2005 (6) TMI 149 - AT - Central Excise

Issues Involved:
1. Whether PGIL and PGHP are related persons under Section 4(4)(c) of the Central Excise Act, 1944.
2. Whether the price at which PGIL sold goods to PGHP was the normal price under Section 4(1)(a) of the Central Excise Act, 1944.
3. Whether the non-compete fee/licence fee of Rs. 12.8 crores received by PGIL from PGHP should be considered as additional consideration affecting the assessable value.
4. Whether the entire demand is barred by limitation.
5. Whether penalties and interest imposed by the Commissioner are justified.

Issue-wise Detailed Analysis:

1. Related Persons:
The show cause notice did not allege that PGIL and PGHP are related persons under Section 4(4)(c) of the Central Excise Act, 1944. The Commissioner's finding that both companies are related due to their common holding company, Proctor & Gamble Company, USA, was deemed unsustainable. The Tribunal relied on the decisions in *International Computer India Manufacture Co. Ltd. v. Collector of Central Excise* and *Indian Oil Corporation v. CCE*, which clarified that common shareholding and directorship do not automatically establish a mutual interest in each other's business. The Tribunal also referenced the Supreme Court's decision in *Alembic Glass Industries Ltd. v. CCE*, which stated that shareholders of a public limited company do not have an interest in the business of the company solely due to their shareholding.

2. Normal Price:
The Tribunal found that the price at which PGIL sold goods to PGHP post-1-4-1994 was the normal price under Section 4(1)(a) of the Act. The Tribunal noted that the entire goods being sold to PGHP does not make PGHP a related person, as supported by the decisions in *Siddhosons v. UOI*, *Chetan B. Thadani v. UOI*, and *CCE v. Besta Cosmetics Ltd.* The Tribunal also held that quality control by PGHP does not affect the normal price, citing *L.V.T. Products Ltd. v. Collector* and *Kwality Ice Cream v. Commissioner*.

3. Non-compete Fee/Licence Fee:
The Tribunal concluded that the non-compete fee/licence fee of Rs. 12.8 crores received by PGIL from PGHP cannot be considered as additional consideration for the sale of detergent powder. This conclusion was supported by the decisions in *Godrej Boyce & Mfg. Co. Ltd. v. CCE* and *Kwality Ice Cream Co. v. CCE*. The Tribunal emphasized that no evidence was presented to justify departing from the normal price under Section 4(1)(a).

4. Limitation:
The Tribunal determined that the entire demand was barred by limitation. The department was fully aware of the facts, as evidenced by the continuous communication and submission of documents by PGIL. Therefore, the allegation of suppression of facts was unfounded.

5. Penalties and Interest:
Given that the duty demands on undervaluation charges could not be upheld on merits and were barred by limitation, the Tribunal found no cause to invoke penalties and interest. The Commissioner's order imposing penalties and interest was set aside.

Conclusion:
The Tribunal set aside the order of the Commissioner, allowing the appeals. The Tribunal held that PGIL and PGHP were not related persons, the price at which goods were sold was the normal price, the non-compete fee/licence fee was not additional consideration, the demand was barred by limitation, and penalties and interest were unjustified.

(Pronounced in Court on 24-6-2005)

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