1991 (7) TMI 190 - AT - Central Excise

Issues Involved:
1. Whether the appellants and M/s. International are "related persons" under Section 4 of the Central Excises and Salt Act, 1944.
2. Whether the demand for duty is time-barred.
3. Whether the benefit of Notification 71/78 needed to be passed on to the customers.

Detailed Analysis:

1. Related Persons:
The primary issue was whether the appellants and M/s. International could be considered "related persons" under Section 4 of the Central Excises and Salt Act, 1944. The adjudicating authority found that the appellants and M/s. International had common directors and that other directors were relatives, indicating that both companies were family concerns sharing benefits. Consequently, it was held that the appellants and M/s. International were related, and the Central Excise duty was leviable on the price charged by M/s. International.

However, the appellants argued that both companies, being private limited companies, were separate entities and could not be treated as related persons. They cited the case of ICIM, where it was held that subsidiaries of the same holding company were not related due to the absence of common shareholding.

The Tribunal noted that merely having common directors does not suffice to establish that the companies are related unless there is mutuality of interest. The Tribunal found no evidence of mutuality of interest except for the sale of goods, which did not indicate the appellants' interest in M/s. International's business. Thus, the Tribunal held that the appellants and M/s. International could not be treated as related persons.

2. Time-Barred Demand:
The appellants contended that the demand for duty was time-barred. They argued that the department was aware of the Notification 71/78 and the prices declared in Part IV, which included M/s. International as a related person. Therefore, there was no suppression of facts, and the department should have verified the prices and computed the exemption limit accordingly.

The Tribunal agreed with the appellants, stating that once M/s. International was declared as a related person, it was the department's duty to verify the prices and compute the exemption limit. The department's failure to do so could not be attributed to the appellants as suppression of facts. Consequently, the Tribunal held that the larger time-limit of 5 years could not be invoked, and the demand of duty was set aside as time-barred.

3. Passing on the Benefit of Notification 71/78:
The appellants argued that Notification 71/78 did not require the benefit of exemption to be passed on to the customers. They relied on judgments from the Delhi High Court and Bombay High Court, which supported their position.

The Tribunal noted that this issue was rendered academic due to the amendment of Section 4(4)(d)(ii) by the Evidence Act, 1982, which clarified that only the effective duty payable by an assessee could be deducted from the total price. However, this issue did not affect the result of the appeal due to the findings on the first two issues.

Conclusion:
The Tribunal concluded that the appellants and M/s. International could not be treated as related persons, the demand for duty was time-barred, and the issue of passing on the benefit of Notification 71/78 was academic. Accordingly, the appeal was disposed of in these terms.

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