2010 (4) TMI 647 - AT - Central Excise

Demand - interconnected undertakings - assessee evade duty - two undertakings which are under the same management or controlled by same persons are group in terms of MRTP Act 1969 - rent free premises provided to the appellants - transaction value adopted is lower than the cost of production - Held that - evidence gathered and the facts brought on record are not sufficient to come to the conclusion that the appellants and MRO TEK are related persons - Merely because the price declared for sales to MRO TEK was mutually agreed and lower than CAS-4 for a portion of time during the relevant period a conclusion cannot be drawn that there was an intention to evade duty - appeal is allowed

Summary

Issues:
1. Whether the appellant and MRO TEK can be considered to have mutuality of business interest.
2. Whether the extended period of limitation was correctly invoked by the Commissioner for demanding differential duty.

Analysis:

Issue 1:
The Commissioner considered MRO TEK and the appellants as interconnected undertakings due to shareholding and common directors. The appellant argued that mutual interest must be proven for them to be related persons under the Central Excise Valuation Rules. The department cited various forms of assistance provided by MRO TEK to the appellants, including bank guarantees, premises, machinery lease, and approvals. The appellant contended that apart from certain assistance, their production and transactions were independent. They calculated excess duty paid, indicating no artificial lowering of prices. The Tribunal agreed with the appellant, noting the lack of evidence showing mutual interest beyond certain assistance and transactions.

Issue 2:
Regarding the limitation period, the Tribunal emphasized that the duty paid by the appellants was available as Cenvat credit to MRO TEK, indicating no intention to evade duty. The Tribunal highlighted that the duty paid exceeded the payable amount for a specific period, suggesting no duty evasion. Citing precedents, the Tribunal held that when the situation is revenue-neutral, an extended period cannot be invoked for demanding differential duty. As the duty paid was in excess during a certain period, the Tribunal concluded that the Revenue failed to establish a case for invoking the extended period. Consequently, the appeal by the appellants was allowed based on both issues.

This detailed analysis of the judgment highlights the arguments presented by both parties, the considerations made by the Commissioner, and the Tribunal's reasoning leading to the final decision in favor of the appellants.