2004 (12) TMI 616 - AT - Central Excise

Clandestine removal - Evidence, Accounts and records of third party - Valuation - Adjudication order, findings in the order contrary to earlier adjudication order

Issues Involved:
1. Allegation of clandestine removal of goods without payment of duty.
2. Determination of assessable value under Section 4 of the Central Excise Act.
3. Relationship between M/s. Charminar Bottling Co. Pvt. Ltd. and M/s. Hyderabad Beverages.
4. Treatment of sale price as cum-duty price.

Detailed Analysis:

1. Allegation of Clandestine Removal:
The primary issue in the appeals was the allegation that M/s. Charminar Bottling Co. Pvt. Ltd. (referred to as M/s. Charminar) had clandestinely cleared 5241 Bags-in-Box without payment of duty. The Revenue based this allegation on discrepancies found in the PMX reports prepared by M/s. Hyderabad Beverages. However, the Tribunal noted that these reports were not prepared by M/s. Charminar and that there was no corroborative evidence such as procurement of raw materials or higher electricity consumption to support the claim of excess production. The Tribunal cited the Supreme Court's decision in Oudh Sugar Mills Ltd. v. U.O.I., which held that findings based on assumptions and without tangible evidence are legally flawed. Consequently, the demand based on the charge of clandestine removal was set aside.

2. Determination of Assessable Value:
The second issue concerned the assessable value of the goods sold by M/s. Charminar to M/s. Hyderabad Beverages. The Commissioner had determined the assessable value based on the sale price of M/s. Hyderabad Beverages, treating them as a frontal organization of M/s. Charminar. The Tribunal, however, found this determination to be untenable because M/s. Hyderabad Beverages had not been issued a show cause notice and were not given an opportunity to defend themselves. Additionally, the Tribunal noted that the Commissioner had previously found that M/s. Hyderabad Beverages and M/s. Charminar were not related persons under Section 4(4)(c) of the Central Excise Act, a finding that had not been challenged by the Revenue. Therefore, the prices at which M/s. Hyderabad Beverages sold the goods could not be used to determine the assessable value for M/s. Charminar.

3. Relationship Between M/s. Charminar and M/s. Hyderabad Beverages:
The Tribunal examined whether M/s. Hyderabad Beverages could be considered a related person or a dummy unit of M/s. Charminar. The Commissioner had initially found that the two entities were not related persons under the Companies Act, 1956. This finding was not appealed by the Revenue, making it binding. The Tribunal emphasized that without new evidence, the Revenue could not contradict this finding in subsequent proceedings. The Tribunal also noted that normal business transactions, such as installation and maintenance of vending machines, payment of rental charges, and supply of cups and advertising, did not justify treating M/s. Hyderabad Beverages as a non-independent firm.

4. Treatment of Sale Price as Cum-Duty Price:
The Revenue's appeal challenged the treatment of the sale price of M/s. Hyderabad Beverages as a cum-duty price. The Tribunal held that the mere fact that the Revenue had filed a review application against the Supreme Court's judgment in CCE v. Maruti Udyog Ltd. was not sufficient grounds to unsettle the Commissioner's findings. Since the appeals filed by M/s. Charminar were allowed, the Revenue's appeal did not survive.

Conclusion:
The Tribunal allowed the appeals filed by M/s. Charminar Bottling Co. Pvt. Ltd., setting aside the demands based on allegations of clandestine removal and the determination of assessable value using the prices of M/s. Hyderabad Beverages. The Tribunal also dismissed the Revenue's appeal, maintaining the treatment of the sale price as cum-duty price.

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