AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 430
X X X X Extracts X X X X
X X X X Extracts X X X X
....). The PPF is supplied at the rate pre-decided 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erial, packing material, etc. and manufacture or collaborate with some one for the same when required. 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 capi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r its own trade mark/brand name and to render financial, technical , administrative and other necessary assistance to the members, to advise the members on price fixation, price policy, public relation and allied matters, to provide common services to 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ected undertaking if the relationship as described in (ii),(iii), or (iv) of Section 4(3)(b) did not exist and the buyer was not a holding company or a subsidiary company then for the assessment purpose, they would not be considered related. 2.2 Learned counsel for the appellant pointed 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 ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o-operatives to hold that two are inter-connected undertakings. This fact has not been disputed by the appellant as well. The question which needs to be answered is if being inter-connected undertakings is sufficient to hold the two as related parties. In this regard, Section 4(3)(b) of the Central 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. Wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctive Trade Practices Act, 1969. The definition of inter-connected undertaking in the said Act reads as follows : "Inter-connected undertakings" means two or more under-takings which are inter-connected with each other in any of the following manner, namely :- (i) if one owns or controls the other, (ii) where the undertakings are owned by firm, if such firms have one or more common partners, (iii) where the undertakings 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....individual (whether independently or together with his relatives) or the same body corporate (whether independently or together with its subsidiaries); viii. if not less than (one-fourth) of the total voting power (in relation to) each of the two bodies corporate is exercised or controlled by the same individuals belonging to a group or by the same bodies corporate belonging to a group, or jointly by such individual or individuals and one or more of such bodies corporate; or ix. if the directors of the one such body corporate are accustomed to act in accordance with the 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 tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nditions are not satisfied then, quite obviously, value in such cases will be determined under the relevant rule. 25. In essence, notwithstanding the change in definition of "related" person in the new Section 4, for practical applications, its scope has been restricted and but for small variation it would not be much different from that covered under the old Section 4 definition. The Commissioners may, however, examine carefully whether any other situation described in the definition of inter-connected undertakings need to be excluded for satisfying the qualification of mutuality of interest. The actual revenue potential in such 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2002 (146) ELT 502 (S.C.) has observed as follows:- "2. The respondent is a co-operative society under the Gujarat Co-operative Societies Act, 1961. It is engaged inter alia, in the manufacture of milk and cocoa products and for that purpose has two units, one at Anand and the other at Mogar, both in Kaira district. The respondent receives milk, from milk producers who are all members of the respondent unit. After the product is received and some manufacturing process is undertaken by the respondent, the product is then sent to a Federation known as "Gujarat Co-operative Milk Marketing Federation Limited‟. That Federation is also registered 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, ....