2017 (5) TMI 1014 - AT - Central Excise

Valuation - related party transaction - It was alleged that since the appellant had entered into an agreement regarding the sales promotion of Cardiovit with Pfizer Ltd. and is paying service charges to them, the appellant and M/s.Prizer Ltd. are related persons - Held that - the onus of establishing that the appellants are related to Duchem Laboratories Ltd. is on the Revenue - No evidence has been produced to show that by virtue of being interconnected undertaking, Duchem Laboratories Ltd. and Pfizer become a single entity - no evidence has been produced to establish that the appellants and Pfizer Ltd. have any interest in the business of each other - From the terms of the agreement it appears that Pfizer is merely a service provider to the appellant - In the absence of any proof of mutuality of interest, it cannot be said that the parties are related - appeal allowed - decided in favor of appellant.

Summary

Issues:
Allegation of related party status between appellant, Duchem Laboratories Ltd., and Pfizer Ltd. under Central Excise Act, 1944.

Analysis:
The case involved an appeal by appellants engaged in pharmaceutical manufacturing against a demand raised by Revenue alleging related party status between the appellant, Duchem Laboratories Ltd., and Pfizer Ltd. The Revenue contended that since Duchem Laboratories Ltd., a subsidiary of Pfizer Ltd., sold the appellant's product at a premium and the appellant had an agreement with Pfizer for marketing services, they were related parties under the Central Excise Act. The appellant argued independence between the companies and challenged the show-cause notice's timing. The Revenue's case relied on the interconnected relationship between Pfizer, Duchem Laboratories Ltd., and the appellant, as well as the service agreement terms.

The Tribunal analyzed the situation and found no legal basis for the related party allegation. The Revenue failed to prove the appellant's relationship with Duchem Laboratories Ltd. or that the companies formed a single entity due to their interconnected nature. The terms of the agreement indicated a service provider-client relationship between the appellant and Pfizer, with no evidence of mutual business interest. The Tribunal concluded that the appellant and Duchem Laboratories Ltd. were not related parties, setting aside the impugned order and allowing the appeal.

In summary, the judgment addressed the issue of related party status under the Central Excise Act, 1944, examining the alleged relationship between the appellant, Duchem Laboratories Ltd., and Pfizer Ltd. The Tribunal found insufficient evidence to support the related party claim, emphasizing the lack of mutual business interest and establishing the appellant's independence from Duchem Laboratories Ltd. The impugned order was overturned, and the appeal was granted, highlighting the importance of establishing clear evidence for related party allegations in legal proceedings.