TaxTMI 
TaxTMI 
2018 (2) TMI 1231
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....ers. These two firms had partners, who also held shares in the appellant company. Department harboured the view that appellant and the two firms are related to each other and having mutual interest; that appellants adopted lower prices to these two firms compared to that of other independent customers; that appellants were collecting certain amounts as twisting & straitening charges from these two firms by raising debit notes which are not being included in the assessable value. Accordingly, various show cause notices were issued dated 15.04.2005, 30.08.2005, 02.02.2006, 04.05.2006 and 26.07.2006, covering the period 12.05.2001 to 30.09.2005, cumulatively proposing demand of differential duty of Rs. 26,31,409/- and education cess Rs. 9,819/- - totalling Rs. 26,44,828/- alongwith interest thereon and imposition of penalties under various provisions. All these show cause notices were adjudicated by a common Order-in-Original No. 07/06-07(JN), dated 30.10.2006, wherein the adjudicating authority confirmed the proposed demand of duty along with interest appropriated an amount of Rs. 5.00 lakhs paid by them during investigation, imposed penalty of Rs. 21,44,588/- under section 11 AC of ....
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.... Act. 7. E/1564/2012 32/2008 dt.28.11.2008 15/2012 (V-I) CE dt.8.3.2012 Rs.3,12,199 Penalty of Rs. 1,50,000 under Rule 25 of the Rules, 2002 Un-quantified interest u/s 11AB of the CE Act. 8. E/1558/2012 10/2010 dt.30.3.2010 15/2012 (V-I) CE dt.8.3.2012 Rs.1,21,145 Penalty of Rs. 15,000 under Rule 25 of the CE Rules, 2002. Un-quantified interest u/s 11AB of the CE Act. 9. E/1559/2012 11/2010 dt.30.3.2010 15/2012 (V-I) CE dt.8.3.2012 Rs.2,75,779 Penalty of Rs. 30,000 under Rule 25 of the CE Rules, 2002. Un-quantified interest u/s 11AB of the CE Act. 10. E/1563/2012 22/2010 dt.24.8.2010 15/2012 (V-I) CE dt.8.3.2012 Rs.2,24,658 Penalty of Rs. 22,000 under Rule 25 of the CE Rules, 2002. Un-quantified interest u/s 11AB of the CE Act. 11. E/1562/2012 23/2010 dt.24.8.2010 15/2012 (V-I) CE dt.8.3.2012 Rs.1,61,041 Penalty of Rs. 15,000 under Rule 25 of the CE Rules, 2002. Un-quantified interest u/s 11AB of the CE Act. 12. E/1557/2012 25/2011 dt.4.7.2011 15/2012 (V-I) CE dt.8.3.2012 Rs.3,21,649 Penalty of Rs. 1,00,000 under Rule 25 of the CE Rules, 2002. Un-quantified interest u/s 11AB ....
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....n 2(g) (iv) of the MRTP Act fails and there is no interconnection whatsoever as wrongly held by the lower authorities. (vi) To support these contentions, Ld. Sr. Advocate drew our attention to the following flow chart, filed alongwith the written submissions: Flow chart In the matter of Black Gold Profiles Limited. (vii) The authorities below have failed to appreciate that in the absence of two-way interest or traffic of interest and mutuality of interest, inter connections cannot be inferred as held by the Supreme Court time and again. (viii) The orders of the authorities below fall foul of the decisions of the Apex Court in UOI Vs.Kantilal Chunilal, 1986(26)ELT 289 (SC), UOI Vs. Ind Lamps Ltd. 1989(43)ELT 161(SC), UOI vs. Atic Industries 1984(17) ELT 323 (SC), Alembic Glass Industries Vs. CCE, 2002(143)ELT 244(SC), CCE Vs. T.I. Millers Ltd 1988(35) ELT 8 (SC) and series of Tribunal decisions following the above judgments. The impugned orders are, therefore, manifestly untenable. Impugned orders are opposed to the decisions of the Tribunal particularly in the cases of Panchaj Kasturi Herbals India Limited Vs. CCE, 2010 (250) ELT 559 (T) and CCE ....
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....found to be inter connected, the lower selling prices extended by appellant to the two related firms cannot be accepted as transaction value. Hence, the differential demand of Central Excise Duty and Cess upheld in all the impugned orders, are correct in law. For these reasons, the appeals may be dismissed. 6.1 Heard both sides and have gone through the facts. The core issue that comes up for appellate decision concerns the interpretation of the definition of related personunder section 4 of Central Excise Act, 1944, read with definition of "interconnected undertakings" in Section 2(g) of MRTP Act, 1969. In particular, it is to be decided whether the shareholding of "close relatives" of the partners can be added to the shareholding of the partners themselves for the purposes of adjudging whether the partners of each firm hold directly or indirectly, not less than 50% of the share of another entity which is a body corporate. 6.2 The period of dispute in all these appeals spans from May 2001 to December 2010. Section 4 of Central Excise Act, which lays down statutory provisions concerning valuation of excisable goods for purpose of charging duty, was amended/substituted w.e.f. ....
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....(b) In any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assesse shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. (2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (3) For the purpose of this section,- (a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) persons shall be deemed to be "related" if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the ....
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...., if such bodies corporate are under the same management, (vi) if the undertakings are owned or controlled by the same person or (by the same group), (vii) if one is connected with the other either directly or through any number of undertakings which are inter-connected undertakings within the meaning of one or more of the foregoing sub-clauses." (emphasis added) 6.5 Show Cause Notices while alleging that the appellant and the two firms are inter connected undertakings, as per definition of Section 2(g) of MRTP Act, 1969, however, do not specifically indicate as to which of the categories (i) to (vii) of the said definition is attracted to the facts of the case in hand. Notwithstanding this omission, the original adjudicating authority has chosen to examine whether the said entities are inter-connected undertakings only from the aspect of Section 2(g)(iv). 6.6 In the Order-in-Original No. 7/06-07(JN), dated 30.10.2006 (related to appeal No. E/609/2008), the adjudicating authority has proceeded to examine the shareholding pattern in the background of the aforesaid provisions. In this case and also in respect of the adjudication orders in the remainin....
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....tion 2(g) of MRTP Act 1969 viz; Where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firm- (a) Hold, directly or indirectly, not less than fifty percent of the shares, whether preference or equity, of the body corporate, or (b) Exercise control, directly or indirectly, whether as director or otherwise, over the body corporate. 6.8 Going by the parameters laid down in the above statutory provisions relied upon by the adjudicating authorities and upheld by the lower appellate authorities, it is to be seen whether the partners in M/s.AS Steel Tradrs hold 50% or more of shares of M/s Black Gold. Similarly, it is to be seen whether the partners of Sri Vijayalaxmi Steel Traders hold 50% or more than shareholding of M/s Black Gold. From the information supplied by Ld. Advocate during the hearing, the combined shareholding of partners of A.S. Steel Traders, namely S/Shri A. Nagesh, A. Mahesh and A. Jagadish as Directors of M/s.Black Gold works out to 30.80%. In the case of Sri Vijayalaxmi Steel Traders, S/Shri Ramesh Gupta and A. Jagadish, partners cumulatively own 33.80% of the shareholding as Directors of....
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....4(3)(b)(i) which lays down that persons are related if they are inter-connected undertakings alone need to be satisfied in the matter and there is no need to look for any other criteria. 6.12 The question then requires to be answered is whether the addition of share holding of close relatives by the adjudicating authority is legally correct or not. In our opinion, the answer is resoundingly in the negative. We are unable to find any provision in section 4 of Central Excise Act, 1944 or for that matter, in section 2(g) of MRTP Act, 1969 that allows for such addition of shareholding of close relatives. Secondly the conclusions arrived at by the adjudicating authorities in this regard are against all accepted principles of statutory interpretation. Words in a statute should be interpreted literally and as they stand, and the starting point for interpreting a statue, is the language of the statute itself. When the words of a statute are unambiguous, this first canon is also the last. This cardinal rule of interpretation has time and again been reiterated by higher appellate courts. For example, in the landmark judgment of Doypack Systems (Pvt.) Limited, Vs. Union of India [1988(36)E....