TaxTMI 
TaxTMI 
2024 (6) TMI 1320
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duty by resorting to undervaluation as they had cleared their finished products through their related unit viz. M/s. H.D. Consortium India Limited., at a price which is lower than the price at which the said products were subsequently sold by M/s. H.D. Consortium India Ltd. to unrelated buyers. Accordingly, it was alleged by the Revenue that during the period from September 2007 to March 2012, the appellant has evaded Central Excise duty amounting to Rs. 1,02,20,679/- (including Cess), on the finished goods cleared by them to their related unit M/s. H.D. Consortium India Ltd. 2.1. The Notice was adjudicated by the Ld. Commissioner vide the impugned order dated 25.03.2013 wherein the demand made in the Notice has been confirmed, along with interest, and equal amount of duty was also imposed as penalty. Aggrieved against the confirmation of the demands in the impugned order, the appellant has filed this appeal. 3. The appellant submits that their unit is located in the North East Region in the State of Assam, where they are eligible for the benefit of Notification No. 20/2007-C.E. dated 25.04.2007; as per the said Notification, they are eligible for refund of the duty paid through....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndia Ltd., the assessable value at which the said finished goods were cleared to the independent/unrelated buyer viz. AIIMS has been considered as assessable value, as per Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. In this regard, the appellant submits that they have procured reagent control cards, clot filters and other items and supplied the same along with their manufactured goods to AIIMS, as a part of goodwill. Thus, it is their contention that the value adopted for AIIMS cannot be the basis for demanding duty on the goods cleared to M/s. H.D. Consortium India Ltd. Accordingly, the appellant submits that appropriate duty has been paid on the finished goods cleared to M/s. H.D Consortium and hence the demand of differential duty confirmed in the impugned order is not sustainable. 3.3. The appellant has also contended that the demand is barred by limitation. They have submitted that they are filing monthly E.R.-1 returns, regularly, and declaring the total clearances during the material period. They were regularly filing their applications of refund claims for the particular months wherein they were submitting invoices and d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e products cleared to the unrelated buyer namely, AIIMS. 7. Thus, we observe that issue to be decided in the present appeal is whether the price at which the finished goods cleared by the appellant to M/s. H.D. Consortium India Ltd. can be considered as the 'Transaction Value' for the purpose of payment of central excise duty. Before arriving at a conclusion on the above issue, it has to be decided whether the appellant and M/s. H.D. Consortium India Ltd. can be considered as "related person" as defined under Section 4(3)(b) of the Central Excise Act, 1944 or not. 7.1. For the purpose of ready reference, the definition of "related" person as provided under Section 4(3)(b)of the Act is reproduced below: - "SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. - ...... (3) For the purpose of this section,- (a) ... (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, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect while the interest of the latter in the business of the former may be indirect, but that would not make any difference so long as each has got some interest direct or indirect in the business of the other. In cases where 50% share of the manufacturing Company is held by the customer Company, the customer Company can be said to be having interest in the manufacturing Company as a shareholder, but for this reason, it cannot be said that the manufacturing company has any interest direct or indirect, in the business carried on by one of its shareholders even though the shareholding of such shareholders may be 50%. We observe that the Department has not brought in any other evidence to substantiate the allegation of mutuality of interest in each other's business. In the absence of mutuality of interest in the business of each other, the customer company holding shares in the manufacturing company cannot be treated to be a 'related person'. 7.5. We observe that this view has been held the Hon'ble Apex Court in the case of Union of India & ors. vs. ATIC Industries Ltd. [1984 (17) E.L.T. 323 (S.C.)], wherein it has been held as under: "4. The assessee urged several grounds i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....valid. 5. The second ground on which the assessee assailed the validity of the demand made by the Assistant Collector for differential duty related to the applicability of the definition of "related person" in clause (c) of sub-section (4) of section 4 of the amended Act. The Assistant Collector took the view that the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were related persons within the meaning of the first part of the definition of the term "related person" and the assessable value of the dyes manufactured by the assessee for the purpose of excise duty was, therefore, liable to be determined with reference to the price at which the dyes were ordinarily sold by Atul Products Limited and Crescent Dyes and Chemicals Limited. This view taken by the Assistant Collector was set aside by the High Court on the ground that the assessee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were not "related persons" and the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited and not the price at which the latter sold the dyes ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Products Limited holds 50 per cent of the share capital of the assessee and has interest as share holder 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 transactions between them are as principal to principal, it is difficult to appreciate how the assessee could be said by virtue of that circumstance to have any interest, direct or indirect, in the business of Atul Products Limited. Atul Products Limited buys dyes from the assessee in wholesale on principal to principal basis and then sells s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hold that the assessable value of the dyes manufactured by the assessee cannot be determined with reference to the selling price charged by Atul Products Limited and Crescent Dyes and Chemicals Limited to their purchasers but must be determined on the basis of the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited. The demand made by the Assistant Collector for differential duty must, therefore, be held to be rightly quashed by the High Court." 7.6. The appellant also placed their reliance on the Hon'ble Apex Court's decision in the case of Commissioner of Central Excise, Chandigarh vs. Kwality Ice Cream Co. [2010 (260) E.L.T. 327 (S.C.)], wherein it has been observed as follows: "15. On analysis of the decisions referred to herein above, it appears what is important is that each of the parties involved should have an interest, whether direct or indirect in the business of each other. The following are the relevant clauses of the agreement between M/s. Kwality Ice Cream and BBLIL/HLL based on which and applying the principles referred to herein above, a view is required to be taken as to whether they are 'related persons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alue of the final product is to be determined as per the provisions of Section 4(1) of the Central Excise Act, 1944. The said Section is reproduced below as ready reference: "SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, exc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....finished goods to the corporate entity by fixing the price in excess of 10% of its cost price. The detailed year-wise pricing structure as submitted by the Appellant is appended as under: Year Total Sale Total Cost Profit Mark up % 2007-08 1,32,14,700 83,45,735 48,68,965 58.34 2008-09 2,27,88,200 1,70,89,154 56,99,046 33.34 2009-10 2,08,63,804 1,66,36,459 42,27,345 25.41 2010-11 2,93,19,016 98,38,750 1,94,80,266 198 2011-12 1,45,46,106 90,28,059 55,18,047 61.12 10.2. From the above table, we observe that the Appellant has adopted a higher value addition and duty was paid at a higher side. Thus, we find that there is no evidence available on record to substantiate the allegation that the appellant has undervalued the finished goods sold to M/s. H.D. Consortium India Ltd. Accordingly, we hold that the demand confirmed in the impugned order on the allegation of undervaluation of the final product is without any basis and liable to be set aside. 11. Limitation: 11.1. The appellant has also contended that the demand is barred by limitation. They have submitted that they are filing monthly E.R.-1 returns, regularly, and declaring the total clearances duri....