2005 (12) TMI 519 - Commission - Central Excise

Issues Involved:
1. Clandestine clearances.
2. Undervaluation of goods.
3. Relationship between M/s. Standard Doors (SD) and M/s. Balaji Trading Corporation (BTC) and other firms.
4. Applicability of the "related person" concept.
5. Calculation and settlement of duty liability.

Detailed Analysis:

1. Clandestine Clearances:
The applicant admitted to clandestine clearances but contested the duty demand of Rs. 10,44,393/- by the Revenue. The Revenue based this on statements from three recipients, assuming higher prices for all consignments. The applicant accepted only Rs. 4.43 lakhs, citing actual higher prices from the three consignees and normal prices for the rest. The Commissioner (Investigation) found no dispute on quantities but noted the absence of value on internal gate passes. The Tribunal emphasized that differential duty cannot be based on assumptions and must be supported by comprehensive investigation, citing the Sharon Veneers case.

2. Undervaluation of Goods:
The applicant contested the duty demand of Rs. 56,39,443/- for undervaluation, admitting only Rs. 3,14,708/-. The Revenue's claim was based on BTC's higher prices and treating BTC as a related person. The Commissioner (Investigation) stated that the prices charged by BTC are irrelevant as the applicant charged the same prices to all buyers except in specific instances of admitted undervaluation. The Tribunal supported this view, citing cases like Excel Thread Industries, which held that sales to independent buyers at the same price negate the related person concept.

3. Relationship Between SD and BTC:
The Commissioner (Investigation) examined the relationship between SD and BTC, finding them distinct entities despite common partners and shared infrastructure. The Apex Court judgment in Kalakutty supported this, stating that different partnership firms, even with the same partners, are distinct entities. The Tribunal agreed, noting that BTC is not the sole distributor of SD and that the price charged to BTC is the same as to others.

4. Applicability of the "Related Person" Concept:
The Tribunal found that the related person concept did not apply as the majority of SD's sales were to independent buyers, and the prices charged were the same. The Tribunal cited several cases, including Pepsico India Holdings, which held that sales to both related and unrelated persons do not invoke special valuation rules. The Tribunal concluded that BTC's higher selling prices were due to its overheads, not a mutuality of interest.

5. Calculation and Settlement of Duty Liability:
The Tribunal settled the duty liability at Rs. 7,58,378/-, already paid by the applicant. Immunity from interest exceeding 10% per annum, penalties, and prosecution was granted, considering the applicant's cooperation and timely payment. The Department was instructed to calculate the interest and communicate it to the applicant for payment.

Conclusion:
The Tribunal settled the case by acknowledging the applicant's admitted duty liability and rejecting the Revenue's broader claims of undervaluation and related person concept. The Tribunal granted partial immunity from interest and full immunity from penalties and prosecution, emphasizing the need for corroborative evidence and rejecting assumptions in duty calculations.

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