2012 (10) TMI 733 - AT - Central Excise

Demand of duty, interest and imposition of penalty related person Held that - Shareholders of a public limited company do not, by reason only of their shareholding, have an interest in the business of the company. Equally, the fact that two public limited companies have common Directors does not mean that the one company has an interest to the business of the other - assessee and the chemical company were not related persons

Summary

Issues involved:
Appeal against dropped demand of duty, interest, and penalty based on related party transactions under Central Excise Act, 1944.

Analysis:
The appeal was filed by the Revenue against an order dropping proceedings initiated by a show-cause notice for demand of duty, interest, and penalty. The Revenue contended that two companies, M/s. Indus Fabricons and M/s. Mojj Engg. Systems, were related due to common directors and management. The Revenue argued that the assessable value of goods manufactured by Indus should be based on the price Mojj sells the goods for, as they are related persons under Section 4(4)(c) of the Central Excise Act, 1944.

The Respondent, Indus Fabricons, countered the Revenue's claim by stating that they sell 90% of goods to Mojj at comparable prices and the remaining 10% to independent buyers at the same price. They argued that Mojj also purchased goods from other manufacturers at similar prices. The Respondent relied on a Supreme Court decision to support their position.

The Tribunal noted that Indus Fabricons indeed sold 10% of goods to independent buyers at the same price as to Mojj, and Mojj purchased goods from other manufacturers at similar prices. Citing the Supreme Court decision, the Tribunal emphasized that common directors do not imply an interest in each other's business. Therefore, the Tribunal found no merit in the Revenue's appeal, as Indus Fabricons did not evade duty by selling goods to Mojj at lower prices. Consequently, the appeal was dismissed.