2007 (12) TMI 104 - AT - Central Excise

Demand raised on ground that ECCC(assessee) & BIL are related persons, so sale price of BIL was taken as base to assess assessee s( ECCC s) products both are limited companies - no finding of flowback of funds from one unit to other - no finding of mutuality of interest between them - BIL s employee being a Director of ECCC, BIL advancing funds to its supplier, & ECCC selling its entire production to BIL are not adequate ground to hold that both are related persons impugned order set aside

Summary

Issues:
1. Denial of SSI benefit to M/s. Electronic Calculators & Computer Company, Bangalore (ECCC) for clearances during 1991-92 to 1995-96.
2. Determination of related persons between ECCC and M/s. Broadma India Ltd. (BIL).
3. Assessment of assessable value of ECCC's products based on BIL's sale price.
4. Validity of the impugned order vacating the demand by the Commissioner.

Analysis:
1. The appeal was filed by the revenue challenging the vacating of a part of the order denying SSI benefit to ECCC for clearances during 1991-92 to 1995-96 to BIL. The original authority found ECCC and BIL to be related persons due to various factors like shared employees and financial transactions. The Commissioner, however, found that there was no flowback of funds between the companies and vacated the demand of over Rs. 2.6 crores, ruling in favor of ECCC's eligibility for the SSI benefit.

2. The issue of related persons between ECCC and BIL was at the core of the dispute. The revenue argued that since BIL sold ECCC's goods at higher prices and both were limited companies, the assessable value of ECCC's products should be based on BIL's sale price. However, the Tribunal noted that being limited companies alone does not establish relatedness, and there was no evidence of mutual interest or significant financial connections between the two entities. The Tribunal upheld the Commissioner's decision, emphasizing that the mere fact of BIL selling goods under its brand name did not prove a related person status.

3. The determination of the assessable value of ECCC's products based on BIL's sale price was a crucial point of contention. The revenue contended that since BIL sold the goods at higher prices, this should be the basis for assessment. However, the Tribunal found that without concrete evidence of financial interdependence or mutual interest, the sale price of BIL could not be automatically considered the assessable value of ECCC's products. Therefore, the impugned order vacating the demand was upheld.

4. The validity of the impugned order vacating the demand by the Commissioner was thoroughly examined. The Tribunal scrutinized the relationship between ECCC and BIL, emphasizing the absence of significant financial transactions or mutual interests to establish related person status. Based on the lack of concrete evidence supporting the revenue's claims, the Tribunal sustained the impugned order and rejected the appeal filed by the revenue, thereby affirming ECCC's eligibility for the SSI benefit.

This comprehensive analysis highlights the key legal issues and the Tribunal's reasoning behind the decision, ensuring a detailed understanding of the judgment.