1994 (8) TMI 101 - AT - Central Excise

Issues Involved:
1. Whether M/s. Alembic Chemical Works Co. Ltd. was a related person under Section 4(4)(c) of the Central Excises and Salt Act, 1944.
2. Whether the price charged to M/s. Alembic Chemical Works Co. Ltd. was low and how the value should be determined.
3. Whether the proceedings initiated by the Collector amounted to a review since the price list was already approved.
4. Whether the demand was barred by time.
5. Whether the penalty imposed was justified.

Issue-wise Detailed Analysis:

1. Related Person Under Section 4(4)(c):
The appellants contended that to hold a company as a related person under Section 4(4)(c), it must be a holding or subsidiary company as defined under the Companies Act, 1956. M/s. Alembic Chemical Works Co. Ltd. was neither a holding company nor a subsidiary company. The Tribunal found that mutuality of interest is the decisive factor for determining a related person. The companies had mutual business interests as they held shares in each other and had common Chairman and Directors. Thus, the Tribunal upheld that M/s. Alembic Chemical Works Co. Ltd. was a related person under Section 4(4)(c).

2. Price Charged and Value Determination:
The appellants argued that even if M/s. Alembic Chemical Works Co. Ltd. was a related person, the price should be determined under Section 4 read with Valuation Rules, particularly Rule 6(b), since the goods were captively consumed. The Tribunal noted that the Collector should have resorted to Valuation Rules for determining the assessable value. Rule 6(b) provides that the value should be based on the comparable goods produced by the assessee or any other manufacturer. Since this method was not followed, the Tribunal remanded the matter to the Collector for re-determination of the value as per Rule 6.

3. Proceedings Initiated by the Collector:
The appellants argued that the proceedings initiated by the Collector amounted to a review since the price list was already approved. The Tribunal held that price lists approved can be re-opened under Section 11A of the Act in case of short-levy, non-levy, or erroneous refund. The Supreme Court's decision in Elson Machines Pvt. Ltd. established that excise authorities are not barred from taking a different view than in the approved classification, subject to the limitation prescribed under Section 11A.

4. Time Barred Demand:
The appellants contended that the demand was barred by time as the activities of both companies were within the Department's knowledge. The Tribunal disagreed, stating that the visit of the officer to the assessee's factory or the location of the office within M/s. Alembic Chemical Works Co. Ltd.'s premises did not imply that the Department was aware of the activities. The Tribunal upheld the Department's invocation of the larger period due to suppression of facts.

5. Imposition of Penalty:
The appellants argued against the imposition of penalties in the absence of clandestine removal and mens rea. The Tribunal decided to reconsider the penalty aspect upon re-determination of the value. The matter was remanded to the Collector for re-evaluation, and the penalty aspect would be reconsidered based on the outcome.

Conclusion:
The appeal was disposed of with directions to the Collector to re-determine the assessable value as per Rule 6 of the Valuation Rules, and to reconsider the penalty based on the re-determined value.

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