 'L-2....