1997 (9) TMI 198 - AT - Central Excise

Summary

Issues:
1. Application for waiver of pre-deposit of duty and penalties under Section 35F of the Central Excise Act, 1944.
2. Assessment of assessable value based on prices charged by a related person.
3. Allegations of mutual interest and related party transactions.
4. Financial hardship of the appellants affecting the deposit amount.

Analysis:

Issue 1: Application for waiver of pre-deposit
The appellants filed applications seeking waiver of pre-deposit of duty and penalties imposed under Section 35F of the Central Excise Act, 1944. The Commissioner of Central Excise, Kanpur had passed Order-in-Original No. 8 of 1997, dated 27-2-1997, leading to duty demands and penalties on the appellants. The applications were opposed by the learned SDR, and after hearing both sides, the Tribunal considered the matter.

Issue 2: Assessment of assessable value
The Tribunal examined the case involving two companies, Plus Cosmetics Pvt. Ltd. and Pratibha Chemicals Pvt. Ltd., manufacturing detergent cakes and soaps, respectively. The dispute revolved around the assessable value based on the prices charged by a related person, Corona Cosmetics & Chemicals, to their wholesale dealers rather than the manufacturers. Duty demands and penalties were imposed on both companies due to the alleged relationship with Corona.

Issue 3: Allegations of mutual interest and related party transactions
The Commissioner found that Corona was a favored buyer and related person of the manufacturers, leading to the assessment of the assessable value based on prices charged by Corona. Various circumstances, including price differences, supply of raw materials, loans, and guarantees, were considered in determining the relationship between the companies and Corona. The appellants contested these findings, arguing that the prices charged were reasonable considering the brand ownership and promotional activities by Corona.

Issue 4: Financial hardship affecting deposit amount
The appellants raised concerns about financial hardship, stating that one company had shut down its manufacturing activity, and the other had incurred significant losses. Considering these circumstances, the Tribunal directed Plus Cosmetics Pvt. Ltd. to deposit Rs. 48 lakhs and Pratibha Chemicals Ltd. to deposit Rs. 10 lakhs in installments. Compliance with the deposit requirements would result in a stay of the recovery of the remaining duty and penalty amounts, with a subsequent hearing scheduled for further proceedings.

This detailed analysis covers the various legal issues addressed in the judgment, including the assessment of assessable value, related party transactions, financial hardship considerations, and the Tribunal's decision regarding the deposit amounts and stay of recovery.