Custom, Excise & Service Tax Tribunal
C.C.E., Jalandhar vs Indo Asian Fusegears Limited on 19 May, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, SCO 147 148, Sector 17-C, Chandigarh-160 017 COURT-I Date of hearing/decision: 19.5.2016 Central Excise Appeal No.2898 of 2006 Arising out of the order in appeal No.10-31/ce/jal/2005 dated 28.2.2005 passed by the Commissioner, Central Excise, Jalandhar. For approval and signature: Honble Mr. Ashok Jindal, Judicial Member Honble Mr. Raju, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? C.C.E., Jalandhar .. Appellant Vs. Indo Asian Fusegears Limited . Respondent
Appearance:
Present Shri G R Singh, A.R. for the Appellant/Revenue Present Ms. Swati Gupta, Advocate for the respondent Coram: Honble Mr. Ashok Jindal, Judicial Member Honble Mr. Raju, Technical Member Final Order No.: 60097/2016 Per Ashok Jindal:
Revenue is in appeal against the impugned order on the ground that ld. Commissioner has failed to examine the issue in correct sense that respondent is a related person. Therefore, all the clearances made by them have been undervalued and the same are to be valued at the prices on which ultimately sold in the open market to their related person.
2. The brief facts of the case are that the respondents are engaged in the manufacture of electrical apparatus. They were selling most of the their manufactured goods through Indo Asian Marketing Ltd. (IAML) and investigation was conducted in their factory on 8.11.1991 and after scrutinising all the records it was alleged that transaction between the respondent and IAML were not at arms length as both of them appeared to be related person within the ambit of Section 4(4)(c) of the Central Excise Act, 1944 as they were indulging in evasion of duty by following modus operandi. To allege both of them are related person, the following is alleged as under:
(a) directors either themselves or their relative are common in both the companies;
b) premises of one company are being used by the officers of other company;
c) employees of one unit are doing the work of other company;
d) they are bearing misc. Expenses on behalf of each other;
e) convenience at which finance available with IAML are used for payment of Central Excise duty by IAFL;
g) IAML were referring to facilities available with IAFL as its own;
h) approximately 97% sales by IAFL were to IAML etc. Therefore, the show cause notice was issued to demand duty on the value on which M/s IAML has cleared the goods in the open market whereas the respondent has paid duty on the value at which the goods were sold to IAML clearance to IAFL. Initially the matter was adjudicated and travelled before this Tribunal and the Tribunal remanded back for quantification of demand vide order dated 7.7.99. The matter was again adjudicated and the said order was again challenged before this Tribunal and this Tribunal vide order No.953-975/2000/NBA dated 25.8.2004 remanded back again for fresh adjudication with following directions:
We now take up the appeal for hearing. The Tribunal vide order dated 7.7.99 remanded the matter to the adjudicating authority with the specific direction that the party is at liberty to raise all the connected pleas during the re-hearing proceedings. In respect of the issue whether the goods were cleared to related person was not decided by the Tribunal. As the matter was remanded to the adjudicating authority with liberty to the party to raise all the connected pleas during the re-hearing, the adjudicating authority was duty bound to go into the issue afresh in respect of related person. As the adjudicating authority had not gone into this issue, therefore, we find that it is a fit case for re-consideration. The impugned order is set aside and the matter is remanded to the adjudicating authority to decide on merit in respect of the issue involved in the proceedings. Appeals are disposed of by way of remand. In remand proceeding, the ld. Commissioner examined the issue of related person and thereafter held that the respondents are not related person and set aside the demand confirmed against the respondent on the ground of related person. Aggrieve from the said order, Revenue is in appeal before us.
3. Heard the parties extensively and examined the issue. In the show cause notice it was alleged that respondents and M/s IAML are related person on the following allegations:
(a) directors either themselves or their relative are common in both the companies;
b) premises of one company are being used by the officers of other company;
c) employees of one unit are doing the work of other company;
d) they are bearing misc. Expenses on behalf of each other;
e) convenience at which finance available with IAML are used for payment of Central Excise duty by IAML;
g) IAML were referring to facilities available with IAFL as its own;
h) approximately 97% sales by IAFL were to IAML etc. We have seen that in the case of Motorol Speciality Oils Ltd. vs. C.C.E. & Cus. , Vadodara 2009 (243) ELT 449 (Tri-Ahmd.). In the said case also , the demand was sought to be confirmed on the allegation of related person on the following grounds:
(i) Shri S.K. Gandhi and his son Shri R.S. Gandhi are directors in assessee company whereas Shri R.S. Gandhi is a Director in M/s. Motorol Technologies Ltd. and have interest, directly or indirectly in the business of each other;
(ii) both are manufacturing automobile oils with the same brand name MOTOROL using similar printed stationery for clearance of goods with only difference in name of the company;
(iii) the brand name is unregistered brand name owned by M/s. Motorol Lubricants (P) Ltd., a marketing agency of M/s. Motorol Technologies Ltd. and the assessee company;
(iv) both are group companies of Motorol Group and the persons employed by one company are also looking after the work of other company, for example Shri V.K. Vota, Vice-President (Operation) of the assessee company is also looking after the production activity of M/s. Motorol Technologies Ltd., Halol with no official status in the said company. Shri Rajendra Gandhi, Vice President (Marketing) and Shri H.S. Nagaraj, Manager (Sales & Administration) of M/s. Motorol Technologies Ltd. are looking after the work of M/s. Motorol Lubricants (P) Ltd., which is a marketing agency of the assessee company as well as M/s. Motorol Technologies Ltd.;
(v) the price list of automotive products manufactured by the assessee company and marketed by M/s. Motorol Technologies Ltd. is given by Shri H.S. Nagaraj, Manager (Sales & Administration) on a letter head of M/s. Motorol Lubricants (P) Ltd., which clearly shows the inter-relationship of the units;
(vi) funds of the assessee company is frequently used for payments of M/s. Motorol Technologies Ltd., as can be seen from ledger account of M/s. Motorol Technologies Ltd. in the accounts of the assessee company;
(vii) no regular payments are received by the assessee company for the goods sold to M/s. Motorol Technologies Ltd. and at the end of the year the outstanding amount to be recovered from M/s. Motorol Technologies Ltd. is adjusted against the payments to be received from M/s. Motorol Lubricants (P) Ltd. as can be seen from the ledge account wherein an amount of Rs. 91 lakhs in the year 2002-2003 and Rs. 1.5 crores in the year 2003-2004 have been so adjusted;
(viii) the assessee company is giving finished goods in bulk quantities to M/s. Motorol Technologies Ltd. on loan basis for repacking into smaller packs which have been cleared on payment of duty to M/s. Motorol Lubricants (P) Ltd. for trading; the assessee company M/s. Motorol Technologies Ltd. and M/s. Motorol Lubricants (P) Ltd. are related companies floated with mention to evade duty. All these companies are having same premises for their registered corporate office at Motorl House, R.C. Dutt Road, Vadodara - 397007 with the same telephone, fax numbers, website www.motorolgroup.com and E.mail address [email protected]. After examining the issue in that case, the Tribunal observed as under:
8.?From the above, we find that the two most important aspects which are required to be considered and answered in affirmative for coming to the conclusion that MSO and MTL are related to each other have not been examined in detail. As per Rule 9, the concept of related person and adoption of price charged by the related person as basis for arriving at the assessable value arises only when the assessee so arranges that all the goods are sold by him only through the related person. Nowhere there is a finding to this effect in the order of the lower authorities. No evidence has been gathered to show that all the shares of the three companies are owned by the only family to support the conclusion that the profits may by any of the companies would stay within the family only and therefore, the corporate veil had to be lifted. Even though several grounds have been given, none of these grounds show that there is a mutuality of interest between the companies and, there is no clear finding on this issue. In the absence of the clear finding that all the goods are sold only to/through a related person, there has to be a finding that either there is a flowback or the price charged is very low. While it has been mentioned that the price charged is much lower, there is no detailed discussion to show how much lower is the price, whether it is much beyond the normal commercial transactions between the purchaser and buyer. There is no finding of a flowback. There is no evidence to show that all the shares are owned by the family members and no evidence to show that the price charged by the MSO to MTL is not normal. Therefore, we find that the evidence relied upon by the lower authorities are not conclusive enough to come to the conclusion that the MSO and MTL are related persons.
9.?In any case, we find strong force in the arguments advanced by the learned Advocate and an alternative submission that the extended period could not have been invoked. In the light of several decisions of the Tribunal and the courts holding that there should be mutuality of interest and merely because there are common directors, common employees, same premises etc. two companies do not become related to each other, intention to evade duty and suppression of facts is to be clearly established by the Revenue. We find that the evidences referred to by the department are not sufficient to come to the conclusion and, therefore, on the ground of limitation also appellants succeed. Once, the duty demand is not upheld penalties also cannot be upheld.
3. We have seen that in the case of Motorol Speciality Oils Ltd. (supra), the allegations are not almost same to this case and thereafter this Tribunal came to the conclusion that the assessee is not related person and have not been liable to pay duty as per Section 4(4)(c) of the Act. In this case also, ld. Commissioner has examined the issue in details and found that the respondent is not a related person to M/s IAFL. We further observe that in this case the respondent is making clearance in the open market also. As respondent is selling goods in the open market, the prices of the goods at which the goods are sold in the open market should be treated the transaction value but in the show cause notice it was not alleged against the respondent. We have also examined the show cause notice, in the show cause notice also the duty has been demanded on the concept of related person not at the prices on which the goods were sold in the open market. In the circumstances, if it is considered that the respondent as well as M/s IAML are related person, in that circumstances also, duty cannot be demanded at the price at which M/s IAML has cleared the goods in the open market. In fact , when the price on which the goods are sold to independent buyers is available, the same is to be treated as transaction value. It is not the case of the Revenue that transaction value at which the independent buyers have purchased the goods be the transaction value, therefore, the impugned order having merits, accordingly, the same is upheld.
4. Appeal filed by Revenue deserves no merits. The same is accordingly dismissed.
(Ashok Jindal) Judicial Member
(Raju)
Technical Member
scd/
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