2018 (1) TMI 1163 - AT - Central Excise

Valuation - sister concern/related person - Revenue felt that the capital goods sold to sister concern/related person should be assessed on the depreciated value - Held that - the Ld. Commissioner (Appeals) has dismissed the appeal of the appellants by one line finding that there is a direct relationship between all the three directors of the appellant s company. There is no other finding as to how relationship has affected the value or whether there is mutuality of interest in the business, which has affected the value. In the absence of any evidence showing mutuality of interest the fact that the Directors of the appellant firm are related to each other or the Director of the appellant firm is the proprietor of the other firm is not sufficient basis to conclude that the value has been affected in any way by the relationship. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against differential duty, interest, and penalty imposition based on relationship with sister concern/related person.

Analysis:
The appellant appealed against an order demanding differential duty, interest, and penalty due to the clearance of capital goods to a sister concern/related person. The Revenue claimed that the goods should be assessed on the depreciated value due to the relationship. The show cause notice demanded duty, interest, and penalty, which was confirmed by the adjudicating authority and upheld by the Commissioner (A). The appellant argued that the mutuality of interest was not proven by the department, solely relying on the relationship. The Revenue contended that the relationship between the parties indicated mutuality of interest. However, the show cause notice was found faulty as it did not specify the basis of the relationship.

The Tribunal noted that the show cause notice lacked details on the relationship basis but the adjudicating authority introduced the relationship aspect, stating the mutuality of interest due to the direct relationship between the directors of the appellant company and the proprietor of the sister concern. The Commissioner (A) dismissed the appeal based on the direct relationship without proving how it affected the value. The Tribunal emphasized that mere relatedness of directors or proprietorship was insufficient to conclude that the value was influenced without evidence of mutuality of interest.

In the case laws cited by the Revenue, the Tribunal found that the presumption of mutuality of interest was not valid without factual data establishing the same. The cases highlighted the need to ascertain shareholdings and control to determine the mutual interest in each other's business. The Tribunal concluded that the Revenue's presumption of mutuality of interest was unfounded in the absence of concrete evidence. Additionally, in another case referenced, significant factors such as logo use, common accounts, and staff presence were crucial in proving mutuality of interest and control, which were lacking in the present case.

Ultimately, the Tribunal found no merit in the Commissioner (A)'s order and allowed the appeal, emphasizing the insufficiency of evidence to support the claim of mutual interest influencing the value. The decision highlighted the importance of concrete evidence in establishing mutuality of interest rather than mere relationships for assessing duty on depreciated value.