2004 (10) TMI 493 - AT - Central Excise

Valuation - Related person status - deduction of duty from the price of the goods charged by the related person - HELD THAT - At the relevant time, as per Section 4(4)(c) of the Central Excise Act, related person means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor. It is also not disputed by the Revenue that there are other partners in the assessee firm as well as there are other directors in M/s. Marc Lab. Thus, one common person will not make a partnership firm related person of a company. There is also no force in the findings in the impugned Order that M/s. Marc Lab sold the goods at a price higher than the price charged by the assessee from M/s. Marc Lab. This is expected in the normal course of business and nothing is unusual. Thus, we hold that M/s. Marc Lab is not the related person of the assessee and the duty has to be discharged by them on the price at which goods are sold by them to M/s. Marc Lab. We, thus, allow the appeal filed by M/s. Marc Pharmaceuticals. Once the appeal filed by the assessee is allowed, the appeal filed by Revenue does not survive and is thus rejected. In any case the Adjudicating Authority had treated the price charged by M/s. Marc Lab as cum-duty price in view of the judgment of the Supreme Court in the case of Maruti Udyog Ltd. 2002 (2) TMI 101 - SUPREME COURT . The Supreme Court has held that when purchaser is not under obligation to pay any amount in excess of sale price already paid, duty demanded has to be deducted from the sale price. The mere fact that the Revenue has filed a Review Petition does not make the judgment inapplicable in absence of any stay granted by the Supreme Court. The appeal of Revenue is rejected.

Summary

Issues Involved: Determination of related person status u/s 4(4)(c) of the Central Excise Act and calculation of duty based on price charged by related person.

Related Person Status: The appeals arose from a common Order-in-Original confirming duty demand and penalty on the assessee, M/s. Marc Pharmaceuticals, based on the relationship with Marc Lab. The Commissioner held that they were related persons due to the use of the brand name 'MARC' and common control by Prem Kishore. The Advocate argued that mutuality of interest was not established solely based on common directors and employees, citing legal precedents.

Legal Precedents: The Advocate referenced cases like CCE v. Besta Cosmetics Ltd. and others to support the argument that common ownership and employees do not establish related person status without financial flow back. The Advocate contended that the Commissioner's finding of control by Prem Kishore was factually incorrect, emphasizing the firm's profitability as evidence of fair pricing.

Judgment on Related Person Status: The Tribunal analyzed Section 4(4)(c) of the Central Excise Act and the Supreme Court's interpretation in U.O.I. v. Atic Industries. It concluded that the mere sale of entire production to Marc Lab did not prove mutual interest. Common control by Prem Kishore was insufficient without extraneous considerations. The Tribunal rejected the related person status between Marc Pharmaceuticals and Marc Lab.

Calculation of Duty: The Revenue argued for duty calculation based on the price charged by Marc Lab, citing the Supreme Court's judgment in CCE v. Maruti Udyog Ltd. The Tribunal disagreed, stating that the price charged by a related person does not automatically qualify as cum-duty price. It held that Marc Lab was not a related person, and duty should be based on the price at which goods were sold to Marc Lab.

Final Decision: The Tribunal allowed the appeal of M/s. Marc Pharmaceuticals, as Marc Lab was not considered a related person. Consequently, the Revenue's appeal was rejected, as the duty calculation based on the price charged by Marc Lab was deemed incorrect without sufficient legal basis or stay granted by the Supreme Court.