2004 (8) TMI 166 - AT - Central Excise

Summary

Issues: Dispute regarding related party treatment for medicines manufactured by one company for another, imposition of penalties.

Analysis:
1. The appeals involved a dispute concerning the treatment of two limited companies as related parties in relation to medicines manufactured by one company for the other. The impugned order assessed the transferred medicines at the selling value due to the related party classification and imposed penalties.

2. The appellants contended that limited companies cannot be considered related parties, emphasizing the commercial nature of the manufacturing agreement without any favoritism. They relied on the legal principle established in the judgment of Alembic Glass Industries Ltd. v. CC.E. - 2002 (143) E.L.T. 244 (S.C.).

3. Upon review, it was found that the manufacturing agreement between the limited companies was purely commercial, and there was no basis to treat them as related parties. Consequently, the impugned order was deemed erroneous, and the demands were held unsustainable, leading to their set aside. As the demands were not sustainable, the penalties imposed were also revoked.

4. The Tribunal allowed both appeals, granting consequential relief to the appellants. The decision was based on the commercial nature of the agreement and the absence of any related party relationship between the limited companies, in line with the legal precedent cited during the proceedings.