2009 (7) TMI 317 - AT - Central Excise

Allegation that MSO and MTL are related persons within the meaning and scope as defined under Section 4 of the Central Excise Act 1944 revenue contend that price charged by the MSO to MTL is much lower - No evidence has been gathered to show that all the shares of the three companies are owned by the only family to support the conclusion that the profits may by any of the companies would stay within the family only and therefore the corporate veil had to be lifted. not proved that there is a mutuality of interest between the companies. - While it has been mentioned that the price charged is much lower there is no detailed discussion to show how much lower is the price whether it is much beyond the normal commercial transactions between the purchaser and buyer. There is no finding of a flowback. There is no evidence to show that all the shares are owned by the family members and no evidence to show that the price charged by the MSO to MTL is not normal. Therefore we find that the evidence relied upon by the lower authorities are not conclusive enough to come to the conclusion that the MSO and MTL are related persons. - We find that the evidences referred to by the department are not sufficient to come to the conclusion and therefore on the ground of limitation also appellants succeed. Once the duty demand is not upheld penalties also cannot be upheld.

Summary

Issues:
Confirmation of duty demand against M/s. Motorol Speciality Oils Ltd. for being related to M/s. Motorol Technologies Ltd. under Central Excise Act, 1944 and imposition of penalties.

Analysis:
The Appellate Tribunal considered the appeal against the duty demand of Rs. 15,33,508/- and penalties imposed on M/s. Motorol Speciality Oils Ltd. (MSO) and its Director. The issue revolved around the relationship between MSO and M/s. Motorol Technologies Ltd. (MTL) under Section 4 of the Central Excise Act, 1944. The grounds for confirming the demand and penalties included common directors, similar brand names, mutual employees, shared premises, and financial transactions between the companies.

The Advocate for the Appellant argued that the grounds cited were insufficient to establish a related person status between MSO and MTL. He referenced a Supreme Court judgment emphasizing the need for mutual interest to determine related persons. The Advocate also contested the invocation of the extended period for the case, highlighting the lack of mutuality of interest and proper valuation rules application by the department.

The Departmental Representative countered by pointing out clearances through related persons, shared employees, and financial transactions as evidence of relatedness. They argued for upholding the lower authorities' decision to lift the corporate veil due to benefits staying within the family, regardless of which company sold the goods.

The Tribunal analyzed the grounds cited by the lower authorities and found a lack of detailed examination on crucial aspects. Rule 9 required all goods to be sold only through related persons for valuation based on related person's price. The Tribunal noted the absence of conclusive evidence showing mutual interest, abnormal pricing, or flowback of funds. They emphasized the necessity for clear findings on these aspects to establish related person status.

Ultimately, the Tribunal found merit in the Advocate's arguments regarding the invocation of the extended period and the insufficiency of evidence to establish related person status. They concluded that the evidence did not conclusively prove relatedness between MSO and MTL, leading to the setting aside of the impugned order and allowing the appeals with consequential relief to the appellants.