2002 (1) TMI 204 - AT - Central Excise

Issues Involved:

1. Relationship between M/s. Bharti Telecom Ltd. (BTL) and M/s. Siemens Telecom Ltd. (STL) under Section 4(4)(c) of the Central Excise Act.
2. Determination of assessable value for excise duty purposes.
3. Alleged clandestine removal of telephone sets by BTL.
4. Imposition of penalties under Section 209A of the Central Excise Act.

Detailed Analysis:

1. Relationship between M/s. Bharti Telecom Ltd. (BTL) and M/s. Siemens Telecom Ltd. (STL):

The primary issue was whether BTL and STL are "related persons" under Section 4(4)(c) of the Central Excise Act. The Commissioner held that BTL and STL were related, based on several grounds such as shared directorship, mutual business interests, and exclusive sales agreements. The Tribunal disagreed, finding that:

- BTL and STL operate as separate entities with independent Boards of Directors and business interests.
- BTL's sales to STL constituted only 17.94% to 28.9% of its total sales, indicating that STL was not the primary buyer.
- The agreement terms, such as exclusive marketing rights and non-competing clauses, were standard commercial practices and did not indicate a lack of independence.
- STL's use of BTL's trademark "BEETEL" and the payment for marketing assets did not establish a related person relationship.

The Tribunal concluded that BTL and STL are not related persons as defined under Section 4(4)(c) of the Central Excise Act.

2. Determination of Assessable Value:

The Commissioner had determined that the price at which STL sold the telephones should be used for valuing the excise duty. The Tribunal found this incorrect, noting that:

- BTL sold telephones to DoT/MTNL at comparable prices, demonstrating that sales to STL were not undervalued.
- The prices for similar models sold to DoT and STL were comparable, with some models even being sold at higher prices to STL.
- The Tribunal rejected the view that the joint venture was formed to reduce the assessable value of BTL's products.

3. Alleged Clandestine Removal of Telephone Sets:

The Commissioner found that BTL had clandestinely removed 3302 telephone sets, resulting in a duty demand of Rs. 7,30,306/-. The Tribunal noted discrepancies in the reconciliation of sales and purchases and remanded this issue for further examination by the adjudicating authority.

4. Imposition of Penalties under Section 209A:

The Commissioner imposed penalties on STL and Shri Rakesh Bharti Mittal under Section 209A. The Tribunal found:

- STL could not be penalized as it is not a natural person and had no personal benefit from the transactions.
- Shri Rakesh Bharti Mittal, as an employee, could not be held liable under Section 209A since he was not in charge of day-to-day affairs related to the goods in question.

The Tribunal set aside the penalties but allowed for the possibility of re-imposition if the issue of clandestine removal is decided against BTL upon remand.

Conclusion:

The Tribunal allowed the appeals, holding that BTL and STL are not related persons, and the sales between them were on a principal-to-principal basis. The issue of clandestine removal of telephone sets was remanded for further consideration. Penalties imposed under Section 209A were set aside, with the possibility of re-imposition contingent on the outcome of the remanded issue.

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