2002 (9) TMI 537 - AT - Central Excise

Issues Involved:
1. Determination of whether M/s. SATL and its buyers, M/s. CEAT and M/s. Goodyear, are "related persons" under Section 4(4)(c) of the Central Excise Act, 1944.
2. Validity of the demand for differential duty due to alleged undervaluation.
3. Appropriateness of invoking the extended period under Section 11A(1) of the Act for alleged suppression of facts.
4. Correctness of the quantification of the duty demand.
5. Whether the case should be remanded for de novo adjudication or the appeals should be allowed.

Detailed Analysis:

1. Determination of "Related Persons":
- The Commissioner argued that M/s. SATL, CEAT, and Goodyear are related due to mutual interest, primarily citing the interest-free loan and equipment provided by CEAT and Goodyear to M/s. SATL.
- The Commissioner relied on the Supreme Court judgment in McDowell & Co. v. Commercial Tax Officer, emphasizing that the legal relationship must be determined by the true nature of transactions, not just their form.
- The Tribunal Member (Judicial) initially supported the Commissioner's view but noted the need for further clarity on the relationship and inconsistencies in duty quantification, suggesting a remand.
- Tribunal Member (Technical) disagreed, stating that the interest-free loan alone does not establish a mutual interest in each other's business as required by Section 4(4)(c). He referenced judgments in Plus Cosmetics Pvt. Ltd. v. CCE and International Computer India Manufacturing Co. Ltd. v. CCE, which held that interest-free loans do not establish a relationship.
- The Technical Member also cited the Supreme Court's decision in UOI v. Atic Industries Ltd., which ruled that mere shareholding and directorship do not imply mutual interest.
- The third Member (Judicial) concurred with the Technical Member, emphasizing the Supreme Court's ruling in Alembic Glass Industries Ltd. v. CCE & Cus., which clarified that shareholders do not have an interest in the business merely by holding shares.

2. Validity of the Demand for Differential Duty:
- The Commissioner confirmed a duty demand of Rs. 8,62,04,576/- after considering deductions for transport charges, taxes, discounts, and interest.
- The appellants argued that the correct liability should be significantly lower, supported by a CA certificate and their own calculations.
- The Tribunal noted inconsistencies in the figures presented by both the appellants and the Commissioner, suggesting a need for reconciliation.

3. Extended Period under Section 11A(1) for Alleged Suppression of Facts:
- The Commissioner invoked the extended period, alleging that M/s. SATL suppressed facts and willfully misdeclared the assessable value to evade duty.
- The Tribunal Member (Technical) found that the appellant's failure to disclose the interest-free loan and equipment supply justified the extended period's invocation.
- However, the Member (Technical) also noted that from the date of the department's knowledge of these facts (17-12-1997), the demand would be barred by limitation.

4. Correctness of Duty Quantification:
- The Tribunal observed discrepancies in the duty quantification, with different figures presented by the Commissioner and the appellants.
- The Judicial Member suggested remanding the case for accurate quantification.

5. Remand vs. Allowing Appeals:
- The Judicial Member initially proposed a remand for de novo adjudication to reconcile inconsistencies and establish the relationship adequately.
- The Technical Member disagreed, concluding that the relationship was not established and the demand was unsustainable on merits.
- The third Member (Judicial) resolved the difference, agreeing with the Technical Member that remand was unnecessary and the appeals should be allowed.

Conclusion:
- The appeals were allowed, and the impugned order was set aside. The Tribunal concluded that M/s. SATL was not related to M/s. CEAT and M/s. Goodyear under Section 4(4)(c) of the Act, and the demand for differential duty was not sustainable. The extended period for invoking the demand was also deemed inappropriate post-disclosure of relevant facts.

← Previous Next →