TaxTMI 
TaxTMI 
2011 (3) TMI 704
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....tered into a job work agreement with M/s.Kisan Mouldings Ltd., (KML in short) a public limited company, which is engaged in the manufacture of pipe fittings. As per the job work agreement, the raw materials, packing materils, etc. were to be supplied by KML to the appellants for the manufacture of plastic pipes and solvent cement and the goods so manufactured were returned to KML on payment of duty. The appellant paid Central Excise duty on the final products manufactured by them based on the Ujagar Prints formula i.e. cost of raw materials + cost of packing materials + job charges including the normal margin of profit. 3. The department conducted investigations and based on the information furnished by the appellant ca....
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....e Act. The Ld. Commissioner also imposed a penalty of Rs.15.00 lakhs on the appellant company under Rule 25 of the Central Excise Rules, 2002 and a penalty of Rs.5.00 lakhs on Shri Satish J. Aggarwal, partner of the appellant firm under Rule 26 of the Central Excise Rules, 2002. 4. In the grounds of appeal it has been urged that the demand is based on the sole allegation that the partners of the appellant firm and the Directors of KML are relatives and, therefore, the appellants are owned and controlled by related persons belonging to the same family.The Ld. Advocate for the appellant further submits that the appellants are a partnership firm and the four partners are related to the Directors of KML, which is a public li....
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....ve mutuality of interest in the business of each other and the price charged was not the normal price but lower than the normal price and the relationship influenced the price, the transaction value has to be accepted as has been held by the Hon'ble apex Court in the case of CCE Vs. Xerographic Limited 2010 (260) ELT 327 (SC). The show-cause notice issued by the department does not allege that the job charges collected are not arms length or the job charges have been influenced by the relationship between the appellants and KML.The appellants further contend that the law laid down as above are relevant and applicable even in the context of new Section 4, which came into force with effect from 01/07/2000 as has been r....
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.... 2 of the Companies Act, 1966. It is the submission of the Ld. DR that if any one of the above conditions are satisfied then the relationship has to be presumed. Accordingly, he submits that since the persons of the partnership firm and a few directors of the public limited company are relatives as defined in the Companies Act, it has to be deemed that the appellants and KML are related to each other and, hence, the price at which the related persons sells the goods shall be the basis for charging of excise duty. He further urges that the appellant was a manufacturer on his own prior to 01/04/2005 and he was selling the goods through his depots and the price at which he sold the goods was taken as the basis for discharge o....
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....x Court and the apex Court affirmed and upheld the findings of the Hon'ble Allahabad High Court. Similarly in the case of Kwality Ice Cream Company's case referred to supra, the Hon'ble apex Court held that to be held as related persons, each of the parties involved should have direct or indirect interest in the business of each other and certain interdependence and reciprocity beyond relationship are required to consider whether the parties are related persons. In CCE, Ahmedabad Vs. Xerographic Ltd., case referred to supra, the Hon'be apex Court reiterated the well settled principle and laid down the three conditions that are required to be satisfied before it can be inferred that there exists a relationship. ....
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....ip firm and some of the Directors of the public limited company are relatives the firm and the company are related, has no legal basis whatsoever, especially in the light of the judgment of the Hon'ble apex Court in the case of Hind Lamps Ltd. The said legal position was affirmed by the Hon'ble apex Court in the case of Jay Engineering Works Ltd., referred to supra wherein it was held that concept of 'relative' has no application to impersonal bodies. 8. The department has also alleged that the party has changed their business practice i.e., prior to 01/04/2005 they were a manufacturer themselves and subsequently they became job workers and, therefore, this change in business practice is a deliberate attempt to escape or to e....