2015 (10) TMI 1840 - AT - Central Excise

Valuation - Related person - mutuality of interest - SSI exemption - Held that - As held by the Hon ble Apex Court in the case of Alembic Glass Industries Ltd. (2002 (4) TMI 75 - SUPREME COURT OF INDIA), merely having shareholding does not make them related persons. - loans has been repaid by M/s. SIPL in future. Moreover, goods sold to M/s. CF by M/s. SIPL at a gross profit of around 16-18% and the sale by M/s. SIPL to M/s. CF is negligible in the year 2001-02 i.e. 8.9%, in the year 2003-04 i.e. 3.20% except in the year 2002-03 i.e. 20.23%. But the gross profit during the impugned period ranges from 16% to 19% whereas the total gross profit of M/s. SIPL during the impugned period is around 18%. If at all, we presume that there is a mutuality of interest in that case also when the goods are sold by M/s. SIPL to M/s. CF on the price at which the goods have been sold to independent buyers, in that case the sale price by M/s. CF cannot be held as assessable value for M/s. SIPL. Therefore, we hold that demand of ₹ 4,84,076/- is not sustainable. Accordingly, same is set aside. M/s. K S Enterprises is a sub contractor and who has got manufactured this aluminum windows in question by purchasing their own raw material and at site. M/s. K S Enterprises has issued invoices to M/s. SIPL to that extent M/s. K S Enterprises, has also filed an affidavit stating that the goods have been manufactured by them and they are not paying duty as they are enjoying SSI Exemption limit. Both the lower authorities has not given credence to the affidavit filed by Shri Kultar Singh, proprietor of M/s. K S Enterprises. In fact, no contrary evidence have been produced by the Revenue, to support that the goods have been manufactured by M/s. SIPL. In fact, duty is payable on manufactured goods not on traded goods. The affidavit is having evidential value if not proved contrary. Therefore, it is held that aluminum windows were manufactured by M/s. K S Enterprises who was enjoying SSI Exemption and M/s. SIPL is only trader for said goods. Therefore, duty cannot be demanded from M/s. SIPL. - Decided in favour of assessee.

Summary

Issues:
1. Whether M/s. CF is related to M/s. SIPL and if there is a mutual interest in their business.
2. Whether duty can be imposed on aluminum windows fabricated by M/s. K S Enterprises in the hands of M/s. SIPL.

Analysis:

Issue 1:
The Revenue argued that the shareholding of Shri Kailash Lamba in both firms and interest-free loans to M/s. SIPL established them as related persons. However, the court cited the Alembic Glass Industries Ltd. case, emphasizing that mere shareholding does not imply relatedness. The gross profit margin and sales between M/s. SIPL and M/s. CF were also analyzed. Even if a mutual interest existed, the assessable value for M/s. SIPL could not be based on sales to M/s. CF. Consequently, the demand of &8377; 4,84,076 was deemed unsustainable, leading to its setting aside.

Issue 2:
Regarding the aluminum windows fabricated by M/s. K S Enterprises, it was established that they were the manufacturer enjoying SSI Exemption, not M/s. SIPL. The lower authorities did not refute the affidavit from M/s. K S Enterprises. Since the duty is levied on manufactured, not traded goods, duty could not be imposed on M/s. SIPL. Consequently, the duty demand was considered unjustifiable, resulting in setting aside the penalties on the appellants.

In conclusion, both issues were decided in favor of the appellants, leading to the setting aside of the impugned order and allowing the appeals with any consequential relief.