2001 (11) TMI 328 - AT - Central Excise

Summary

Issues:
1. Whether ASA can be treated as a related person in terms of Section 4(4)(c) of the Central Excise Act, 1944.
2. Whether advertisement expenses incurred by ASA should be included in the assessable value of clocks.
3. Whether the demand for differential duty on clocks sold to ASA is time-barred.

Issue 1: Related Person Aspect
The case involved determining whether ASA could be considered a related person to the First Respondent under Section 4(4)(c) of the Central Excise Act. The Commissioner analyzed various grounds and evidence to establish mutuality of business interest between the parties. The evidence included credit facilities, loans advanced between parties, advertising expenses, sales procedures, physical locations, and shared resources. The Commissioner concluded that the advancement of credit facilities and other factors did not establish a relationship under the Act. The Commissioner's decision was upheld as the evidence did not support the claim of related persons, and the grounds presented by the Revenue were insufficient to challenge the Commissioner's analysis.

Issue 2: Inclusion of Advertisement Expenses
The Revenue appealed regarding the inclusion of advertisement expenses incurred by ASA in the assessable value of clocks. The Commissioner correctly noted that the Show Cause Notice did not propose to include such expenses but alleged them to establish a related person status. The Commissioner held that this ground was insufficient to consider ASA as a related person. The decision not to include advertisement expenses was upheld, as the Commissioner's order was based on valid reasoning. Moreover, the Commissioner's finding that the sale price to ASA could not be the basis for determining assessable value due to sales to other independent buyers at the same price was not challenged. Therefore, no differential duty could be demanded based on proviso (iii) to Section 4(1)(a).

Issue 3: Time-Barred Demand
The Respondents argued that the demand for differential duty was time-barred since the Department was aware of the relationship facts as evidenced by correspondence in 1986. The Revenue's reliance on the Nizam Sugar case for extended limitation was deemed insufficient, as the facts were known to the Department before the demand period commenced in February 1991. The demand was held to be barred by limitation under Section 11A of the Central Excise Act. Consequently, the impugned order of the Commissioner was upheld, and the appeals by the Revenue were rejected.

In conclusion, the judgment centered on the related person aspect, the inclusion of advertisement expenses, and the time-barred demand for differential duty. The decision favored the Respondents on all issues, upholding the Commissioner's order and rejecting the Revenue's appeals.