Customs, Excise and Gold Tribunal - Mumbai
Goodyear South Asia Tyre Pvt. Ltd. vs Commissioner Of Central Excise on 11 March, 2005
Equivalent citations: 2005(189)ELT304(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1.1 The South Asia Tyres Ltd (herein after referred to as SATL) is a company formed in terms of the Joint Venture Agreement between RPG industries, Ceat Holdings Limited, Ceat Finance Limited (for short, RPG CEAT Group) and Goodyear India Limited and Goodyear Tyre and Rubber Company, USA (for short Goodyear group.). After 25.8.98, RPG Ceat Group sold all its shares in SATL to Goodyear Tyre and Rubber Company, USA and SATL became subsidiary of Goodyear Tyre and Rubber Company, USA. SATL manufactured and sold various kinds of tyres, tubes to Goodyear India Limited (for short Goodyear) under the later brand name. During the period after 25.8.1998 and upto 30.6.2000 around 64% of the tyres and tubes (other than for 2/3 wheeler vehicles) were sold to them. SATL also manufactured and sold various types of tyres and tubes etc. to M/s Ceat India Limited (for short Ceat) under their brand name. During the period after 25.8.1998 and upto 30.6.2000 around 36% of the tyres and tubes (other than for 2/3 wheeler vehicles) were sold to Ceat.
1.2 The prices at which SATL sold the goods to CEAT and Goodyear were agreed between the parties on the basis of off-take agreements entered. According to the terms of the agreement the price of the goods was to be arrived at as cost of production plus 1.5% profit for goods with brand names Ceat /and Goodyear.
1.3 For the period from 1.3.97 to 16.4.98, Commissioner of Central Excise, Aurangabad, passed an Order-in-Original dated 11.5.2000 holding that Ceat and Goodyear were related person in terms of Section 4(4)( c) of the Central Excise Act 1944 and the assessable value of the goods manufactured and sold by SATL to Goodyear and Ceat had to be determined in terms of Clause (iii) of the proviso to Section 4(1)(a) based on the price at which Ceat and Goodyear had sold the goods to their wholesale buyers. The appeal No. E/2721 to 2724/00 filed by the SATL and others against the aforesaid order was heard by the CEGAT and order dated 12.9.2002 reported at 2003 (106) ECR 295 (T) was passed. The CEGAT held that SAIL & M/s CEAT and SAIL & M/s Good Year are not related since there was no mutuality of interest between SAIL & M/s CEAT and SATL & M/s Good Year.
1.4 A provisional assessment order dated 13.4.98 by the Assistant Commissioner fixing the assessable value of various types of tyres manufactured by SATL for Ceat and Goodyear India Limited and others, effective from 17.4.98. The provisional value was fixed by the Assistant Commissioner as the price at which Ceat or Goodyear India Limited had sold the goods less 15% deduction in respect of sales in replacement market and 5% deduction on sales to OE manufacturers and OTR tyres. The provisional assessment was ordered for the reason that proceedings were initiated by the commissioner of Central Excise Aurangabad for the earlier period proposing to hold that SATL and CEAT and SATL and Goodyear were related on various grounds on the basis of off-take agreement.
1.5 A show cause notice dated 7.10.98 proposing to finalise the assessment by treating the price at which Goodyear and Ceat had sold the goods to their buyers as the basis for determination of assessable value. The entire basis in the show cause notice for the aforesaid proposal is off-take agreement entered into by the SATL with Ceat and Goodyear. According to the show cause notice, in terms of this off-take agreement, the goods sold to Goodyear and Ceat should be assessed in terms of Clause (iii) of proviso to Section 4(1)(a) and the price at which Ceat and Goodyear are sold the goods to their buyers should be the basis for determination of assessable valure.
1.6 i) The Deputy Commissioner of Central Excise passed Order-in-Original dated 30.8.2000 holding that for the period from 17.4.98 to 30.6.2000, Goodyear India Limited should be treated as related person and accordingly finalized the assessable value based on the price at which Goodyear sold goods to its buyers.
ii) In respect of the sales made by SATL to Ceat, the Deputy Commissioner in the aforesaid order held that Ceat would be treated as related person only upto 25.8.98 since from that date onwards, Ceat was not holding any share in SATL.
iii) SATL filed appeal against the aforesaid order-in-original to Commissioner of Central Excise(Appeals). The Commissioner (Appeals) after hearing the appeal passed the impugned Order-in-Appeal dated 19.10.2001 holding that:-
a) Both Ceat and Goodyear were not related person during the period from 17.4.98 to 25.8.98.
b) Goodyear and SATL are to be treated as related person after 25.8.98 since Goodyear, USA had purchased all the shares which were held by Ceat in SATL. Therefore, Goodyear, USA had become holding company of SATL.
c) The transportation charges incurred from the place of sale to the place of delivery and interest on receivable are to be deducted from the price at which Goodyear India Limited had sold the goods in order to arrived at the assessable value.
d) Amortised cost of mould supplied by Goodyear and Ceat should be added to the assessable value.
e) The eligibility to abatement towards interest on receivable had to be established by SATL by presentation of satisfactory evidence to show that interest charges for sale on credit to independent buyers were actually built into price charged by Goodyear from its customers, and the customers were informed of their liability to interest for subsequent delays beyond the permissible credit on delayed payment.
Aggrieved by the portion of order passed by the Commissioner (Appeals), which is against SATL this appeal was preferred by SATL. While Revenue is in appeal also.
2.1 After hearing both sides and considering the material it is found -
a) The entire basis in the show cause notice to treat the price of Goodyear and Ceat as the basis for assessable value is the clauses in off-take agreement. Hence, the impugned order of the Commissioner (Appeals) is beyond the show cause notice.
b) In the present proceedings, the only ground to arrive at the conclusion that SATL and Goodyear are related person and therefore Clause (iii) to Section 4(1)(a) should be applied is the terms and conditions of off-take agreement. The said ground has already been rejected by CEGAT in SATL's own case. The said order of the CEGAT would apply for the period after 25.8.98 also in view of the fact that the grounds taken in the show cause notice and the order-in-original in the present proceedings are same as the grounds taken in the earlier proceedings. The impugned order of the Commissioner (Appeals) holding that SATL and Goodyear are related person is therefore incorrect and unsustainable in law.
c) The decision of Supreme Court in the case of Flash Laboratories Ltd. v. CCE.- 2003(151) ELT 241 not applicable as the facts of the case of M/s Flash Laboratories Ltd. are that they were the manufacturer of tooth paste with Prudent brand name & had sold the goods to their holding company M/s Parle Products Ltd, which was the holding company of M/s Parle Biscuits Ltd. Flash Laboratories sold part of the goods to its holding company and part of the goods to another subsidiary of the said holding company. The holding company also had been incurring expenses for sale promotion and advertisement for the sale of prudent branded toothpaste. The CEGAT in the Final Order dated 195.1994 had basically held that since the advertisement and sale promotion has been done by the holding company, they are related. The issue as to whether two subsidiary companies of the same holding company are inter se related in terms of erstwhile Section 4(4)(c ) of the Central Excise Act, 1944 was not the issue involved in the aforesaid case. The entire case of the department as well as the finding of the CEGAT in the case of Flash Laboratories was that the advertisement and sale promotion for the prudent toothpaste were undertaken by the buyers and therefore they are related person. This decision therefore cannot be treated as laying down the ratio that two subsidiary companies of one common holding company are inter se related on the ground of mutuality of business interest between them. Further, in terms of the recent decision of Supreme Court in the case of Alembic Glass Industries Ltd v. CCE reported in 2002 (143) ELT 244, the shareholders of public limited company do not, by reason of their shareholding have interest in the business of the company. The Hon'ble Supreme Court considered the earlier decision of the Supreme Court in the case of Atic Industries and also the decision of Supreme Court in Calcutta Chromotype Ltd and held as under :-
"7. In our view, this is the heart of the matter. The shareholders of a public limited company do not, by reason only of their shareholding, have an interest in the business of the company. Equally, the fact that two public limited, companies have common Directors does not mean that the one company has an interest in the business of the other. It is, therefore, not possible to uphold the conclusion of the Tribunal that the assessee and the chemical company were related persons. This being so, it is unnecessary to go into the alternate arguments advanced on behalf of the assessee"
Therefore, in the present case, Goodyear India Ltd who is the buyer, has shareholding in SATL but SATL does not have shareholding in Goodyear India Ltd. Hence, it cannot be held that SATL and Goodyear India Ltd are related on the ground of mutuality of business interest merely for the reason that Goodyear, USA is the common holding company for both SATL and Goodyear India Ltd.
d) Even if it is held SATL and Goodyear are related person whether such relationship had not influenced the price at which SATL sold the goods to Goodyear is to be established. In this case the price at which SATL had sold the goods to Goodyear has been determined by the off-take agreement. In terms of off-take agreement, the said price was arrived at as cost of production plus 1.5% profit. This is the basis for arriving at the price for the goods manufactured and cleared by SATL to Ceat also. The Commissioner (Appeals) has held that Ceat was not related person even if such price was arrived at based on the off-take agreement. Therefore, the price at which the goods were sold to Ceat was the sole consideration for sale. The price at which the goods were sold to Goodyear was also arrived at on the same basis, as the terms of off-take agreement are identical for both Ceat as well as Goodyear. Therefore, it would be natural to conclude that the price at which SATL sold the goods to Goodyear was genuine and the said price has not been influenced by the so-called relationship. Therefore, the price at which Goodyear sold the goods to their buyers cannot be treated as the basis for determination of the assessable value. In this regard, the following decisions are relied upon as per the impugned Order, Goodyear India Ltd. at the same price prior to and after 25.8.1998. SATL had been selling the goods to Goodyear India Ltd. at the same price prior to and after 25.8.1998. Therefore, the price at which goods were sold by SATL after 25.8.1998 has not been influenced by the relationship, if any. Hence the assessable value can be determined based on the sale price of SATL to Goodyear India Ltd. This view is fully supported by the following decisions:
a) Ralliwolf Ltd v. UOI [1992 (59) ELT 220 (Bom)] [para31]
b) Xerographers Ltd v. CCE [1999 (108) ELT 372] (Tribunal)
c) Samtel Electro Devices Ltd v. CCE [2000 (38) RLT 484 (CEGAT -L.B)
d) Samcor Glass Ltd. v. CCE [2000 (36) RLT 854 (CEGAT) (Department's appeal against this decision was dismissed by Supreme Court. Please see 2000 (40) RLT F1) In any case, the entire goods are not sold to Goodyear since the sales are also made to Ceat who is treated as independent buyer and also to other original equipment manufacturers. Hence, the Clauses (iii) to proviso to Section 4(1)(a) not applicable.
In any case, after 25.8.1998, entire production has not been sold to Goodyear India Ltd., which has been held to be related person since part of the goods manufactured was sold to CEAT who has been held to be not a related person. Clause (iii) of the proviso to Section 4(1)(a) is not applicable as has been held by Bombay High Court in Cosmos (India) Rubber Works v. UOI - 1988 (36) ELT 102 (Bom). Therefore, the impugned order holding that the price at which Goodyear had sold the goods as the basis for the determination of the assessable is incorrect. Similar view was taken by the CESTAT in the following cases :-
a) Ultra Refrigerators Pvt Ltd. v. CCE 2004 (170) ELT 341
b) Ishaan Research Lab(P) Ltd v. CCE 2001 (137) ELT 293 paragraph 5.2 at page 318
c) Namita Gautam v. CCE 2002 (141) ELT 814 para 5 In view of the above decisions, the price at which SATL had sold the goods to Ceat could be treated as the basis for determination of assessable value of the goods cleared to Goodyear as the sales to Ceat should be treated as sales to independent buyers, if same /similar and like goods are subject matter of sale.
e) Therefore, whether Tyres; and tubes sold to Ceat and Goodyear India Ltd. are same /similar, like, excisable goods notwithstanding the fact that they are affixed with either Ceat or Goodyear brand is required to be determined on facts. When goods bearing brand name of the buyer is sold to the buyer, the goods are to be treated as if they are not branded since in such cases brand name has no value in a submission made. It is further claimed. Hence Clause (iii) of proviso to Section 4(1) (a) is not applicable. It is on record the SATL sold their goods to Ceat Ltd. as well as Goodyear India Ltd apart from sales to original equipment manufacturers. The Ceat Ltd. is according to the impugned order-in-appeal not related to SATL. The goods sold to Ceat Ltd are affixed with brand name "Ceat". The goods sold to Goodyear India Ltd are affixed with "Goodyear" brand. However whether that alone would mean that the goods sold to Ceat Ltd. and Goodyear India Ltd are different excisable goods, has to be reconsidered in light of the decision of CEGAT and the Hon'ble High Court.:
i) Bata India Ltd v. CCE [1986 (25) ELT 559] para 8 at page 566.
ii) Namita Gautam v. CCE -2002(141) ELT 814 para 5 iii) Bata India Ltd v. Government of India and Ors. [1987 (30) ELT 907(Cal) Para 18 at page 915.
Once this issue is re-determined in the facts of this case then the entire goods sold by the appellants to Goodyear India Ltd. and Ceat Ltd could to be treated as same excisable goods. Then in -view of the above before the department can use the plea that "Goodyear" brand tyres and "Ceat" brand tyres are different goods and thus, seek to reject arguments of SATL, these facts have to be established and thereafter findings about non-applicability of Clause (iii) of proviso to Section 4(1) (a) arrived.
f) The Revenue appeal has been filed against the portion in the same Order-in-Appeal dated 19.10.2001, by which the Commissioner (Appeals) has held that Ceat and Goodyear were not related person for the period prior to 25.8.1998 (in respect of Goodyear and for the entire period in respect of Ceat). The only ground in the appeal filed by the revenue is that the Commissioner of Central Excise, Aurangabad vide its Order-in-Original dated 11.5.2000 had held that Ceat and Goodyear were related person and therefore that decision would apply. However, the said Order-in-original passed by Commissioner of Central Excise, Aurangabad had already been set aside on merits by the CEGAT in SATL's own case reported at 2003 (106) ECR 295 (T). Therefore, the entire basis in the appeal filed by the revenue does not exist. In view of the aforesaid order of the CEGAT in SATL's case the appeal filed by the revenue deserves to be rejected, however we are informed that Revenue is in appeal against the above mentioned decision of this Tribunal. Outcome of that has to be amounted.
g) In this view of the matter, these appeals are to be allowed as remand to re-determine, whether these exits a factory gate sale for like goods and thereafter determine the other issues involved which are kept open for both sides to urge in the DENOVO proceedings.
3.1 The appeals are allowed as Remand for DENOVO adjudication.
(Pronounced in Court 11/03/2005)