2001 (11) TMI 193 - AT - Central Excise

Summary

Issues Involved:
1. Confirmation of Central Excise duty.
2. Imposition of penalties under various sections/rules.
3. Interest on the confirmed duty.
4. Determination of "related persons" under Section 4 of the Central Excise Act.
5. Allegations of suppression of facts and evasion of duty.

Issue-wise Detailed Analysis:

1. Confirmation of Central Excise Duty:
The Commissioner of Excise and Customs, Aurangabad, confirmed a duty of Rs. 3,00,03,287/- against the appellants. The duty demand was based on the premise that the appellants, Cosepa Fiscal Industries Ltd., and Standard Batteries Ltd. were related persons under Section 4 of the Central Excise Act, 1944. The department argued that the price at which Cosepa sold goods to Standard Batteries was not the normal price, and the normal price should be the price at which Standard Batteries sold to independent buyers.

2. Imposition of Penalties:
The Commissioner imposed penalties under various sections/rules:
- Rs. 2,54,82,569/- under Section 11AC on Cosepa.
- Rs. 10,00,000/- under Rule 173Q on Cosepa.
- Rs. 10,00,000/- under Section 209A on Standard Batteries.
- Rs. 5,00,000/- each under Section 209A on Sadarangani, Guzdar, and Shenoy.

3. Interest on Confirmed Duty:
Interest was levied on the confirmed duty amount of Rs. 2,54,82,569/- under Section 11AB.

4. Determination of "Related Persons":
The key issue was whether Cosepa Fiscal Industries Ltd. and Standard Batteries Ltd. were "related persons" under Section 4(4)(c) of the Central Excise Act. The department alleged that due to the transfer of land, shared directors, and financial transactions, the two entities had mutual interest in each other's business. However, the tribunal concluded that these circumstances did not establish mutuality of interest. The tribunal referred to the Supreme Court's decision in Union of India v. Atic Industries Pvt. Ltd., emphasizing that both entities must have direct or indirect interest in each other's business, which was not the case here.

5. Allegations of Suppression of Facts and Evasion of Duty:
The Show Cause Notice charged the appellants with deliberately suppressing material facts about their relationship to evade excise duty. The tribunal found that the memorandum of understanding and other relevant documents were provided to the department in a timely manner, negating the suppression charge. The tribunal also noted that the transactions between the two companies were at normal commercial terms without any extra commercial considerations.

Conclusion:
The tribunal allowed the appeals and set aside the impugned order. It ruled that Cosepa Fiscal Industries Ltd. and Standard Batteries Ltd. were not "related persons" under Section 4(4)(c) of the Central Excise Act, thereby invalidating the basis of the duty demand and penalties. The tribunal's decision was based on the facts of the case and the legal interpretation of "related persons" as established by the Supreme Court.