2007 (6) TMI 437 - AT - Central Excise

Summary

Issues Involved:
1. Whether M/s. BPL Sanyo Utilities & Appliances Ltd. (BSUA) and M/s. BPL Ltd. are "related persons" u/s 4(4)(c) of the Central Excise Act, 1944.
2. Whether the sale price between BSUA and BPL Ltd. was influenced by their relationship.
3. Validity of the duty demand and penalties imposed by the Commissioner of Customs & Central Excise, Noida.

Summary:

Issue 1: Relationship Between BSUA and BPL Ltd.
The Adjudicating Authority held that BSUA and BPL Ltd. are "related persons" u/s 4(4)(c) of the Central Excise Act, 1944, due to mutuality of interest in each other's business. However, the appellants argued that even if they are related, the relationship did not affect the sale price. They cited several case laws, including Beacon Neyrpic Ltd. v. CCE, Madras and Samtel Electron Devices Ltd. v. CCE, Meerut, to support their claim that the relationship did not influence the price.

Issue 2: Influence of Relationship on Sale Price
The appellants contended that the price difference between BSUA and BPL Ltd. was due to legitimate business expenses such as advertisement and marketing overheads, and not due to any mutual interest. They referenced previous decisions, including those involving their Bangalore factory, where similar allegations were dismissed. The Tribunal found that the relationship did not affect the price, as the difference was only around 8%, which is not significant.

Issue 3: Duty Demand and Penalties
The Commissioner confirmed a duty demand of Rs. 8,83,77,549.00 and imposed equivalent penalties on BSUA and BPL Ltd., along with personal penalties on certain directors. The appellants argued that the penalties were unjustified as there was no contravention of Central Excise Law. They highlighted that the Assistant Commissioner had provisionally approved the price lists, and hence, Rule 173Q penalties were not applicable.

Tribunal's Findings:
The Tribunal noted that similar issues had been previously adjudicated in favor of the appellants, where it was held that BSUA and BPL Ltd. are separate legal entities with no mutuality of interest. The Tribunal reiterated that the mere fact that both companies are public limited does not establish a related person relationship. They also emphasized that the expenses incurred by BPL Ltd. for advertisement and marketing cannot be included in the assessable value of BSUA's goods.

Conclusion:
The Tribunal set aside the impugned order, holding that BSUA and BPL Ltd. are not related persons u/s 4(4)(c) of the Central Excise Act, 1944, and their relationship did not affect the sale price. Consequently, the duty demand and penalties imposed were unjustified. The appeals were allowed.