1992 (1) TMI 109 - HC - Central Excise

Valuation - Related person - Demand - Limitation - Classification list and price list - Interpretation of statute

Summary

Issues Involved:
1. Legality and validity of the Collector's order dated February 26, 1987.
2. Determination of whether Alembic Chemical Works Company Ltd. was a "related person" under Section 4(4)(c) of the Central Excises and Salt Act, 1944.
3. Alleged suppression of facts and misstatement by the petitioner company.
4. Applicability of Section 11A of the Central Excises and Salt Act, 1944 for recovery of duties.
5. Validity of the penalties imposed under Rule 173-Q of the Central Excise Rules, 1944.

Detailed Analysis:

1. Legality and Validity of the Collector's Order:
The petitioners challenged the legality and validity of the Collector's order dated February 26, 1987, which confirmed the demand for the short payment of excise duty and imposed penalties. The petitioners contended that the conclusion arrived at by the Collector was based on a misinterpretation and disregard of the provisions of law, specifically Section 4(4)(c) which defines "related person." The court upheld the Collector's order, finding no error in the conclusions drawn regarding the relatedness of Alembic Chemical Works Company Ltd. and the petitioner's company.

2. Determination of "Related Person":
The court examined the relationship between the petitioner company and Alembic Chemical Works Company Ltd. under Section 4(4)(c) of the Act. It was found that both companies held equity shares in each other, and they shared common directors and a common chairman. This reciprocal interest in each other's business led the court to conclude that Alembic Chemical Works Company Ltd. was indeed a "related person." The court noted that the shareholding was significant and not negligible, thus supporting the Collector's conclusion.

3. Alleged Suppression of Facts and Misstatement:
The court found that the petitioner company had suppressed facts and wilfully misstated information. The company did not file the correct price list (Part II or Part IV) despite charging different prices to different buyers, including Alembic Chemical Works Company Ltd. The petitioner also failed to comply with summons for producing relevant documents and cost data. The court agreed with the Collector's finding that there was a deliberate suppression of facts and misstatement, which justified the invocation of the extended period of limitation under the proviso to Section 11A of the Act.

4. Applicability of Section 11A for Recovery of Duties:
The court addressed the petitioners' contention that once a price list is approved under Rule 173C, it becomes final and cannot be reopened unless set aside in appeal. The court clarified that Section 11A of the Act allows for the recovery of duties not levied or paid, short levied or paid, or erroneously refunded, irrespective of the approval of the price list. The court emphasized that the provisions of Section 11A can be invoked in cases of fraud, collusion, wilful misstatement, or suppression of facts, even if the price list has been approved. The court rejected the petitioners' argument, noting that such an interpretation would render the provisions of Section 11A unworkable.

5. Validity of Penalties Imposed:
The court upheld the penalties imposed under Rule 173-Q of the Central Excise Rules, 1944. The penalties were deemed appropriate given the findings of suppression of facts and wilful misstatement by the petitioner company. The court found no merit in the petitioners' contention that the penalties were unwarranted.

Conclusion:
The court rejected the petition, upheld the Collector's order, and discharged the rule. The interim relief granted earlier was vacated. The court also addressed the petitioners' request for keeping the order vacating interim relief in abeyance, directing that the recovery of the amount in question be stayed until March 8, 1992, subject to the petitioners paying interest at the rate of 18% per annum and filing an undertaking as specified.