TaxTMI 
TaxTMI 
2024 (8) TMI 261
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....ssioner vide Order dated 20th May, 2011 dropped the demand on the grounds that the appellants and their customers are not related; the Show Cause Notice did not establish any mutuality of interest; Rule 8 is not applicable as the goods are not consumed captively by the manufacturer or on his behalf; M/s Everest Flavours Ltd. being a distributor or sub-distributor of the noticee is ruled out and hence Rule 9 is not applicable and that the valuation is to be done under Rule 10(b) in terms of Board's Circular No.354/81/2000-TRU dated 30.06.2000. 2. Committee of Chief Commissioners, having reviewed of the order of the Commissioner, directed the Commissioner to file an appeal on the following grounds: • Commissioner erred in holding that the respondent and M/s Everest Flavours Ltd. are merely related being inter-connected undertakings and the value shall be determined under Rule 10(b) of the Valuation Rules, 2000. • Commissioner has failed to appreciate that the case of M/s Kanchan Industries is misplaced as the facts are different; whereas neither M/s Kanchan Industries- 2005 (186) ELT302. nor their sole customer i.e. M/s Meghal Enterprises have any common ....
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....consideration in the transaction and no evidence to the effect has also been placed on record. He submits that the Department did not challenge the CAS-4 submitted by them on any solid grounds and no finding that the goods cleared by them to M/s Everest Flavours Ltd. was lower than the price of the goods in the market. Under these circumstances, the allegation is not sustained as held by the Hon'ble Apex Court in the case of M/s Bilag Industries Pvt. Ltd. - 2023 (384) ELT 494 (SC). 5. Learned Counsel for the respondent submits that the Review Order passed by the Committee of Chief Commissioners is at variance with the SCN and travels beyond the scope of the SCN. Whereas the SCN, other than merely stating that there is mutuality of interest, has not given any pattern of shareholding in the respondent's and their customer's company, the Review Order seeks to show the shareholding pattern. He submits that as held by the Hon'ble Apex Court in the case of M/s Besta Cosmetic Ltd. - 2005 (183) ELT 132 (SC), new ground cannot be raised at any stage of the proceedings. He submits that the SCN does not make any comparison with the market value of the identical goods manufactured and clear....
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....able to be dismissed. 7. Heard both sides and perused the records of the case. The Show Cause Notice alleges that the respondents and M/s Everest Flavours Ltd. are related to each other in terms of Section 4 (3) (b) of the Central Excise Act, 1944 and satisfy the definition of "Inter-connected Undertakings" as defined under Section 2 (g) (iii) and 2 (g) (vi) read with Explanation I (i), (ii), (iii), Explanation II and V (b) of Monopolies and Restrictive Trade Practices Act 1969 and that the valuation of goods supplied by the respondent to M/s Everest Flavours Ltd. requires to be done under proviso to Rule 9 read with Rule 8 of the Valuation Rules i.e 110% of cost of production. 8. We find that learned Commissioner had dropped the demand on the grounds that: (i) The respondent and the buyer cannot be related in terms of section 4(3)(b)(ii) as they are juridical persons and therefore, they are not covered in the definition of relatives as defined under section 2(41) and section 6 of the Companies Act, 1956. (ii) The respondent and the buyer cannot be related in terms of section 4(3)(b) (iv) as clearance of entire production does not establish mutuality of inte....
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....e goods were known in the market to be those of Kanchan Industries, price list was circulated on the letter head of Kanchan Industries and the entire responsibilities of advertisement and publicity rested with Meghal Enterprises. These grounds do not satisfy the first part of the definition of "related person" as given in Section 4(4)(c) of the Central Excise Act, that is, all these factors do not establish that they have interest, directly or indirectly, in the business of each other. Sale of entire production by a manufacturing unit is not sufficient to prove that the purchaser is a related person as found by the Tribunal in the case of Lakme Ltd., supra. All the factors mentioned in the impugned order for treating M/s. Meghal Enterprises as a related person are nothing but business transaction as Meghal Enterprises purchase the entire production of the goods manufactured by the manufacturing units on mutually agreed price and they are responsible for advertising and publicity by of the goods. Bearing the responsibility of advertisement and publicity by Meghal Enterprises does not make them related person as they have also their own interest in advertising the goods. In any case ....
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....M/s Kanchan Industries is misplaced. We find that CBEC vide Circular No.354/81/2000-TRU dated 30.06.2000 has clarified that: 25. In essence, notwithstanding the change in definition of "related" person in the new 1 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 ofmutuality of interest. The actual revenue potential in such situations may be estimated and a report sent in due course. 11. We find that Hon'ble Supreme Court in the case of Besta Cosmetic Ltd. (supra) held that: 3. The decision of this Court in Union of India and others v. Atic Industries Ltd. - 1984 (17) E.L.T. 323 (S.C.) has clearly stated that for the purpose of Section 4, a concern would be taken to be the related person if there is a reciprocity of interest between the assessee and such allegedly related person, interest being defined as shareholding. The interest claimed in ....
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....ld not have concluded that such relationship, as is contemplated by Section 4(4)(c) could have been inferred, without applying the proper test. Additionally, the revenue had the materials before it, in the form of documents which indicated the mark up towards profit margin, and other objective evidence to compare, if indeed, the cost of the goods sold, were depressed, or were comparable to the market price of the same or similar goods. There is no finding that the price of the goods was lower than what was the price of those goods, in the market. 14. We find that in the impugned case, it is simply alleged that as the respondent and M/s Everest Flavours Ltd. are related valuation requires to be done with reference to Valuation Rules 8 & 9; further the Show Cause Notice finds fault with the CAS-4 submitted by the respondents. We find that no effort seems to have been made by the Revenue to ascertain the actual price of the goods, except alleging that the goods cleared by the respondents are over-valued to avail additional refund. While the Show Cause Notice does not give the constitution of both the respondent and M/s Everest Flavours Ltd., the Review Order lists out Directors in ....