1998 (11) TMI 274 - AT - Central Excise

Summary

Issues Involved:
1. Determination of the normal price for excise duty purposes.
2. Relationship between PCPL and CCCL as related persons.
3. Eligibility for concessional rate of duty under Notification 175/86.
4. Imposition of penalties on PCPL, CCCL, and their directors.

Summary:

1. Determination of the Normal Price for Excise Duty Purposes:
The Commissioner of Central Excise, Kanpur, confirmed a duty demand of Rs. 1,24,74019.76 against PCPL, based on the price at which CCCL sold detergent cakes and powder to independent buyers, treating CCCL as a favoured buyer of PCPL. The Tribunal found that the factors cited by the Revenue to establish CCCL as a favoured buyer were insufficient. The Tribunal held that the transactions between PCPL and CCCL were at arm's length and that the price at which PCPL sold goods to CCCL was the normal price u/s 4(1)(a) of the Central Excise Act, 1944.

2. Relationship Between PCPL and CCCL as Related Persons:
The Tribunal examined various factors, including common directors, unsecured loans, and financial arrangements, and concluded that these did not establish CCCL as a related person or favoured buyer of PCPL. The Tribunal distinguished the present case from the Pratibha Chemicals case, noting the absence of mutual shareholding between PCPL and CCCL.

3. Eligibility for Concessional Rate of Duty Under Notification 175/86:
The Commissioner extended the benefit of Notification 175/86 to PCPL, accepting that the brand 'Plus' detergent cake belonged to CCCL and thus, clearances of Plus detergent cake were not required to be clubbed with the clearances of Plus detergent powder manufactured by PCPL. The Tribunal upheld this finding, noting that the brand name 'Plus' belonged to CCCL.

4. Imposition of Penalties on PCPL, CCCL, and Their Directors:
The Tribunal set aside the penalties imposed on PCPL, CCCL, and their directors, finding that the transactions between the two companies were at arm's length and that CCCL was not a favoured buyer of PCPL. Consequently, the duty demand was also set aside as unsustainable.

Conclusion:
The Tribunal held that the relationship between CCCL and PCPL was on a principal-to-principal basis, and the two companies were not related persons within the meaning of Section 4 of the Central Excise Act, 1944. The appeals were allowed, and the impugned order was set aside.