TaxTMI 
TaxTMI 
2023 (11) TMI 609
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....Thereafter, department conducted detailed investigation against the respondent which revealed that apart from M/s SWPPL, there were also other sister concerns viz., Sterling & Wilson Energy Systems Pvt. Ltd. (M/s SWESPL); (ii) M/s. Sterling & Wilson Pvt. Ltd. (M/s. SWPL) and M/s Sterling & Wilson Co-Gen Solutions Pvt. Ltd. (M/s SWCGSPL). The share-holding pattern in SGPL, SWPPL, SWPL, SWPPL and SWESPL was as under: Name of the Shareholder SWPL SWPPL SWESPL SGPL SWCGSPL M/s Shapoorji Pallonji and Company Pvt. Ltd. 65.77% 56% -- 56% 51% Mr. Khurshed Y. Daruvala 33.33% 40% 50% 17% 24.5% Mrs. Kainaz K. Daruvala -- 04% 49.80% 27% 24.4% Others 0.90% - 0.20% 01. 1.4 It was alleged that, it is clear that all the above firms are under the control of the same management. Thus, they were covered within the meaning of Section 4(3) of Central Excise Act 1944 as 'related person'. Hence, the provisions of Section 4(1)(b) read with section 4(3) of the Act read with Rule 5 and 9 of Central Excise valuation (Determination of Price of Excisable goods) 2000 (hereinafter referred to as 'Valuation Rules')....
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....erein they are relatives within the meaning of Section 4 (3)(b)(ii) of the Act; and or associated in such a way that they have interest, directly or indirectly in the business of each other in terms of Section 4(3)(b)(iv) of the Act. Therefore, the conclusion arrived at by the adjudicating authority completely ignores the provisions contained in sub-clauses (ii),(iii) & (iv) of clause (b) to Section 4(3) of the Act, and hence erroneous. 2.1 He also submits that in the present matter respondent themselves have admitted that the final products sold by the them to M/s SWPPL and M/s SWPL are consumed by them in the execution of project and not cleared as such for further sales; and they avail duty credit to discharge service tax liability to works contracts on such projects. Therefore from the said admission, it is very clear that even though they may not be selling the excisable goods to their customers/ unrelated buyers, however admittedly these goods are being sold to such customers as part of the works contract services being provided by M/s. SWPPL and M/s. SWPL. In case of works contract services, there is both supply /sales/ transfer of property in goods as well as, provision ....
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.... He also argued that the adjudicating authority vide her findings recorded in the impugned order held that it cannot be said that the assessee and any of the aforesaid four entities are interested in the business of each other even though the shareholders are common. However applying the ratio of decision of Hon'ble supreme court decision in the case of Commissioner of Central Excise, Mumbai Vs. J. Foundation reported at 2015(0324) ELT 0422 (SC) to the facts of the present case, it is clearly brought on record that in the case of respondent i.e M/s SGPL M/s Shapporji Pallonji and Company Pvt. Ltd. holds 56% of shares constituting one group, while the remaining shares constituting 44% is held by Shri Khurshed Y. Daruvala and his wife Mrs. Kainaz K. Daruwala constituting another group. In rest of the 4 firms to whom the respondent have cleared the excisable goods, except in the case of M/s SWESPL held by only Daruwala Group, it is held by the same group of persons, i.e M/s SPCPL and Daruwala (either individually or Jointly). In view of the above, it is clear that apart from the being relatives in terms of sub-clause(ii) of Section 4(3)(b), there also exists mutuality of interest betw....
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....since the first condition itself of sub-clause (iii) is not satisfied, the buyers and the respondent cannot be considered as related under sub-clause (iii) of Section 4(3)(b). In any case, the respondent and the 4 buyers are not holding or subsidiary companies of each other. Therefore, the second condition of such -clause (iii) is also not fulfilled in the present case. Ld. Commissioner has not erred in examining the relationship of the respondent and the buyer under sub-clause (iv) of Section 4(3)(b) of the Central Excise Act, 1944. 3.3 He also submits that with respect to the goods cleared to SWPL and SWPPL, the Ld. Commissioner has rightly set aside the demand on the ground that provision of Rule 9 and 10 of the Valuation Rules, 2000 are not applicable. Ld. Commissioner in order has rightly held that since the goods are not sold further by SWPL and SWPPL but consumed in providing works contract services, the provisions of Rule 9 and Rule 10 of the valuation Rules cannot be invoked to demand differential duty. Rule 9 read with Rule 10, provide for payment of duty on the value at which the goods are sold further by related person to unrelated/ independent buyer whereas in the c....
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....l-to -principal basis and extra -commercial reasons were not involved while arriving at the sale price. The price charged from the 4 buyers is not influenced by any relationship and therefore the price charged to them should be treated as transaction value. He placed reliance on the following decisions: (i) CCE Vs. Beacon Neyrpic Ltd. -2006(193) ELT 16(SC) (ii)Philips (I) Ltd. Vs. CCE -2006-TIOL-359-CESTAT-MUM (iii) Aquamall Water Solutions Ltd. Vs. CCE - 2003(153) ELT 428(T) (iv) Xerographers Ltd. Vs. CCE- 1999(108) ELT 372(T) (v) Rallis India Ltd. Vs. CCE - 2000(118) ELT 780 (T) 3.9 In addition to above, he further submits that the Revenue has challenged the Order-In-Original on limited grounds. In fact, the revenue has not claimed that the entire Order-In-Original is bad in law. Demand dropped by the Ld. Commissioner on the grounds, other than the grounds specifically challenged in the appeal of the revenue, has attained finality. The Order-In-Original has not been challenged to such extent and the relief arising therefrom to the Respondent cannot be denied by the revenue. It would be beyond the scope of the revenue's appeals to en....
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.... are inter-connected undertakings. The question which needs to be answered is that the seller and buyer being inter-connected undertakings is sufficient to hold them as related parties. In this regard, Section 4(3)(b) of the Central Excise Act,1944 needs to be read which is 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 undertakings" 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 issue regarding inter-connected undertaking has also been clarified by the Circular of C.B.E. & C. No. MF/DR/F/354/81/2020-TRU, dated 30-6-20....
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....ger of the other; or (iii) if one such body corporate holds not less than (one fourth) of the equity shares in the other or controls the composition of not less than (one fourth) of the total membership of the Board of Directors of the other; or (iv) if one or more directors of one such body corporate constitute, or at any time within a period of six months immediately preceding the day when the question arises as to whether such bodies corporate are under the same management, constituted (whether independently or together with relatives of such directors or the employees of the first mentioned body corporate) one-fourth of the directors of the other; or (v) if the same individual or individuals belonging to a group, while holding (whether by themselves or together with their relatives) not less than (one-fourth) of the equity shares in one such body corporate also hold (whether by themselves or together with their relatives) not less than (one-fourth) of the equity shares in the other; or (vi) if the (same body corporate or bodies corporate belonging to a group, holding, whether independently or along with its or their subsidiary or subsidiaries....
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....sees which may be held as "related person" under the new definition. It may be noted that under the erstwhile provisions under Section 4, except for the specifically named categories, namely, holding company, subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor, buyer was held to be related to selling assessee only if they were so associated that they have interest directly or indirectly in the business of each other. In contrast no such general condition/restriction applies for inter-connected undertakings to be "related" under new Section 4. However, a provision has been made in the new valuation rules that even if the assessee and the buyer are inter-connected undertakings, the transaction value will be "rejected" only when they are "related" in the sense of any of Clauses (ii), (iii) or (iv) of sub-section 4(3)(b) or the buyer is a holding company or a subsidiary company of the assessee. In other words, while dealing with transactions between inter-connected undertakings, if the relationship as described in Clauses (ii), (iii) or (iv) does not exist and the buyer is also not a holding company or a subsidiary company, then ....
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.....f. 01.12.2013)- Where whole or part of the excisable goods are sold by the assessee to or through a person who is related in the manner specified in any of the sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of such goods shall be the normal transaction value] at which these are sold by the related person at the time of removal, to buyers (not being related person); or where such goods are not sold to such buyers, to buyers (being related person), who sells such goods in retail : Provided that in a case where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in rule 8. RULE 9.- (as existing upto 01.12.2013)- Where the excisable goods are sold by the assessee to or through a person who is related in the manner specified in any of the sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of such goods shall be the normal transaction value] at which these are sold by the related person at the time of removal, to buyers (not being related person); ....
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....n impugned order -in-original has correctly examined whether the Respondent and other buyers are related in terms of sub-clause (iv) of Section 4(3)(b). In the present matter it is rightly pointed out by the Ld. counsel that the argument of the revenue that the respondent and other buyers are related in terms of sub-clause (ii) or (iii) of Section 4(3)(b) would be beyond the scope of show cause notice inasmuch as the same is never alleged in the show cause notice. Hence, the same is also not acceptable at this stage. It is admitted that in the SCN the allegation of being related person was made by resorting the provision of Section 4(3)(b) (i) and (iv). The Adjudicating Authority has rightly examined that whether the appellant and their buyers are related or otherwise, in terms of Sub-Clause (i) & (iv) of Section 4(3)(b) of Central Excise Act, 1944, and dropped the proceedings. The revenue in their grounds of appeal enhanced the scope by contending that the appellants are also related in terms of Sub-Clause (ii) & (iii) of Section 4 (3)(b). It is a settled law in the grounds of appeal, ground cannot be made on the provision which was not invoked in the SCN. In the facts of the pres....
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....e respondent and buyers are related in terms of Sub-Clause (ii) and (iii), we find that Clause (ii) under any circumstances cannot be invoked as it is applicable only for the natural persons and not for artificial persons like carporater, but in the present case, the respondent and the buyers being a corporate bodies they are not related in terms of Clause (ii). This has been held in the case of M/s. Union of India Vs. Hind Lamps Limited- 1977 (1) ELT J1 (All), which has been upheld by the Hon'ble (S.C) as reported under 1989 (43) ELT 161 (S.C). This is for the reason that relative shall have the meaning assigned to it in Clause 41 of Section 2 of Companies Act ,1956 as per the explanation to Section (4)(3) of the Central Excise Act, 1944 during the relevant period. The meaning of word related under Clause 41 of Section 2 of the Companies Act, 1956 covers only natural persons and artificial persons like companies cannot be relative amongst themselves. Consequently, the buyers who are all companies cannot be treated as relatives for the purpose of sub clause (ii) of Section 4 (3)(b) of Central Excise Act, 1944. 4.8 We also find that the respondents and the buyers are also not cov....
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.... the contention of the department, the Hon'ble Supreme Court has held as under: ".....Now in the present case, Atul Products Limited has undoubtedly interest in the business of the assessee, since Atul Products Ltd. holds 50 per cent of the share capital of the assessee and has interest as shareholder in the business carried on by the assessee. But it is not possible to say that the assessee has any interest in the business of Atul Products Limited. There are two points of view from which the relationship between the assessee and Atul Products Limited may be considered. First, it may be noted that Atul Products Limited is a shareholder of the assessee to the extent of 50 per cent of the share capital. But we fail to see how it can be said that a limited company has any interest, direct or indirect, in the business carried on by one of its shareholders, even though the shareholding of such shareholder may be 50 per cent. Secondly, Atul Products Limited is a wholesale buyer of the dyes manufactured by the assessee but even then, since the transaction between them are as principal to principal, it is difficult to appreciate how the assessee could be said by virtue of that cir....
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....ntended by Shri S. N. Kacker, learned counsel for the petitioner company, in order to come within the first part of this definition, the petitioner company and the customer companies must have interest directly or indirectly in the business of each other. Such of the customer companies, which hold shares in the Petitioner Company, can be said to have interest in the business of the Petitioner Company. But only one of the customer companies, namely, Bajaj Electricals Ltd., Bombay. holds shares in the Petitioner Company. The remaining four customer companies do not hold any shares in the Petitioner Company. 19. Even assuming that all these four customer companies have interest in the business of the Petitioner Company, it is not shown that the Petitioner Company has any interest directly or indirectly, in the business of these four customer companies. ....... 21. Thus, we are unable to accept the contention of the learned Chief Standing Counsel that these five customer companies fulfil the requirement of the first part of the definition of 'related person'." 4.13 The above judgments were affirmed by the Hon'ble Supreme Court vide its detailed jud....
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....n the respondent an the 4 buyers and the relationship is not covered by Sub-Clause (iv) of Section 4(3)(b) of Central Excise Act 1944S but only Sub-Clause (i) of Section 4(3)(b) of Central Excise Act 1944. 4.16 We find that the judgments relied upon by the revenue are completely on different facts in the present case. Therefore, the same are not applicable. In this position, the transaction value of the goods between respondent and the so-called interconnected undertaking is correct valuation and the same cannot be disturbed, therefore, we do not find any merits in the appeal of revenue. 4.17 We have also gone through judgments relied upon by the rivals. We find that the judgment relied upon by the ld. Counsel are directly applicable in the facts of the present case. Further the Ld. Commissioner in impugned order dealt with the disputed matter in details and given detail findings. After careful examination of the impugned order, we find no reason to interfere with the impugned order. 4.18 On going through the impugned order and grounds of appeals of the revenue we also find that the Ld. Commissioner has also set aside the demand on grounds - (i) limitation ....