2003 (4) TMI 444 - AT - Central Excise

Summary

Issues Involved:
1. Mutuality of interest between Detergents India Ltd. (DIL) and Shaw Wallace & Co. (SWC)
2. Whether DIL and SWC are related persons under Section 4(4)(c) of the Central Excise Act, 1944.
3. Suppression of facts and invocation of the extended period of limitation under Section 11A of the Central Excise Act, 1944.
4. Determination of assessable value and differential duty.
5. Imposition of penalties under various rules of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Mutuality of Interest Between DIL and SWC:
The Tribunal examined whether there was mutuality of interest between DIL and SWC. The Commissioner found that SWC, being the holding company, had significant control over DIL, including financial assistance, managerial control, and production planning. DIL provided monthly reports to SWC, and SWC incurred expenses for advertisements and sales promotions for DIL's products. The Tribunal concluded that there was mutuality of interest between DIL and SWC, as evidenced by their interdependent operations and financial arrangements.

2. Whether DIL and SWC are Related Persons Under Section 4(4)(c) of the Central Excise Act, 1944:
The Tribunal considered the definition of "related person" under Section 4(4)(c) of the Central Excise Act, 1944, which includes holding and subsidiary companies. The Tribunal found that DIL and SWC were related persons, as SWC was the holding company and DIL was its subsidiary. The Tribunal relied on the Supreme Court's judgment in Calcutta Chromotype Ltd. v. CCE, which emphasized the need to look beyond the corporate veil to determine the true nature of the relationship between companies.

3. Suppression of Facts and Invocation of the Extended Period of Limitation Under Section 11A of the Central Excise Act, 1944:
The Commissioner found that DIL had suppressed the fact that it was related to SWC and had not declared this relationship in its price lists filed with the Central Excise Department. The Tribunal upheld the Commissioner's finding that DIL had willfully suppressed material facts with the intent to evade duty. Consequently, the extended period of limitation under Section 11A of the Central Excise Act, 1944, was applicable.

4. Determination of Assessable Value and Differential Duty:
The Tribunal upheld the Commissioner's order that the assessable value of the goods should be determined based on the price at which SWC sold the goods to independent buyers, rather than the lower price at which DIL sold the goods to SWC. The Tribunal found that the differential duty amounting to Rs. 1,12,42,499/- was correctly demanded from DIL based on the difference between the price at which SWC sold the goods and the cum-duty price adopted by DIL.

5. Imposition of Penalties Under Various Rules of the Central Excise Rules, 1944:
The Commissioner imposed penalties on DIL and SWC under Rule 173Q and Rule 209A of the Central Excise Rules, 1944, respectively. The Tribunal upheld the penalties, finding that DIL had willfully suppressed facts and evaded duty, and SWC had abetted in the evasion of duty. The Tribunal also upheld the confiscation of land, buildings, plant, and machinery used in the manufacture of dutiable goods, with an option to redeem the same on payment of a fine.

Separate Judgment by Member (Judicial):
Member (Judicial) disagreed with the findings of Member (Technical) and held that there was no mutuality of interest between DIL and SWC. He emphasized that the relationship between the two companies was on a principal-to-principal basis and that mere holding of shares by SWC in DIL did not establish mutuality of interest. He also found that the extended period of limitation was not applicable as there was no suppression of facts by DIL. Consequently, he allowed the appeals filed by DIL and SWC and rejected the Revenue's appeal.

Majority Order:
In terms of the majority order, the appeals filed by DIL and SWC were allowed, and the appeal filed by the Revenue was rejected. The majority found that there was no mutuality of interest between DIL and SWC, and the extended period of limitation was not applicable. The assessable value should be based on the price at which DIL sold the goods to SWC, and not the price at which SWC sold the goods to independent buyers.