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2019 (7) TMI 1650 - AT - Central ExciseMethod of Valuation - related party transaction - benefit of SSI exemption - existence of mutuality of interest - HELD THAT - There is nothing in the records to show that the two companies are related i.e., they are inter-connected undertakings or relatives or one is a distributor of the other or they are so associated that they have interest directly or indirectly in the business of each other. Under the circumstances, there is no infirmity in the order of the learned Commissioner once he held that there is no evidence that the two companies are related persons. Therefore, there is also no ground whatsoever to deny them the benefit of SSI exemption individually. It is the case of the Revenue that they are located on the same plot of land and have three common directors and were using the same office and telephone. It is also the case of the Revenue that in one letter-head of M/s.Bharat, the name of the appellant was also printed on the type right side. It is further the case of the Revenue that the balance sheet and profit and loss account of the two companies show that one amount went to the other - None of these facts, if true, would meet the requirement under section 4(3)(b) for the two companies to be called related persons. The impugned order is upheld and the appeal filed by the Revenue is dismissed.
Issues:
1. Whether two companies should be treated as related persons for the purpose of Central Excise valuation. 2. Whether the two companies can be combined for the purpose of calculating the SSI exemption. Issue 1: The appeal was filed by the Revenue against an Order-in-Original, alleging that two companies were related persons and thus the transaction value was not applicable for Central Excise valuation. The Revenue contended that as per section 4(3)(b)(ii) of the Central Excise Act, the companies should be treated as related persons due to various commonalities. However, the adjudicating authority found that there was no evidence to establish that the companies were related as per the legal definition. The authority emphasized that the companies being located on the same plot of land and having common directors did not automatically make them related persons. The authority concluded that the companies did not meet the criteria under section 4(3)(b) to be considered related persons, and therefore, the demand of duty, interest, and penalty was dropped. Issue 2: The Revenue also argued that the two companies should be combined for calculating the Small Scale Industries (SSI) exemption. However, the adjudicating authority ruled that since the companies were not related persons, they could not be clubbed together for the SSI exemption. The authority held that each company was eligible for the SSI exemption independently. The Revenue contended that the acceptance of mutuality of interest by the Commissioner implied a relationship between the companies, but the appellate tribunal disagreed. The tribunal reiterated that for companies to be treated as related persons, specific criteria under section 4(3)(b) must be met, which was not the case here. Therefore, the tribunal upheld the impugned order and dismissed the appeal filed by the Revenue. In conclusion, the appellate tribunal, comprising HON’BLE SHRI P.K.CHOUDHARY and HON’BLE SHRI P.VENKATA SUBBA RAO, held that the two companies were not related persons as defined by the law, and therefore, the transaction value was applicable for Central Excise valuation. Additionally, the tribunal ruled that the companies could not be combined for the SSI exemption calculation and were eligible for the exemption individually. The tribunal upheld the order of the adjudicating authority, dismissing the appeal filed by the Revenue.
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