2013 (2) TMI 567 - AT - Central Excise

Sale to related person - demanding duty at the sale price - assessee contested as they are dealing with M/s WTIPL at the arms length & also demand is time barred - Held that - M/s Sandvik AB, Sweden is holding company of the applicant firm both having more than 50% of the shares in M/s Walter AG Germany, which in turn holds 99.9% of shares of M/s WTIPL, the customer of the applicant. Thus going through the adjudication order it is found that the goods cleared by the applicants were further sold by M/s WTIPL at the higher price, thus in view of the share holding as mentioned above the dealing is not at arms length - issue of limitation is question of law and facts and the same shall be taken at the time of final hearing - applicant has not made out a prima facie case for complete waiver of pre-deposit thus directed to deposit Rs.4.5 lakhs within a period of eight weeks.

Summary

Issues:
1. Waiver of pre-deposit of duty, interest, and penalty.
2. Related party transaction between the appellant and M/s Walter Tools India Pvt. Ltd.
3. Time limitation for issuing the show-cause notice.

Analysis:
1. The appellant sought a waiver of pre-deposit of duty amounting to Rs.18,38,795 along with interest and penalty. The appellant, engaged in manufacturing Specific Drilling Tools, cleared goods to M/s Walter Tools India Pvt. Ltd. (WTIPL) during a specific period. The Revenue demanded duty based on the goods' subsequent sale by WTIPL to its customers, alleging a related party transaction. The appellant contended that WTIPL is not related, and the demand is time-barred since the issue was raised in 2006, and the notice was issued in 2010.

2. The Revenue argued that due to shareholding relationships between the appellant, M/s Sandvik AB, M/s Walter AG Germany, and WTIPL, the demand was justified as WTIPL sold the goods at a higher price. The Tribunal observed that the goods were sold at a higher price by WTIPL, indicating a potential lack of arm's length dealing. The issue of limitation was deemed a question of law and facts to be addressed during the final hearing.

3. After reviewing the adjudication order, the Tribunal found that the appellant did not establish a prima facie case for a complete waiver of pre-deposit. Consequently, the appellant was directed to deposit Rs.4.5 lakhs within eight weeks. Upon this deposit, the pre-deposit of the remaining duty and penalty amount would be waived, and the recovery stayed during the appeal's pendency. A compliance report was scheduled for a specific date following the pronouncement of the judgment.