1999 (1) TMI 381 - AT - Central Excise

Summary

Issues:
- Denial of exemption under Notification No. 120/75 due to the relationship between the manufacturer and the buyer.
- Burden of proof on the department to establish that the invoice price was influenced by any relationship.
- Interpretation of clause (iv) of the proviso to Notification 120/75.
- Comparison of prices with other buyers and lack of evidence presented by the department.
- Application of Section 4 of the Central Excise Act in determining the influence on the invoice price.

Analysis:
1. The appeal concerned the denial of exemption under Notification No. 120/75 due to the relationship between the manufacturer and the buyer, Fenner (India) Ltd., a holding company of the appellants. The Additional Commissioner held that since Fenner (India) Ltd. was a related person, the exemption could not be allowed under the notification.

2. The burden of proof was on the department to establish that the invoice price was influenced by any commercial, financial, or other relationship between the manufacturer and the buyer. The appellant argued that the department failed to provide evidence to deny the exemption based on the relationship alone.

3. The interpretation of clause (iv) of the proviso to Notification 120/75 was crucial. The clause stated that the invoice price should not be influenced by any relationship between the manufacturer and the buyer. The appellant contended that the department did not meet the burden of proving such influence on the price.

4. The appellant highlighted that during the period in question, goods were sold at the same price to other buyers, and Fenner (India) Ltd. procured similar goods from other sources at a higher price, indicating that the price was not influenced by the relationship.

5. The application of Section 4 of the Central Excise Act was discussed in determining the influence on the invoice price. The department argued that the price at which goods were sold was influenced by the relationship between the parties, as the appellants were previously acting as job workers for Fenner (India) Ltd.

6. The Tribunal referred to a previous case involving Graphite India Ltd. where it was held that the department must establish that the invoice price was influenced by any relationship. Following this precedent and the Supreme Court's decision in Union of India v. Atic Industries, the Tribunal set aside the impugned order and allowed the appeal, as the department had not proven the influence on the invoice price.