1989 (10) TMI 176 - AT - Central Excise

Summary

Issues:
1. Whether CMO is a related person or a favoured buyer.
2. Whether the discount allowed by the respondent company to CMO is permissible.
3. Whether the demand is time-barred.

Analysis:
The case involved two appeals filed by the Revenue, interlinked and connected, regarding the respondents, a manufacturer of Prepared and Preserved Foods falling under Tariff Item Nos. 1A and 1B of Central Excise Tariff. The issue revolved around the trade discount alleged to be retained by the Central Marketing Organisation (CMO), approved by the Department, leading to a show cause notice for non-passage of full discount to wholesale dealers. The Assistant Collector confirmed the demands under Section 11A, citing lack of invoices from CMO and alleged suppression of facts. The Collector of Central Excise (Appeals) held that CMO was not a related person, and no suppression of facts occurred, leading to the Revenue's appeal.

The Revenue contended that CMO was a related person due to majority partners being close relatives of the respondent's directors, invoking the Bombay Tyres International case. They argued that the agreement between the respondent and CMO indicated a lack of arm's length transaction, justifying the demand disallowing the discount. On the other hand, the respondent argued that the entities were separate legal entities, citing legal precedents and asserting that CMO was not a favoured buyer, as prices were similar to other distributors. They emphasized the fair pricing and normal trade practices, challenging the invocation of a larger period under Section 11A.

The Tribunal considered the issues of CMO's status and the discount's permissibility, citing a previous appeal where CMO was not deemed a related person or favoured buyer. Upholding the previous view, the Tribunal concluded that the discount was just and reasonable, deducting it from the assessable value. As the issues and facts were similar in both appeals, the Tribunal dismissed the Revenue's appeals, ruling in favor of the respondents. The consequential relief of refund claimed by the respondents in one appeal was also allowed, aligning with the upheld impugned order. Consequently, both impugned orders were upheld, and the Revenue's appeals were dismissed.