TaxTMI 
TaxTMI 
2022 (9) TMI 430
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by GCMMF. The GCMMF is registered under Gujarat Co-operative Societies Act, 1961 and are engaged in marketing of various dairy products under brand name AMUL. The GCMMF monitors all the transactions including the procurement and supply of plastic granules to the appellant for the manufacture of PPF, distribution of manufactured PPF to different DCMPUs and associate member (dairies) as per the programme. The GCMMF also coordinates procurement of milk from DCMPUs/associate members (dairies) and the payment thereof. Almost entire products manufactured by the appellant is sold to DCMPUs/associate members (dairies). 1.2 On the strength of the above facts, revenue alleged that the price at which the PPF is sold to DCMPUs/associate members (dairies) is not normal transaction between the appellant and the dairies. It was alleged that the price is not sole consideration for sale. Revenue alleged that the appellant and DCMPUs/associate members are related persons in terms of Central Excise Act. Following facts are mentioned in the show cause notice to arrive at the conclusion that the appellant and DCMPUs/associate members (dairies) of GCMMF are related. (1) The main object of the Fede....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Under Article 5,2.14 arrange training of staff of the members and the Federation. Under Article 5.2.16 market products under its own trade mark / brand name or of its members' brand name / trade mark. Under Article 5,2.18 render financial, technical, administrative and other necessary assistance to the members and enter into collaborative agreements. Under Article 5.2.19 advice the members on price fixation, price policy, public relation and allied matters. Under Article 5.2.26 provide common services to members in various fields including staff, cadre etc. Under Article 5.2.27 work as administrator of members at the request of the Registrar or takeover management of any milk union on its request. Under Article 5.2.30 Undertake periodical supervision of the members and the societies affiliated to its members. The Federation will also have powers to recommend liquidation of any member. Under Article 8.1 it was further prescribed that initially every Ordinary member shall subscribe Rs. One lakh as share capital. Under Article 9 of the bye-law, the obligations of members are prescribed Every Ordinary Member shall Under Article 9.1.1, manufacture and market a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... members in various fields including staff, cadre manufacture and market all of its dairy and allied produce as directed by the Federation and to adhere to the manufacturing programme decided by the Federation. 1.4 It was alleged that the appellant and DCMPUs are inter-connected undertakings in terms of Clause 2(g) of MRTP Act. On the basis of the above observations it was held that :- (a) The DCMPUs and the assessee are related persons, (b) Both the manufacturer and the buyers have got mutuality of interest in the business of each other, (c) Both the parties are interdependent and (d) Price of the goods was not the sole consideration Reliance was placed on the definition of related persons appearing in Section 4(3)(b) of Central Excise Act to assert that the two are related person. Consequently, the value was re-determined under Section 4 of the Central Excise Act and the differential duty was demanded invoking Rule 8 and Rule 9 of the Central Excise Valuation Rules, 2000. 02. Learned counsel for the appellant argued that in the year 1981, the similar case was booked by excise authority in charge of M/s. Kaira District Co-Operative Milk Producers Union Ltd. Anand in res....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d out that in total five show cause notices have been issued. He pointed out that the demand of Central Excise duty was confirmed by the learned Commissioner. He further pointed out that they had filed writ petition before the Hon'ble High Court of Gujarat challenging the said order however, they were allowed to withdraw the said petitions with liberty to approach the tribunal for the remedy. 2.3 Learned counsel pointed out that in a similar case of M/s. Kaira District Co-Operative Milk Producers Union Ltd. the Hon'ble Gujarat High Court as well as Hon'ble Apex Court held that the federation and M/s. Kaira District Co-Operative Milk Producers Union Ltd. are independent entities and not related. He argued that the said two entities and the appellants are identically placed and therefore, the decision of Hon'ble High Court of Gujarat and the Hon'ble Apex Court in the said case would be squarely applicable to the instant case as well. He pointed out that the Hon'ble Courts have held that dairies were co-operative societies under Gujarat Co-Operative Societies Act and the federation was also registered under the said Gujarat Co-operative Societies Act and the decision in the case of A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Excise Act reads as under:- "4(3)(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 assessee, 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. Explanation.-In this clause- (i) "inter-connected under takings" shall have the meaning assigned to it in the clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956);" 4.1 The rule 8, 9 and 10 of the Central Excise Valuation Rules read as follows:- "Rule 8. Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods. "Rule 9. When the assessee so arranges that the excisable goods are not sold by an assessee except to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ings are owned by bodies corporate, - a. if one body corporate manages the other body corporate, or b. if one body corporate is a subsidiary of the other body corporate, or c. if the bodies corporate are under the same management, or d. if one body corporate exercises control over the other body corporate in any other manner; (iv) 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 per cent 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, (v) if one is owned by a body corporate and the other is owned by firm having bodies corporate as its partners, 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 foregoing sub-clauses. Explanation I. - For the purpose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....directions or instructions of one or more of the directors of the other, or if the directors of both the bodies corporate are accustomed to act in accordance with the directions or instructions of an individual, whether belonging to a group or not. Explanation II. - If a group exercises control over a body corporate, that body corporate and every other body corporate, which is a constituent of or controlled by, the group shall be deemed to be under the same management. Explanation III. - If two or more bodies corporate under the same management hold, in the aggregate, not less than (one-fourth) equity share in any other body corporate, such other body corporate shall be deemed to be under the same management as the first mentioned bodies corporate. Explanation IV. - In determining whether or not two or more bodies corporate are under the same management, the shares held by (financial institutions) in such bodies corporate shall not be taken into account. Illustration Undertakings N is inter-connected with undertaking A and undertaking C is inter-connected with undertaking B. Undertaking C is inter-connected with undertaking A; if undertaking D is inter-connected with unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch situations may be estimated and a report sent in due course. 4.3 From the above cited provisions and the clarification, it is clear that only if the parties are related in terms of Clause (ii), (iii), (iv) of Section 4(3)(b) of Central Excise Act, would they be treated as related persons. Analysis of the impugned order shows that the said order after reaching at the conclusion that the two namely, the appellant and the Dairies are inter-connected undertakings does not proceed further. The impugned order holds that since GCMMF holds control that both the appellants as well as Dairies, there is mutuality of interest between the appellant and the dairies. The impugned order hold that M/s. GCMMF has a decisive role to play in financial matter on which the price of products is done. The impugned order holds that as per bylaw no.5.2.9, it is incumbent on GCMMF to plan overall production programme for the federation and its members keeping in view the market strategy. Bylaw no. 5.2.13 casts obligation on M/s. GCMMF to purchase or assist in purchasing raw material, etc and manufacture or collaborate with someone when required and bylaw no. 5.2.19 authorizes GCMMF to advise the members ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stered under the Gujarat Co-operative Societies Act, 1961. 3. The respondent submitted a price list to the Superintendent of Central Excise, Anand. In the price list they claimed a deduction of the commission charged by the Federation from the Union for the purposes of marketing the products of the appellants. The Commissioner rejected the price list on the ground that the respondent-Union and the Federation were "related persons" within the meaning of Section 4(4)(c) of the Central Excise Act, 1944. 4. The respondent, thus, filed a writ petition challenging the rejection of its price list. The High Court has, by the impugned judgment, allowed the writ petition and held that the Union and the Federation cannot be said to be related persons. The High Court has so held on the basis of a decision of this Court in the case of Union of India and Ors. v. ATIC Industries Ltd. reported in [1984 (3) SCC 575]. In this case, it has been held that in order to attract the definition of a "related person" in Section 4(4)(c), the assessee and the person alleged to be related, must have interest, direct or indirect, in the business of each other. It has been held that if there is a shareholder....