1999 (3) TMI 213 - AT - Central Excise

Summary

Issues:
1. Central Excise duty demand based on related party transactions.
2. Application of Small Scale Exemption Notification.
3. Time limit for demanding duty under Section 11A of the Central Excise Act.

Central Excise Duty Demand Based on Related Party Transactions:
The appeal was filed against the Order-in-Original, where it was found that the appellants had sold their products through related persons without charging appropriate prices, leading to the demand of Central Excise duty amounting to Rs. 1,78,710.29 and imposition of a penalty. The Collector held that all units were related and had mutual interests to avoid duty payment. The appellant contended that they did not have business with favored buyers and had no mutual interests, citing approvals and agreements. Legal precedents were referred to supporting the appellant's argument.

Application of Small Scale Exemption Notification:
The appellant argued that as a private limited company, they did not fall under the definition of related persons unless it was a holding or subsidiary company, which was not the case here. They contended that there was no evidence of money flow or mutual interest. Reference was made to a Tribunal decision highlighting the nature of agreements and transactions between parties on a principal-to-principal basis. The appellant also cited a Supreme Court judgment emphasizing the requirement of direct or indirect interest in each other's business to apply the related person definition.

Time Limit for Demanding Duty under Section 11A:
The Department argued that the extended time limit for demanding duty was applicable due to new facts coming to light, justifying the invocation of the proviso to Section 11A(1) of the Central Excise Act. However, the Tribunal noted that the show cause notice issued beyond the normal period of six months was hit by the time limit as the Department was already aware of the facts from an earlier notice. The Tribunal held that the demand of Central Excise duty was time-barred as the appellant had not suppressed any facts, and the extended period could not be invoked. Legal precedents were cited to support this decision, distinguishing the present case from others where the extended period was deemed applicable.

In conclusion, the Tribunal allowed the appeal solely on the grounds of the time limit for demanding duty under Section 11A of the Central Excise Act, ruling that the demand of Central Excise duty was hit by the time limit and could not be pursued further, without delving into the merits of the case regarding related party transactions or the Small Scale Exemption Notification.