1987 (5) TMI 283 - AT - Central Excise

Summary

Issues:
- Withdrawal of facility of invoice value assessment under Central Excise Notification No.120/75
- Dispute regarding financial relationship between appellants and buyer
- Interpretation of Notification No.120/75 conditions
- Application of the concept of "related person" as per Supreme Court judgment
- Burden of proof on the department to establish influence of financial relationship on invoice price

Analysis:
The case involved the withdrawal of the facility of invoice value assessment under Central Excise Notification No.120/75 by the Assistant Collector due to the alleged financial relationship between the appellants and the buyer, M/s Carbon Corporation Ltd. The appellants contended that their financial investment in Carbon Corporation did not create a related person status, and they were entitled to the assessment facility. The Assistant Collector rejected these arguments, leading to an appeal before the Appellate Collector, Calcutta, and subsequently before the Tribunal.

The Tribunal considered the conditions of Notification No.120/75, which exempted goods from excess excise duty based on invoice price, provided there was no influence from any commercial, financial, or other relationship between the manufacturer and the buyer. Referring to the Supreme Court judgment in Union of India v. Atic Industries Ltd., the Tribunal analyzed the concept of "related person" under Section 4 of the Central Excises and Salt Act, 1944. The Supreme Court clarified that a direct or indirect interest in each other's business is essential to establish a related person status.

While the term "related person" was not explicitly stated in Notification No.120/75, the Tribunal applied the Supreme Court's interpretation to determine the existence of a financial relationship between the appellants and Carbon Corporation. It concluded that even if a financial relationship existed, the department had to prove that it influenced the invoice price, which was not demonstrated in this case. Therefore, the Tribunal held that the lower authorities' decision was incorrect, and the appeal was allowed, setting aside the orders that disallowed the assessment facility.

In summary, the judgment focused on the interpretation of Notification No.120/75 conditions, the application of the "related person" concept from the Supreme Court judgment, and the burden of proof on the department to establish the influence of any financial relationship on the invoice price. The Tribunal's decision favored the appellants, emphasizing the lack of evidence showing that the financial relationship impacted the pricing, leading to the allowance of the appeal.