2007 (7) TMI 68

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....d the record. 2. The first appellant M/s. Oswal Woollen Mills is a manufacturer of yarn. It sold yarn manufactured by it to the second appellant, M/s. Vanaik Spinning Mills Ltd. The yarn was converted into multi-folded yam, packed and disposed of by the second appellant. Part of the multi fold yarn was sold to M/s. Oswal Woolen Mills also. 3. Under the impugned order, it has been held that t....

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....s that the finding is the result of gross mis-understanding of facts. It is being pointed out that the first appellant is a large manufacturer of yarn and only a small portion of the yarn so manufactured is sold to the second appellant. The ld. Counsel emphasized that there is no allegation that the sale to the second appellant was at a lower price than the sale to other parties, so as to justify ....

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....only a small portion of the yarn, the first appellant would not be able to recover the loss resulting from the undervalued sale of yarn to the second appellant. 5. Another point being emphasized is that during most of the period in question (2002-2003), multi-folded yarn was exempt from duty and, therefore, the appellants did not stand to gain from the alleged undervalued circular transaction. ....

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....ant. It also does not stand to reason that an assessee would sell bulk of its produce at undervalued prices to a party so as to benefit from undervalued return of about 40% of its sales. Thus, the finding regarding undervalued Circular transactions and evasion of duty do not fit in with the facts of the case. 8. The allegation of circular transactions to evade duty is also not viable inasmuch a....