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per kg to M/s. Sri Kaliswari Fire Works.

2.2.1 The contention in the first Show Cause Notice dated 30.03.2011 relating to Appeal No. E/40697/2013 is that M/s. Sri Kaliswari Fire Works is a partnership firm consisting of 18 partners. Out of the 18 partners of M/s. Sri Kaliswari Fire Works, 17 partners jointly hold 55.87% shares in the appellant's company. Hence, the appellants and M/s. Sri Kaliswari Fire Works are associated and related persons.

2.2.2 The contention in the second Show Cause Notice dated 08.12.2011 relating to Appeal No. E/41951/2013, is that M/s. Sri Kaliswari Fire Works Pvt Ltd. consists of 30 shareholders. Out of the 30 shareholders of M/s. Sri Kaliswari Fire Works Pvt. Ltd., 27 shareholders hold 94.29% shares in the appellant's company. Hence, the appellants and M/s. Sri Kaliswari Fire Works Pvt. Ltd. are associated and related persons.

(i) The appellants are adopting different prices for different buyers based on the terms of the payment. There is no favoured price for sale of metal powder to M/s. Sri Kaliswari Fire Works. There is no mutuality of interest in extending Re.

1/- extra discount based on large quantum of purchase by M/s. Sri Kaliswari Fire Works.

(ii) In this, there is no mutuality of interest. It is submitted that 'mutuality' of interest in each other's business means that there should be a 'two way flow'. There is no such allegation in the notice itself and mere extending discount to an industrial consumer would not entail the Department to apply the transaction as a sale to a related person. There is absolutely 'no' mutuality of interest. Therefore, the impugned Order is liable to be set aside.

(vii) As per the said clarification, the sales to unrelated buyers cannot be adopted for sales to related buyers. As per Section 4(1), sale of the same goods to related buyers recourse will have to be taken to the residuary Rule 11 read with Rule 9 or 10. Rule 9 alone cannot be applied in such cases directly since it covers only those cases where all the sales are to related buyers only.

(viii) Without prejudice to the above submissions, it is submitted that as per proviso to Rule 9, where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in Rule 8. In this case, M/s. Sri Kaliswari Fire Works has consumed the Aluminium Powder in the manufacture of fireworks. Therefore, the demand confirmed in the impugned order is liable to be set aside.