AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 78
X X X X Extracts X X X X
X X X X Extracts X X X X
....rds to the bearings used for wind energy, the appellants have availed the benefit of exemption provided under Notification No.6/2006-CE. 3. Learned Counsel stated that during investigation, statement of various persons including Shri. Chandramowli Srinivasan was recorded u/s. 14 of the Central Excise Act, 1944. The statement of Shri. Chandramowli Srinivasan is not relied upon by the department. The similar facts were recorded in the statement of Shri. Vijendra Patwari which was relied upon by the department. 4. Shri. Chandramowli Srinivasan in his statement has in Q.No.5 & 6 enumerated the method of fixing the price by the appellant. The same is reproduced below: Q.5 "How are the prices fixed of the above mentioned types of bearing? Ans. With respect to the price at which the goods are sold by M/s. SKF Technology India Pvt. Ltd. And M/s SKF India Ltd. I state that the prices at which the goods are sold by SKF Tech to SKf India depend up on the segment in which such goods are sold by SKF India to the end customer. The same is elaborated as under:- Wind customer:- The price at which goods are sold by SKF Tech depends up on the end customer price of SK....
X X X X Extracts X X X X
X X X X Extracts X X X X
....firmed the demand and levied equal amount of penalty u/s. 11AC of the Central Excise Act, 1944. The Order also imposes penalty under Rule 26(1) on M/s. SKF India Ltd. and on Shri Chandramowli Srinivasan. 7. Learned Counsel submitted that the "related person" has been defined in section 4(3)(b) of the Central Excise Act, 1944. It is submitted that mutuality of interest must be substantiated in order to consider M/s. SKF India Ltd. as related person. The definition or "related person" is reproduced below: (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 assesee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other." Only clause (iv) can apply in present facts. 7.1. Learned Counsel submitted that since there is no mutuality of interest, M/s SKF India Ltd. cannot be considered as "related person". The appellants made this submission and referred to various judgments before the authority. There is no fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der, follow-up for delivery of goods, ensure proper delivery, follow-up for raising of invoice, follow-up for the payment, etc. It is submitted that the margin of 8% to 15% is quite reasonable compared to the efforts involved. Therefore, it is submitted that the price has not been influenced by the relationship. Hence, the price cannot be rejected. 7.6 Learned Counsel submitted that the Tribunal in the case of M/s Themis Medicare reported in 2012-276-ELT-539 has held that the margin of 7% to 8% is quite reasonable. Therefore, it is submitted that the price at which the goods have been sold to M/s SKF India Ltd. should be accepted. The appellants also rely upon the following Judgment: M/s. Nagpal Petro-Chem Ltd. 1979-(4)-ELT-117 (Mad.) M/s. Power Tech Internationl 2001-(431)-ELT-401 (Tri.-Mum) M/s. Christo George 2006-(227)-ELT-410(Tri.-Bang.) Hind Lamps Ltd. 1981-(8)-ELT-11(Del.) M/s. Hind Lamps Ltd 1998-(98)ELT A208 (SC) 7.7 The royalty agreement between appellant & M/s. AB SKF (Sweden) was submitted in response to query from the bench.In para 11 of the agreement for the period 2008 to 2012 it is stated that the appellant cannot u....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Central Finance Taxation Centre for Learning (CFL) Talent Management Recruitment Business Application Support Company Purchase. 7.12 Learned Counsel submitted that the allocation is made to independently assess the profitability of each of the companies. These details have been audited by the departments under various acts namely Income Tax Act, Service Tax, Excise Etc. and no query has been raised by them. 7.13 Learned Counsel submitted that the appellant (M/s SKF Technologies India Pvt. Ltd) has factories at Ahmedabad & Mysore and depots (sales units) at various location. The Ahmedabad factory has its own departments like purchase, human resource, maintenance, product & process Engineering, production, quality assurance, supply chain & planning etc. The persons are employed by appellant on their payroll for carrying out the day to day functions in various departments. However, in order to bring the uniformity in functioning, the policy matters are advised by employees of M/s. SKF India Ltd. For example, the employees of human resource department employed by appellant carries out the functions of compliance of various statutory provisions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y generator. (ii) Nacelle: which contains of gearbox, generator, yaw components, flexible couplings, brake hydraulic, brake callipers, sensors, nacelle plate, nacelle cover and other smaller components. (iii) Rotor: consists of blades, hub, nosecone, main shaft, special bearings. (iv) Wind turbine controller, nacelle controller, main shaft, special bearings." The ball bearings are used in these items only. Therefore, following the ratio of these judgments, the benefit of the notification shall be allowed. 8.3 Learned Counsel submitted that the Show cause Notice has been served on 19/09/2014. The demand for the period 2009-2010 to 2013-2014 has been raised. It is submitted that the demand for the period beyond one year is time barred. Therefore, the demand for the period prior to August-2013 is time barred as there was no malafide intention in non-payment of duty, due to the following reasons: (i) The bearings are used in the rotor shops and are also used in various places of the wing mill i.e nacelle part of the wing mill i.e. rotor shaft, gearbox (step-up gear), generator, yaw gearbox (reduction) yaw slewing table, blade pitch revolving se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y. 9 Learned Authorized Representative, Shri. T. G. Rathod Joint Commissioner relied upon the impugned order. 9.1 Learned AR submitted that M/s. Aktiebolaget SKF, Sweden holds 92.89% of the shares of M/s. SKF Technologies and 46.7% shares of M/s. SKF India. Thus, it is evident that M/s. AB SKF, Sweden has control over both the body corporate Viz. M/s. SKF Technologies and M/s. SKF India. These facts lead to the inevitable conclusion that both, M/s. SKF Technologies and M/s. SKF India are under the same management. 9.2 Learned AR submitted that the fact that M/s. AB SKF, Sweden is holding company of both M/s. SKF Technologies and M/s. SKF India has been admitted by SKTF in their written reply dated 04.12.2014 at Para No. 6, whereby they submitted that Cost sharing agreement for charging on the basis of turnover is very common wherein group companies are involved. Moreover, Shri Anil Raskar, Manager Excise and Service tax with SKF India, Pune, who is responsible for handling all matters related to Central Excise and Service Tax for whole of India pertaining to SKF India, including SKF Technologies has also categorically stated in his statement dated 23.04.2012 that all the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Mr. Srhikant Savangikar - Director Business Excellence Quality & Sustainability being employee of SKF India was also director in SKF Technologies." These facts were admitted by Shri Anil Raskar and Shri Vrijendra Patwari in their statement dated 23.04.2012 and 04.09.2014 respectively. 9.6 Learned AR submitted that in the instant case, M/s. SKF Technologies does not have any backup for selling goods in market and they use the manpower, know-how and proficiency of M/s. SKF India for getting orders for manufacture product. Likewise, M/s. SKF India doesn"t have manufacturing facility and they are solely engaged in the marketing of products manufactured by M/s. SKF Technologies. Thus, the entire business of M/s. SKF Technologies and M/s. SKF India is inter-dependent in as much as M/s. SKF Technologies is entirely dependent on M/s. SKF India for marketing of the Bearings manufactured by them and M/s. SKF India is entirely dependent on the supply of bearing from M/s. SKF Technologies for its marketing activity. Learned AR submitted that M/s. SKF Technologies manufactures goods under the technical guidance of M/s. SKF India and also sells the entire quantity to M/s. SKF India. By w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that they have interest, directly or indirectly, in the business of each other. The explanation to this clause states that "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of Section 2 of the Monopolies and Restrictive Trade Practices Act, 1969. Under Section 2(g) of MRTP Act, 1969, two or more undertakings are inter-connected with each other if the conditions specified in any of the seven specified manners which include (i) if one owns or controls the other (ii) if one body corporate manages the other and (iii) if the bodies corporates are under the same management are satisfied. We are of the opinion that UPL and UTL are under the same management in view of clause (ii) of Explanation 1 to Section 2 ibid, that is to say, if the managing director or manager of one such body corporate is the managing director or manager of the other or clause (iii), that is to say, if one such body corporate holds not less than one third of the equity shares in the other or..........We find that Shri Sanjay Bahadur is the managing director of UPL and simultaneously is the director of UTL. Further, Shri Ramesh Chandra, is director in both UPL and UTL. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us "J" Foundation (2015 (324) E.L.T. 422 (S.C), Hon. Apex Court has clearly held at para-14 that where the two companies/ firms etc., belong to the same group then the test of mutuality is established and satisfied. Further it has also deliberated upon holding company and subsidiary company. 9.14 In respect of bearing supplied for wind mills Learned AR submitted that the language employed in the notification clearly indicates that the exemption is not extended to each and every non-conventional energy devise or system. The scope of exemption has been restricted only to such devices or systems which have been specified in List 5. Further, it is evident that while some entries is List 5 above refer to individual items or devices, some other entries include systems as a whole or a combination of an equipment and the corresponding systems. In this background each of the entries in list 5 would have to be constructed strictly as per the text of the entry itself without expanding the scope merely because group heading in entry 84 of the table refer to systems. 9.15 Learned AR submitted that, adj. authority has examine history of exemption given to non conventional energy devices/ s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he best judge to ascertain the relation of the two units despite having such knowledge, they chose to value their excisable goods on "transaction value" basis with the sole intention to evade the payment of duty at appropriate rates. Further found that the language employed in Notification No. 12/2012 dtd. 17.03.2012 is unambiguous and yet the assessee chose to avail of the benefits which were not available to them. 10. We have considered rival submissions. We find that there are two issues which are needed to be decided. Firstly, if M/s SKF India Ltd. and M/s SKF Technologies India Pvt. Ltd. are related persons in terms of the Central Excise Act, 1944. Secondly, to see if the benefit of notification no. 06/2006 can be extended to the bearings manufactured by the SKFTIL and supplied for use in the wind operated electricity generators. 10.1 It has been asserted by Revenue that M/s SKFIL and M/s SKFTIL are related as both of them are controlled by their holding company, namely M/s AB SKF, Sweden. It has been asserted by Revenue that M/s SKFTIL in their balance-sheet have reiterated under the heading "related parties transactions" with SKFIL. It has also been asserted that there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore, it can only be treated as business transaction. 10.3 The mere fact that the entire production of M/S SKFTIL is sold through M/s SKFIL is not sufficient to make them related parties. There has to be positive evidence of them having interest in the business of each other. The mere fact that M/s SKFTL are reporting transactions with M/s SKFIL as "related party transaction" in their balance sheet is irrelevant. The criteria for treating two parties as related is very well defined in Central Excise Act and treatment given by the appellant in their balance sheet has no relevance in the facts of this case. 10.4 We find that no such evidence has been produced by Revenue and in these circumstances they cannot be treated as related parties. Since the two cannot be treated as related parties, the transaction value between SKFIL and SKFTIL has to be accepted for the purpose of assessment. The appeal on this count is allowed. 11. The next issue related to the admissibility of notifications of 06/2006 to the bearings manufactured by the M/s SKFTL and ultimately sold for use in the wind operated electricity generators as parts. Revenue has sought to deny the benefit of this notific....