1989 (2) TMI 231 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of Notification No. 120/75.
2. Determination of related persons under Section 4(4)(c) of the Central Excises and Salt Act.
3. Influence of relationship on the invoice price.
4. Invocation of extended time limit under Section 11A for raising the demand.
5. Provisional assessment and finalization of duty demand.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 120/75:
The appellants manufactured goods under T.I. 63 and availed concessional assessment based on invoice price per Notification No. 120/75. The notification exempts goods from excess duty if the invoice price is the actual price charged, excluding duty and local taxes. The appellants sold goods to their holding company, which raised higher invoices to ultimate customers. The Assistant Collector initially dropped proceedings, finding no extra commercial considerations influencing the invoice price. However, the Collector (Appeals) reversed this, asserting that the relationship between the holding and subsidiary company influenced the invoice price, thus disqualifying the appellants from the notification's benefits.

2. Determination of Related Persons under Section 4(4)(c):
The definition of "related person" includes a holding company and subsidiary company. The Assistant Collector found no mutuality of interest between the appellants and their holding company, thus not treating them as related persons. Conversely, the Collector (Appeals) held that the legal presumption of interest in each other's business exists between a holding and subsidiary company, making them related persons under Section 4(4)(c). The appellate tribunal noted that the lower authorities did not adequately examine the influence of the relationship on the invoice price per Notification 120/75.

3. Influence of Relationship on the Invoice Price:
Proviso (iv) of Notification 120/75 stipulates that the invoice price should not be influenced by any commercial, financial, or other relationships. The Assistant Collector found no evidence of such influence, while the Collector (Appeals) presumed influence due to the holding-subsidiary relationship. The appellate tribunal emphasized the need for a detailed examination of the transaction modalities and any contractual obligations affecting the price, which the lower authorities failed to conduct.

4. Invocation of Extended Time Limit under Section 11A for Raising the Demand:
The second show cause notice invoked the extended time limit under Section 11A, alleging suppression of facts. The Assistant Collector found no evidence of suppression or misstatement, and this finding was not specifically challenged in the department's appeal. The appellate tribunal noted the lack of challenge and directed the Collector (Appeals) to pass a reasoned order on the time bar aspect.

5. Provisional Assessment and Finalization of Duty Demand:
The department argued that the assessments were provisional, and the second show cause notice referenced the first, suggesting a continuous process. The Assistant Collector's findings on the absence of suppression and the finality of assessments were not adequately addressed by the Collector (Appeals). The appellate tribunal directed a de novo examination, emphasizing the need to consider the terms of Notification 120/75 and the specific findings on provisional assessments.

Conclusion:
The appellate tribunal set aside the Collector (Appeals)'s order and remanded the matter for a de novo examination, focusing on the applicability of Notification 120/75, the influence of the holding-subsidiary relationship on the invoice price, and the time bar issue. The tribunal emphasized the need for a detailed analysis of the transaction modalities and any contractual obligations affecting the price.