Custom, Excise & Service Tax Tribunal
Melet Schloesing Laboratoires India vs Guwahati on 27 June, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Excise Appeal No. 71425 of 2013
(Arising out of Order-in-Original No.43/Commr/CE/GHY/12-13 dated 25.03.2013
passed by the Commissioner of Central Excise and Service Tax, Guwahati, Sethi Trust
Building, G.S. Road, Bhangagarh, Guwahati - 781 005)
M/s. Melet Schloesing Laboratories India : Appellant
EPIP, Amingaon,
Guwahati - 781 031 (Assam)
VERSUS
Commissioner of Central Excise and Service Tax : Respondent
Guwahati, Sethi Trust Building, G.S. Road, Bhangagarh,
Guwahati - 781 005 (Assam)
APPEARANCE:
Shri Devaraj Sahu, Advocate for the Appellant
Shri S. Mukhopadhyay, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 76168 / 2024
DATE OF HEARING: 24.06.2024
DATE OF DECISION: 27.06.2024
ORDER:[PER SHRI K. ANPAZHAKAN] The appellant has filed this appeal against the Order-in-Original No.43/Commr/CE/GHY/12-13 dated 25.03.2013 passed by the Commissioner of Central Excise and Service Tax, Guwahati, wherein he has confirmed the demand of Central Excise duty of Rs.1,02,20,679/- (including Cess), along with interest and equal amount of duty as penalty.
2. The facts of the case are that the appellant, M/s. Melet Schloesing Laboratories India, EPIP, Amingaon, Guwahati - 781 031 (Assam), engaged in the manufacturing of 'laboratory reagents'. A Show Cause Page 2 of 18 Appeal No.: E/71425/2013-DB Notice dated 14.09.2012 has been issued to the appellant alleging that they have evaded Central Excise 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 PLA for clearance of the goods manufactured by them. Since whatever duty paid would be refunded to them by the Department, they would not be benefitted any way by resorting to undervaluation.
Page 3 of 18Appeal No.: E/71425/2013-DB 3.1. The appellant submits that the Department has alleged that they have cleared their finished goods through M/s. H.D. Consortium India Ltd. who are a 'related person' as defined under Section 4(3)(b) of the Central Excise Act, 1944. It has been alleged that the appellant and M/s. H.D. Consortium India Ltd. are 'inter-connected undertakings' since the Partners of the appellant-firm hold more than 50% share of M/s. H.D. Consortium India Ltd. In the impugned order, it has been held that they have interest directly or indirectly in the business of each other and hence they are 'related' as per the definition of 'related person' as defined under Section 4(3)(b) of the Central Excise Act, 1944. In this regard, the appellant submits that two partners of the appellant-firm, namely, Mr. Manas Pratim Baruah and his wife Mrs. Jhula Baruah, are also the Directors in the limited company viz. M/s. H.D. Consortium India Ltd. The appellant submits that M/s. H.D. Consortium India Ltd. is a Public Limited Company incorporated under the Companies Act, 1956 having a distinct legal entity. It is their contention that their firm and M/s. H.D. Consortium India Ltd. are independent to each other and both entities are managed independently on pure commercial parlance; there is no control on each other's business and there is no inflow / outflow of any consideration from each other, either directly or indirectly. It is also submitted that even though the two partners of the appellant-firm are the Directors in M/s. H.D. Consortium India Ltd., the said company has no business obligation to purchase the goods from the appellant-firm at a higher price than the prevailing market price; the goods manufactured by the appellant-firm are available in the open market for other persons also. Accordingly, they submit that the Page 4 of 18 Appeal No.: E/71425/2013-DB price at which the goods sold to M/s. H.D. Consortium India Ltd. was the normal transaction value and it was not an influenced price.
3.2. During the period 26.12.2009 to 10.05.2010, when the appellant sold part of their finished goods to the unrelated buyer, namely, All India Institute of Medical Sciences (AIIMS) besides their related buyer M/s. H.D. Consortium India 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 duty paid challans to the Range Superintendent; that refund claims were verified by the concerned authority and refund orders were issued every month by the Assistant / Deputy Page 5 of 18 Appeal No.: E/71425/2013-DB Commissioner, Central Excise Division. In these circumstances, the refund sanctioning authority never raised any objection on erroneous refund under Notification No. 20/2007-C.E. dated 25.04.2007. Accordingly, it is contended by the appellant that the demand raised by invoking the extended period of limitation is not sustainable.
4. The Ld. Authorized Representative appearing on behalf of the Revenue submits that M/s. H.D. Consortium India Ltd. is a "related person" to the appellant. He has cited the shareholding pattern of Partners of the appellant firm in M/s. H.D. Consortium India Ltd. and contended that as per the definition of "related person" provided in clause (b) to sub-section (3) of Section 4 of the Central Excise Act, 1944, the appellant-firm and M/s. H.D. Consortium India Ltd. are 'interconnected undertakings' and they are having mutual interest in each other's businesses. Accordingly, he submits that the price at which the goods were cleared by the appellant-firm to M/s. H.D. Consortium India Ltd. was an influenced price and therefore the impugned order has rightly demanded differential duty. Accordingly, he supported the impugned order.
5. Heard both sides and perused the appeal documents.
6. We observe that during the period September 2007 to March 2012, the appellant has cleared their finished goods to M/s. H.D. Consortium India Ltd. For some period, the appellant has also cleared their finished goods to the independent/ unrelated buyer, namely AIIMS, in addition to M/s. H.D. Consortium India Ltd. During the period when the goods were not cleared to any other buyer other than M/s. H.D. Page 6 of 18 Appeal No.: E/71425/2013-DB Consortium India Ltd., the Department has determined the assessable value after deducting the Central Excise duty and VAT paid from the price declared in the invoices issued from the respective branches of the related person M/s. H.D. Consortium India Ltd, as per Rule 9 of the Central Excise Valuation Rules, 2000. During the period when the appellant cleared excisable goods to the unrelated buyer namely, AIIMS, besides their related buyer M/s. H.D. Consortium India Ltd., the assessable value of clearance for related buyer was determined on the basis of the assessable value of the 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;
Page 7 of 18
Appeal No.: E/71425/2013-DB
(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 clause (g) of section 2 of the Monopolies and Restrictive Trade Practice Act, 1969 (64 of 1969)."
7.2. From the above, we observe that in order to consider the appellant firm as a "related person" to M/s. H.D. Consortium India Ltd, the appellant has to satisfy any one of the four criteria mentioned in Section 4(3)(b) (supra). In the present case, the appellant is a partnership firm and M/s. H.D. Consortium India Ltd. is a company registered under the Companies Act, 1956. We observe that they are both distinct legal entities having separate existence under law. From the impugned order, we find that the Department has considered the appellant and M/s. H.D. Consortium India Ltd as related persons, as they are 'inter-connected undertakings', since the Partners of the Appellant-Firm hold more than 50% share of M/s. H.D. Consortium India Ltd.
7.3. It is to be mentioned here that if the transactions between the manufacturer and his customer were on principal-to- principal basis and the price charged by the appellant to the customer company was the sole consideration for the sale and no extra commercial considerations were entered in the determination of such a price, the customer cannot be held to be a 'related person' merely because the partners of the appellant-firm hold some percentage of shares in the customer's Company.
Page 8 of 18Appeal No.: E/71425/2013-DB 7.4. For treating the customer as a 'related person', the first part of the definition of related person as given in Section 4(3)(b) requires that the person who is sought to be branded as a 'related person' must be a person who is so associated with the appellant that they have interest directly or indirectly in the business of each other. Thus, it is not enough that the appellant has an interest directly or indirectly in the business of the person alleged to be a 'related person'. In order to attract applicability of the first part of the definition, it is essential that both the appellant and the person alleged to be a related person must have interest direct or indirect in the business of each other. The equality and degree of interest which each has in the business of the other may be different; the interest of one in the business of the other may be direct 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'.
Page 9 of 18Appeal No.: E/71425/2013-DB 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 in support of the writ petition before the High Court but it is not necessary to refer to them in detail, because the High Court ultimately decided the writ petition in favour of the assessee only on two grounds and it will, therefore, be enough if we refer to those two grounds alone and consider whether the decision of the High Court is correct in so far as it decided those two grounds in favour of the assessee. The first ground was that the concept of "related person"
occurring in clause (c) of sub-section, (4) of section 4 of the amended Central Excises and Salt Act, 1944 was outside the legislative competence of Parliament under Article 246 read with Entry 84 in the Union List and was, therefore, unconstitutional and void. This ground found favour with the High Court in view of the earlier decision given by the same Bench on 20/21 February, 1979 in Special Civil Application No. 119 of 1976. But, this decision of the High Court striking down clause (c) of sub-section (4) of section 4 of the amended Act cannot stand in view of the decision of this Court in Union of India v. Bombay Tyres International Limited (1984) 1 SCC 467 = 1983 E.L.T. 1896 (SC) where an identical challenge to the constitutional validity of the definition of the term "related person" was negatived by this Court. The definition of the term "related person" was read down and it was held by this Court that "On a proper interpretation of the definition of "related person" in sub-section (4) (c) of section 4, the words "relative and a distributor of the assessee"
do not refer to any distributor but they are limited only to a distributor who is a relative of the assessee within the meaning of the Companies Act, 1956. So read, the definition of "related person" is not unduly wide and does not suffer from any constitutional infirmity. It is within the legislative competence of Parliament." The decision of the High Court holding that "the concept of related person occurring in amended section 4 is ultra vires the legislative competence of Parliament under Article 246 read with Entry 84 in the Union List" and striking down clause (c) of sub-section (4) of section 4 as also the expression "the buyer is not a related person and"Page 10 of 18
Appeal No.: E/71425/2013-DB in clause (a) of sub-section (1) of section 4 and proviso (iii) to that clause must consequently be set aside and it must be held that these provisions are constitutionally 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 to the dealers or the consumers, represented the true measure of the value of the dyes for the purpose of chargeability to excise duty. This conclusion reached by the High Court was assailed before us by the learned Attorney General appearing on behalf of the Revenue. He fairly conceded that the only part of the definition of "related person" in clause (c) of sub-section (4) of section 4 on which he could reply was the first part which defines "related person" to mean "a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other". The second part of the definition which adds an inclusive clause was admittedly not applicable, because neither Atul Products Limited nor Crescent Dyes and Chemicals Limited was a holding company or a subsidiary company nor was either of them a relative of the assessee, so as to fall within the second part of the definition. But we do not think that even the limited contention urged by the learned Attorney General on behalf of the Revenue based on the first part of the definition can Page 11 of 18 Appeal No.: E/71425/2013-DB succeed. What the first part of the definition requires is that the person who is sought to be branded as a "related person" must be a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other. It is not enough that the assessee has an interest, direct or indirect, in the business of the person alleged to be a related person nor is it enough that the person alleged to be a related person has an interest, direct or indirect, in the business of the assessee. It is essential to attract the applicability of the first part of the definition that the assessee and the person alleged to be a related person must have interest, direct or indirect, in the business of each other. Each of them must have a direct or indirect interest in the business of the other. The equality and degree of interest which each has in the business of the other may be different; the interest of one in the business of the other may be direct, while the interest of the latter in the business of the former may be indirect. That would not make any difference, so long as each has got some interest, direct or indirect, in the business of the other. Now, in the present case, Atul Products Limited has undoubtedly interest in the business of the assessee, since Atul 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 such dyes in the market. The assessee is not Page 12 of 18 Appeal No.: E/71425/2013-DB concerned whether Atul Products Limited sells or does not sell the dyes purchased by it from the assessee nor is it concerned whether Atui Products Limited sells such dyes at a profit or at a loss. It is impossible to contend that the assessee has any direct or indirect interest in the business of a wholesale dealer who purchases dyes from it on principal to principal basis. The same position obtains in regard to Crescent Dyes and Chemicals Limited. Perhaps the position in reard to Crescent Dyes and Chemicals Limited is much stronger than that in regard to Atul Products Limited. Crescent Dyes and Chemicals Limited is not even a shareholder of the assessee and it has, therefore, no interest direct or indirect in the business of the assessee. It is Imperial Chemical Industries Limited, London which holds 50 per cent of the share capital of the assessee and this foreign company also holds 40 per cent of the share capital of Crescent Chemicals and Dyes Limited. Imperial Chemicals Industries Limited, London would admittedly have an interest in the business of the assessee in its capacity as a shareholder, but how can Crescent Dyes and Chemicals Limited of which 40 per cent of the shares are held by Imperial Chemical Industries Limited, London which in its turn is a shareholder of the assessee, can be said to have any interest, direct or indirect, in the business of the assessee. Equally the assessee has no interest direct or indirect in the business of Crescent Dyes and Chemicals Limited, which is just a wholesale dealer purchasing dyes from the assessee in wholesale on principal to principal basis. It is obvious that for the same reasons which have prevailed with us while discussing the case of Atul Products Limited, the assessee has no direct or indirect interest in the business of Crescent Dyes and Chemicals Limited. The first part of the definition of related person in clause (c) of sub-section (4) of section 4 of the amended Act is, therefore, clearly not satisfied both in relation to Atul Products Limited as also in relation to Crescent Dyes and Chemicals Limited and neither of them can be said to be a "related person" vis-a- vis the assessee within the meaning of the definition of that term in clause (c) of sub-section (4) of section 4 of the amended Act. We, therefore, affirm the view taken by the High Court and 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 Page 13 of 18 Appeal No.: E/71425/2013-DB 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'.
"6 (i) - Kwallty Ice Cream (K-North) agrees to exclusively source and produce products for BBLIL.
(i)(a) - The products will be manufactured and produced by K (North) in accordance with the specifications, particulars of which are set out in Appendix-2 of the Agreement which inter alia provides that reasons for change in raw material will be intimated by the party to BBLIL and approved list of suppliers of material will be intimated by BBLIL and K (North)".
....
19. What is of importance is certain interdependence and reciprocity beyond the relationship of either a distributor or manufacturer so as to consider as to whether the parties are 'related persons'. On the facts it is noticed, Page 14 of 18 Appeal No.: E/71425/2013-DB essentially the relationship between M/s. Kwality Ice Cream and BBLIL/HLL is one sided and the facts do not suggest that each one of them have interest direct or indirect, in the business of each other."
7.7 From the above interpretation of Section 4 by the Hon'ble Apex Court, we observe that having shareholding in the company alone cannot be a reason to allege that they are related persons. In absence of direct and/or indirect interest in the business of each other, two companies cannot be considered as related. The law has been settled by the Hon'ble Apex Court that mere shareholdings in the company is not sufficient to declare two companies are related unless direct and/or indirect business relation is established. In view of the discussions above and by relying on the decisions cited above, we hold that the appellant cannot be considered as 'related person' as provided under Section 4(3)(b) of the Central Excise Act.
8. The appellant submits that they have cleared the finished goods to M/s. H.D. Consortium India Ltd. in the normal course of business and hence the assessable value declared by them was the transaction value for the purpose of demanding central excise duty. The appellant submits that the pricing structure determined by them was on the basis of prevailing market price at the time and place of removal and the price declared was the sole consideration for the transaction with M/s. H.D. Consortium India Ltd. Accordingly, they submit that the price is to be determined in terms of Section 4(1) of the Central Excise Act, 1944 and the price of the goods charged in the invoice was the "Transaction Value".
Page 15 of 18Appeal No.: E/71425/2013-DB 8.1. We observe that the assessable value 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, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods."
8.2. As per the provisions of Section 4(1) of the Central Excise Act, 1944, we observe that the price determined by the appellant is the sole consideration for sale of the finished goods and it is the 'Transaction Value' for determination of Central Excise Duty by the appellant. Accordingly, we observe that there is no need to resort to Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 to determine the assessable value in this case. Hence, we hold that the demand confirmed by interpreting Rules 8 and 9 of the Central Excise Valuation Rules, 2000, to confirm the demand of central excise duty in this case is not sustainable in law. Accordingly, we hold that the demand confirmed Page 16 of 18 Appeal No.: E/71425/2013-DB in the impugned order by rejecting the 'Transaction Value' declared by the appellant in the invoices raised to M/s. H.D. Consortium India Ltd., is not sustainable.
9. The appellant further submits that there is no loss of revenue to the exchequer due to sale of finished goods from the appellant-unit to M/s. H.D. Consortium India Ltd. in view of availability of benefit of Notification No. 20/2007-C.E. dated 25.04.2007 to the appellant-unit.
9.1. We observe that the appellant has been availing the benefit of Notification No. 20/2007-C.E. wherein they are eligible for refund of the whole of the duty of excise paid by them. Thus, we find merit in the contention of the appellant that there is no revenue loss to the exchequer on account of the clearance to M/s. H.D. Consortium India Ltd. at a lower price.
10. The appellant also submitted that the price structure adopted by them as per the prevailing market price at the time and place of removal, was more than the price determined under CAS-4 statement to the group companies; the seller company sells its final products at a higher value addition and pays central excise duty charging the buyer company at a higher side making higher payment through Account Current (PLA). Under these circumstances, there is no revenue loss to the exchequer.
10.1. We observe that the ld. adjudicating authority failed to appreciate the contentions of the appellant with regard to the pricing pattern adopted by them. In this context, it is submitted by the appellant that they have cleared their finished goods to the corporate entity by fixing the price in excess of 10% Page 17 of 18 Appeal No.: E/71425/2013-DB 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 during the material period. They were regularly filing their applications of refund claims for the particular months wherein they were submitting invoices and duty paid challans to the Range Superintendent; that refund claims were verified by the concerned authority and refund orders were issued every month by the Assistant / Deputy Commissioner, Central Excise Division. In these circumstances, the refund sanctioning authority never Page 18 of 18 Appeal No.: E/71425/2013-DB raised any objection on erroneous refund under Notification No. 20/2007-C.E. dated 25.04.2007. Accordingly, it is contended by the appellant that the demand raised by invoking the extended period of limitation is not sustainable.
11.2. We find merit in the contention of the appellant. We find that the appellant is eligible to claim refund of the duty paid by them in PLA as per Notification No. 20/2007-C.E. dated 25.04.2007. The appellant has been filing returns regularly and disclosing all relevant information before the appropriate authority. The Range Superintendent has verified all the invoices and challans submitted by the appellant while sanctioning the refund claims. Thus, we observe that suppression of fact with intent to evade payment of tax does not exist in this case. Accordingly, we hold that the demand raised by invoking the extended period of limitation is not sustainable.
12. In view of the above discussion, we hold that the demand of duty confirmed in the impugned order is not sustainable and accordingly, we set aside the same. Since the demand itself is not sustainable, the question of raising any interest on the demands or imposition of penalty does not arise.
13. In the result, the appeal filed by the appellant is allowed with consequential relief, if any, as per law.
(Order pronounced in the open court on 27.06.2024) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd