TaxTMI 
TaxTMI 
2018 (7) TMI 171
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....apter 22 of Central Excise Tariff Act, 1985 and are registered with the jurisdictional Central Excise Department. The appellants were incorporated in 1990 and the shareholders were S/Shri Joseph Varghese, George Varghese and Sundaram. Shri George Varghese, Director was managing the day-to-day affairs of the company. The appellants entered into franchisee agreements with M/s. Venkateswara Essences and Chemicals Ltd., Bangalore to manufacture soft drinks with brand name Ruch, Sprint and Thrill. They also had an agreement with M/s. McDowell to manufacture plain soda of McDowell brand. The appellants were availing exemption under Notification No.175/1986 dated 1.3.1986 and No.1/1993 dated 28.2.1993. The Superintendent, Central Excise, Range Alwaye issued a show-cause notice dated 31.10.1995 demanding a differential duty of Rs. 6,24,982/- for the period 4/1995 to 9/1995 on the allegation that the entire production of the appellants were sold through M/s. Concept Sales, Yelathala and M/s. Concept Sales were in turn selling the product in the market at a double the price for which they got it and as to why the price at which M/s. Concept Sales has sold the products should not be treated a....
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....order. 4. The learned advocate for the appellant submitted that this is a second round of litigation. He submitted that the transaction value cannot be denied on the allegation of related party transactions as the price at which M/s. Concept Sales sold to all distributors and dealers are same; Department has alleged that M/s. Concept Sales is a dummy unit but has not given any cogent reasons or evidence for the same; it is submitted that the M/s. Concept Sales has come into existence in 1987 whereas the appellants came into existence in 1992; the so-called payments received from the distributors of M/s. Concept Sales to the personnel of the appellants are payments to individuals working with the appellants; the payments from M/s. Concept Sales to the appellants are in the course of business for transportation or for the loss of crates or bottles occurred during the sales; the fact that the different units are not connected and that the officers of the appellants were receiving amounts from M/s. Concept Sales or other distributors in their individual capacity for the work done by them to different companies, is categorically borne out in the statement and cross-examination of Shr....
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....ed by the department while computing the differential duty. They have placed reliance on following cases (i). Asst. Collector of Central Excise and Others vs. Madras Rubber Factory Ltd.: 1987 (27) ELT 553 (SC) (ii). CCE, Aurangabad vs. Goodyear South Asia Tyres Pvt. Ltd.: 2015 (322) ELT 389 (SC). (iii). CCE vs. Bisleri International Pvt. Ltd.: 2005 (186) ELT 257 (SC); (iv). UOI vs. Bombay Tyre International Ltd.: 1983 (14) ELT 1896 (SC); (v). Pepsico India Holdings Ltd. vs. CCE: 2005 (187) ELT 382 (Tri.- Mumbai). 4.3. The appellants further contended that during the year 1993-94, they were eligible for availing Notification No.175/86 or No.1/93 in respect of McDowell soda, therefore, the value of clearance of soda should not have been taken into account for computing the whole exemption limit of Rs. 20 lakhs or Rs. 30 lakhs; the department has wrongly concluded that the sale price of the appellants was less than the cost of production; it is accepted that it was only for the year 1992-93, the situation was like that; however, for the consequent years and particularly during the relevant period of show-cause notice the situation was not like th....
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.... 5.1. Coming to the valuation issue, the learned AR has placed reliance of Hon'ble Supreme Court's decision in the case of Modi Alkalies and Chemicals Ltd.: 2004 (171) ELT 155 (SC), wherein it was held that pervasive financial and management control are prima facie indicators of interdependence; conclusion that a unit is dummy has to be on the facts of each case and there could not be any generalization or rule of universal application. He asserted that lifting of the corporate veil is of much more significance; he also placed reliance on Parle Bisleri Pvt. Ltd. vs. CCE: 2011 (263) ELT 15 (SC); it can be seen that the Commissioner has given a categorical finding that none of the proprietors of the said distribution firms (of M/s. Concept Sales) had invested in the capital and none had any control in the day-today affairs of the firms; they did not get any share of the profit either; as such, all these firms did not have any independent existence; the intermediary firms like M/s. Concept Sales and RTC, VSC, GTC and M/s. Concept Sales, etc., are connected and controlled by the Directors of the appellants themselves and were used as a front for undervaluation; therefore, the sales ef....
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....have cleared their entire products to M/s. Concept Sales and the price at which it was sold to M/s. Concept Sales was less than the cost of production; different distributors of M/s. Concept Sales are nothing but companies created or controlled by the appellants; there are various evidences to show that there is flow back of money from M/s. Concept Sales and their distributors to the appellant; the goods cleared by the appellants have changed hands through certain benami companies before the actual sales in the wholesale trade; These companies did not have any independence existence but were controlled by the Directors of the appellant. It is seen from the records that though M/s. Concept Sales was in existence even before the confirmation of the appellant's company, huge amounts were transferred back to the appellants from M/s. Concept Sales by book entries and fictitious debits towards unspent expenses. A statement of proprietor of M/s. Concept Sales shows that there was mutuality of interest. M/s. Concept Sales had paid salary, allowance, etc., of the employees of the appellant. This is evidenced by the fact that huge sums were transferred by M/s. Concept Sales to M/s. VAD, a pa....
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....p Concern with Shri Jeby K.John as the proprietor; Investigation conducted revealed that Shri Jeby K.John has not invested any amount in the business; amounts from this unit were withdrawn by Shri George Varghese or spent for his personal expenses; there appears to be a flow back of money directly from this unit to the appellants or its director; Commissioner has given a clear finding to this effect. (ii). Elinjikal Beverages: It is a Partnership Concern with Shri George Varghese and Smt Rani Jose as partners. Shri George Varghese is the Director of appellants. (iii). Gautam Traders: It is a Proprietorship Concern with Shri Giji Jose as the proprietor. However, Shri Jose has not invested any amount in the business. He stated that he was only an employee of Elingikal Foods and getting salary of Rs. 1500/- per month. Investigation established that the the amounts from this unit were withdrawn by Shri George Varghese or spent for his personal expenses. Thus there is flow back money directly from this unit to appellants or their director. (iv). Commerce International: It is a Proprietorship Concern with Shri Denni Hanibal as the Proprietor. Investigation established that the c....
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....ons was not the normal price but the price lower than the normal price and because of extra commercial consideration the price charged is less than the normal value. We find that in the instant case, mutuality of interest is established by the investigation and has been brought out by the learned Commissioner in his Order-in-Original. The corporate veil has been lifted satisfactorily. It has been established that the Directors of the appellants were managing various distributors of M/s. Concept Sales either by themselves or through their employees. None of the distributing firms were functioning independently and were for all practical purposes controlled and managed by Shri George Varghese of the appellants. It is important to note that the Hon'ble Supreme Court in the case of Modi Alkalies and Chemicals Ltd. (supra) have stated categorically that where there is interdependence and where another unit is in fact a dummy unit has to be adjudicated on the facts of the case. There cannot be any generalization or rule of universal application. Two basic features which prima facie show interdependence are pervasive, financial control and management control. Going by the facts of the cas....
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....s of interconnectedness, interdependence nature of the units and inexplicable financial transactions between different companies have come to light. Therefore, it cannot be said that the department had the knowledge of these aspects at the time of issuance of the first show-cause notice. Therefore, going by the ratio of the following judgments, we find that the instant show- cause notice is not time barred. a. British Physical Laboratories (I) Ltd. vs. CCE: 2003 (160) ELT 1123 (Tri.-Chennai) b. Saraswati Air Products Ltd. vs. Collector of Central Excise: 1998 (98) ELT 391 (Tri.) c. Burn Standard Co. Ltd. vs. CCE: 2000 (119) ELT 650 (Tribunal) 6.7 Regarding the issue of exclusion of the clearances of McDowell brand soda, we find that the learned Commissioner has given a clear finding in the Order-in-Original. In terms of Notification No.175/86, full exemption is given to first clearances of Rs. 20 lakhs if goods fall under one chapter ... and Rs. 20 lakhs if the goods manufactured fall under more than one chapter; accordingly, the value of clearances of McDowell which is also falling under same chapter 22 had been taken into account for computing the ag....