2007 (5) TMI 80 - AT - Central Excise

Valuation- Related person - Mere common shareholding is not determinable factor to held that the buyer and seller are related person - When goods are sold at the same price at which sold to other independent buyers, allegation of undervaluation is not sustained

Issues Involved:
1. Determination of whether BPL should be considered a related person to the appellants.
2. Assessment of whether the price at which the appellants sold their products to BPL was depressed.
3. Evaluation of the financial accommodation provided by BPL to the appellants and its impact on their relationship.
4. Examination of the applicability of Supreme Court judgments in similar cases.

Issue-wise Detailed Analysis:

1. Determination of whether BPL should be considered a related person to the appellants:
The central issue was whether BPL should be considered a related person to the appellants, which would affect the assessable value of the goods sold. The adjudicating authority concluded that the appellants were related to BPL due to financial accommodations and the fact that BPL owned the premises where the appellants operated. However, the appellants argued that there was no cross-shareholding between them and BPL, citing the Supreme Court's decisions in Atic Industries Ltd. and Alembic Glass Industries Ltd.. The Tribunal found that the appellants were private limited companies with no shares held by BPL or vice versa, and thus, the relationship criteria were not satisfied.

2. Assessment of whether the price at which the appellants sold their products to BPL was depressed:
The appellants contended that the prices at which they sold their products to BPL were the same as those sold to independent buyers, indicating no price depression. The Tribunal noted that the adjudicating authority failed to contradict this claim, and it was undisputed that the appellants sold their goods at the same price to both BPL and independent buyers. Therefore, the allegation of undervaluation was dismissed.

3. Evaluation of the financial accommodation provided by BPL to the appellants and its impact on their relationship:
The adjudicating authority argued that the financial accommodation provided by BPL to the appellants established a relationship. However, the Tribunal found that the financial accommodations were towards the consideration of sales and not indicative of a controlling relationship. The Tribunal referenced the Supreme Court's judgment in Alembic Glass Industries Ltd., which stated that common directors or financial transactions alone do not establish a mutual interest in each other's businesses.

4. Examination of the applicability of Supreme Court judgments in similar cases:
The Tribunal extensively referenced the Supreme Court judgments in Atic Industries Ltd. and Alembic Glass Industries Ltd., which clarified that common shareholding or directors do not necessarily make companies related persons unless there is mutual interest in each other's business. The Tribunal also cited the Amar Sinhji Stationery Industries Ltd. case, reinforcing that the absence of mutual control and the same pricing to related and independent buyers negate the related person claim.

Conclusion:
The Tribunal concluded that the appellants and BPL were not related persons under the Central Excise Act, as there was no mutual interest in each other's business, and the prices charged to BPL were the same as those to independent buyers. Consequently, the differential duty demand was unsustainable, and the appeals were allowed with consequential relief.

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