2004 (10) TMI 490 - AT - Central Excise

Issues Involved:
1. Whether M/s. Mukut Pipes Ltd. and M/s. Surindra Engg. Co. Ltd. are related persons under Section 4 of the Central Excise Act.
2. Whether the process of epoxy painting and guniting should be included in the assessable value of MS Pipes.
3. Determination of the correct assessable value for the purpose of charging Central Excise duty.
4. Imposition of penalties on the appellants.

Issue-Wise Detailed Analysis:

1. Relationship Between M/s. Mukut Pipes Ltd. and M/s. Surindra Engg. Co. Ltd.:
The primary issue was whether M/s. Mukut Pipes Ltd. and M/s. Surindra Engg. Co. Ltd. are related persons under Section 4 of the Central Excise Act. The Revenue argued that both companies had cross shareholdings, common directors, common authorized signatory for bank accounts, common funding, marketing, and management control, thus attracting the provisions of Proviso (iii) to Section 4(1)(a) of the Central Excise Act. The learned Advocate countered that both companies are independent legal entities and transactions were on a principal-to-principal basis. The Tribunal found that the companies had mutual interests, common management, and interlocking finances, thus satisfying the definition of related persons under Section 4(4)(c) of the Central Excise Act. Consequently, the price at which M/s. Mukut Pipes Ltd. sold goods to M/s. Surindra Engg. Co. Ltd. could not be the assessable value under Section 4.

2. Inclusion of Epoxy Painting and Guniting in Assessable Value:
The Revenue contended that M/s. Mukut Pipes Ltd. paid duty on base pipes and not on subsequent value additions like epoxy painting and guniting. The learned Advocate argued that the process of epoxy painting and guniting was not carried out by M/s. Mukut Pipes Ltd., and thus, these expenses should not be included in the assessable value. The Tribunal held that the cost of epoxy painting and guniting should not be included in the assessable value as these processes were not undertaken by M/s. Mukut Pipes Ltd.

3. Determination of Assessable Value:
The Tribunal noted that the price charged by M/s. Surindra Engg. Co. Ltd. was inclusive of various expenses and taxes. The duty should be charged only on the price of MS Pipes after excluding all deductible expenses and taxes. The Tribunal remanded the matter to the jurisdictional Adjudicating Authority to determine the assessable value and recompute the duty payable, allowing the appellants to produce evidence for various deductions.

4. Imposition of Penalties:
The learned Advocate argued that no penalty should be imposed as the appellants had discharged their duty burden correctly and there was no suppression or misstatement of facts. The Tribunal left the issue of penalties on M/s. Mukut Pipes Ltd. and M/s. Surindra Engg. Co. Ltd. open for the jurisdictional Adjudicating Authority to decide after determining the assessable value and computing the duty. However, no penalty was imposable on Shri Kuljinder Singh Ahluwalia, Managing Director of M/s. Surindra Engg. Co. Ltd., as the ingredients for imposing penalty under Rule 209A of the Central Excise Rules, 1944, were not established.

Conclusion:
The Tribunal remanded the appeals of M/s. Mukut Pipes Ltd. and M/s. Surindra Engg. Co. Ltd. to the jurisdictional Adjudicating Authority for readjudication on the assessable value and duty computation. The appeal of Shri Kuljinder Singh Ahluwalia was allowed, and no penalty was imposed on him.

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