2004 (3) TMI 200 - AT - Central Excise

Summary

Issues:
1. Whether two companies are related persons based on common shareholding, common directors, and financial transactions.
2. Whether charges collected by one company from customers should be included in the assessable value.
3. Whether the show cause notice is time-barred.

Issue 1:
The case involved determining if two companies, M/s. Koron Business Systems Ltd. and M/s. Kores (India) Ltd., were related persons due to common shareholding, common directors, and financial transactions. The Commissioner argued that the companies were related based on various grounds, including the majority shareholding by M/s. Kores (India) Ltd., common directors, and an unsecured loan given by M/s. Kores (India) Ltd. to M/s. Koron Business Systems Ltd. However, the Tribunal referenced legal precedents, such as the Alembic Glass Industries case and the Atic Industries case, to establish that common shareholding and common directors do not necessarily indicate a relationship between companies. The Tribunal concluded that the circumstances presented did not prove a relationship between the two companies, and hence, the Commissioner's contention was rejected.

Issue 2:
The Commissioner contended that charges collected by M/s. Kores (India) Ltd. from customers should be included in the assessable value of the goods. The Tribunal disagreed, stating that the charges collected were for services provided by M/s. Kores (India) Ltd. to its customers and did not flow back to M/s. Koron Business Systems Ltd. The Tribunal noted that even when M/s. Koron Business Systems Ltd. directly sold machines to government organizations, similar charges were collected but passed on to M/s. Kores (India) Ltd. for after-sales services. Therefore, the Tribunal rejected the Commissioner's argument that these charges indicated a relationship between the two companies.

Issue 3:
Regarding the timeliness of the show cause notice, the department argued that new information about common directors and an unsecured loan justified invoking a larger period of limitation. However, the Tribunal found that these factors did not establish a relationship between the companies. The Tribunal noted that the issue of 'related persons' had been adjudicated twice earlier in the same case, indicating that the department was aware of the circumstances. Consequently, the Tribunal held that the show cause notice was time-barred and set aside the Commissioner's order, allowing the appeals.