2014 (11) TMI 964 - AT - Central Excise

Waiver of pre deposit - manufacture of motor vehicles - body building activity on the duty paid chassis falling under CH 8706 - Exemption under benefit of Sl No. 39 of Notification No. 6/2006-CE dated 01.03.2006 and Sl. No. 276/2012 CE dated 01.03.2012 - Suppression of facts - Held that - AB Volvo owns the technology relating to manufacture of Volvo Buses and the fact that both the parties supplying chassis and building chassis are subsidiaries of AB Volvo would result in a situation that there cannot be any sales transactions between two subsidiaries. No judicial decisions or provisions of Statute have been cited to come to the conclusion that two subsidiaries of one company are to be considered as one and there cannot be sale and purchase between the two. We are also unable to understand how the transactions between the two companies result in a situation that ownership of the chassis does not change hands. Even if it remains within the group, it does not mean that the supplier of chassis did not sell the busses to the appellants who built the chassis on the same. The Notification clearly provided exemption when the chassis is sold and body is built on it and no CENVAT credit is taken. The whole case is built on the premise that there cannot be a sale and purchase between two subsidiaries and transfer of ownership does not take place. It is not supported by any statutory provision. even if VBT and VIPL are related persons, that will be applicable only for valuation of the goods and the very fact that provisions of Section 4 recognizes sales to related persons and provided that value in such cases has to be arrived at on the basis of the price at which goods are sold by related persons itself would show that there can be transfer of ownership, transfer of possession and sale and purchase between two related persons. appellant has been able to make out a case on merits for complete waiver - Stay granted.

Summary

Issues:
Central excise duty demand on manufacturer of buses for not being eligible for exemption under specific notifications, penalty imposition on the duty demand, ownership of chassis in the context of body building activity, relationship between appellant and group companies, applicability of exemption notifications to independent body builders, imposition of penalty on the Company Secretary and Director for non-payment of duty on bus bodies built on supplied chassis.

Analysis:
The judgment addresses the central excise duty demand of over &8377;58 crore on the manufacturer of buses, alleging ineligibility for exemption under specific notifications. The duty demand was based on the appellant undertaking body building activity on duty paid chassis, which was considered as manufacturing motor vehicles. The appellant's failure to register under the Central Excise Act for bus manufacturing and inconsistencies in their ER-1 returns were highlighted. The agreements with Volvo entities, including a Technology License contract and Chassis Supply Agreement, were scrutinized to establish the relationship between the appellant and group companies, indicating control and ownership within the Volvo group.

The judgment delves into the interpretation of exemption notifications applicable to independent body builders and the alleged suppression of facts by the appellant to claim undue benefits. The penalty imposition on the Company Secretary and Director for non-payment of duty on bus bodies built on supplied chassis was also discussed. The Commissioner's reasoning regarding the relationship between the appellant and group companies, the transfer of ownership in sales transactions, and the applicability of statutory provisions like Section 4 of the Central Excise Act and Customs Act were analyzed.

The Appellate Tribunal disagreed with the Commissioner's conclusions, emphasizing that the transactions between subsidiaries do not negate the possibility of sales transactions. The Tribunal highlighted the lack of statutory support for considering two subsidiaries as one entity and refuted the claim that ownership of the chassis did not change hands. The Tribunal found merit in the appellant's arguments for a complete waiver, leading to the waiver of predeposit and granting a stay against recovery for 180 days from the order date. The judgment clarifies the legal intricacies surrounding ownership, sales transactions, and exemption eligibility in the context of central excise duty demands on bus manufacturing activities.