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2012 (7) TMI 637 - AT - Central ExciseRelated persons assessable value Held that - Merely because ice cream was manufactured using brand name acquired by HLL and entire product was sold to BILIL/HLL, that did not make them related person - Revenue merely issued SCNs making allegation that price was not sole consideration of appellant s products. Persons behind manufacturer and the buyer were not proved to be one and the same through corporate shells. HLL was concerned with KFRL in commercial terms and KFRL having facility of manufacture, such facility was availed by HLL to get its branded goods manufactured by the former. That does not make them related persons - Manufacturer and buyer had their separate commercial interest without being related to each other. Merely bringing machineries for upgradation does not make parties related persons when object of each other is different. Trade practice many a times call for advance payments to meet requirement of trade. That also does not make them inter-dependent to depress the assessable value.
Issues Involved:
1. Whether the value adopted by KIMPL and KFRL was the normal price in terms of Section 4(1)(a) of the Central Excise Act, 1944. 2. Whether BBLIL and HLL had controlling interest over KIMPL and KFRL, influencing the assessable value. 3. Whether the transactions between KIMPL, KFRL, and BBLIL/HLL were at arm's length or influenced by mutual interest. 4. Whether penalties imposed on KIMPL, KFRL, and HLL were justified. Issue-wise Detailed Analysis: 1. Normal Price Determination: The adjudicating authority framed the issue to decide if the value adopted by KIMPL and KFRL was the normal price in terms of Section 4(1)(a) of the Central Excise Act, 1944. It was concluded that BBLIL and HLL controlled the affairs of KIMPL and KFRL, and the declared value was not the normal price, leading to the re-determination of the assessable value for differential duty. 2. Controlling Interest and Influence on Assessable Value: The agreements and financial arrangements between KIMPL, KFRL, and BBLIL/HLL were scrutinized. It was argued that BBLIL/HLL had managerial control and provided financial advances, influencing the assessable value. However, the tribunal found no objective analysis of cost data or evidence of flow back. The managerial control was alleged without evidence to show how the assessable value was depressed. The tribunal concluded that there was no nexus between the decisions and pricing, and no evidence surfaced to prove that the buyer of goods influenced the sales price. 3. Arm's Length Transactions and Mutual Interest: The tribunal examined the agreements and found that the relationship between the parties was on a principal-to-principal basis. The sourcing agreement specified that KFRL procured raw materials at its own cost and maintained quality standards as per the purchaser's specifications. The sale price was mutually agreed upon and included all costs and profit margins. The tribunal referred to the Supreme Court's judgment in CCE Chandigarh Vs Kwality Ice Cream Co., which held that the relationship between Kwality Ice Cream and BBLIL/HLL was not of mutual interest but of principal-to-principal. The tribunal found that there was no evidence to suggest that KIMPL and KFRL were related to BBLIL/HLL or that the transactions were influenced by mutual interest. 4. Justification of Penalties: The penalties imposed on KIMPL, KFRL, and HLL were challenged. The tribunal found that the department failed to prove how the assessable value was depressed or that the sales were not made in the normal course of trade. The tribunal concluded that there was no material evidence to prove that the parties were related or that there was any intent to cause loss to revenue. Therefore, the penalties imposed were not justified. Conclusion: The tribunal allowed the appeals, setting aside the adjudication order. It was held that the transactions between KIMPL, KFRL, and BBLIL/HLL were at arm's length, and the price was the sole consideration for the sale of goods. There was no evidence of mutual interest or controlling influence that depressed the assessable value. The penalties imposed on the appellants were not justified, and the adjudication order was set aside.
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