2003 (8) TMI 250 - AT - Central Excise

Valuation - Related person - Statement - SSI Exemption - Brand name - Water meter - Clandestine removal - Proof

Summary

Issues Involved:
1. Related persons and assessable value.
2. Small scale exemption eligibility.
3. Alleged clandestine removal of water meters.
4. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Related Persons and Assessable Value:
The primary issue was whether the appellant, M/s. Progressive Thermal Control Pvt. Ltd., and their buyer, M/s. Schlumberger Industries India Ltd., were related persons under Section 4(4)(c) of the Central Excise Act, 1944, thereby affecting the assessable value of goods. The Commissioner held that the appellant and their buyer were related, leading to a short-payment of duty of about Rs. 60 lakhs. The reasons cited included exclusive supply and procurement relationships, equity participation, technical know-how provision, and brand name usage. However, the appellants contested these findings, arguing that the sale price was a commercial price and not influenced by the relationship. They relied on several judicial precedents, including the Supreme Court's decision in Union of India and Others v. M/s. Atic Industries Ltd., to support their stance. The Tribunal found merit in the appellants' submissions, stating that the minority shareholding and exclusive supply did not affect the commercial nature of the transactions. Therefore, the rejection of the sale price on the grounds of being related persons was deemed unsustainable.

2. Small Scale Exemption Eligibility:
The second issue concerned the duty demand of about Rs. 6 lakhs for the period 1-1-96 to 31-3-97, based on the claim that the appellant was affixing the brand name 'Precimag' on water meters, making them ineligible for small scale exemption. The Revenue relied on statements from company officials, but the appellants argued that they only started affixing the brand name from 1-4-97 and provided documentary evidence to support this claim. The Tribunal accepted the appellants' explanation, noting discrepancies in the statements and the consistency of the documentary evidence.

3. Alleged Clandestine Removal of Water Meters:
The third issue was the alleged clandestine removal of 552 water meters, leading to a short levy demand of about Rs. 31,000/-. The appellants argued that this allegation was based on incorrect verification of their buyer's records and that the discrepancy arose from returned defective meters being counted twice. They provided evidence, including D-3 returns filed with the Central Excise Authorities, to support their claim. The Tribunal found the appellants' explanation reasonable and noted that the statutory records had not been disproved or doubted, thus rejecting the allegation of clandestine removal.

4. Imposition of Penalties:
The impugned order imposed a penalty of about Rs. 59 lakhs on the appellant company and Rs. 2 lakhs on the Managing Director, citing knowledge and responsibility for duty evasion. Given the Tribunal's findings on the primary issues, the penalties were also set aside.

Conclusion:
The Tribunal concluded that the findings in the impugned order were not sustainable and set aside the duty demands and penalties, allowing the appeal with consequential relief to the appellants.