2002 (9) TMI 106 - SC - Central Excise

Whether the respondent and M/s. International are related persons? Whether, on the facts and in the circumstances, it is open to the Revenue to invoke the provisions of Section 11A of the Act? Held that - It was found that the respondent and M/s. International were having common Directors and that they were relatives of one another; a further finding was also noted that both the companies were family concerns and were beneficiaries of their ventures and that the benefit of both the concerns are shared by members of one and the same family. From these findings, it is difficult to resist the conclusion that the respondent and M/s. International have a direct interest, in the business of each other and that the mutuality of interest between the two is apparent. Once the findings are accepted, the conclusion that there is mutuality of interest between the two concerns is inevitable. In this view of the matter, we set aside the finding of the Tribunal that the respondent and M/s. International are not related persons. As it is clear that the respondent had disclosed the correct facts including the price at which the goods were sold to related person and the difference in the price. In view of this declaration, it is futile to contend that there was any suppression of fact on the part of the respondent. The learned Attorney General does not seriously dispute this position. It follows that the larger period of limitation provided in Section 11A of the Excise Act is not available to the Revenue. We, therefore, confirm the conclusion arrived at by the Tribunal on this aspect. For the period April 11, 1978 to September 29, 1979 the show cause notice was issued on April 13, 1982 which is far beyond the period of six months, therefore, the Revenue is not entitled to claim any difference of duty.

Summary

Issues:
1. Whether the respondent and M/s. International are related persons under the Central Excise Act.
2. Whether the Revenue can invoke the provisions of Section 11A of the Excise Act.

Analysis:

Issue 1:
The case involves the determination of whether the respondent and M/s. International are related persons under the Central Excise Act. The Tribunal found common Directors and familial relationships between the two companies, indicating a direct interest in each other's business. The definition of "related person" under Section 4(4)(c) of the Excise Act requires mutual interest in each other's business, whether direct or indirect. The Supreme Court analyzed previous judgments to interpret this definition. It concluded that the Tribunal's findings support the existence of a direct interest between the respondent and M/s. International, making them related persons. The Court set aside the Tribunal's finding to the contrary.

Issue 2:
The second issue pertains to whether the Revenue can apply Section 11A of the Excise Act. The Tribunal noted that the respondent declared M/s. International as a related person, disclosing prices at which goods were sold to them. The Court found that there was no suppression of facts by the respondent, making the larger period of limitation under Section 11A unavailable to the Revenue. As the show cause notice was issued beyond the six-month period, the Revenue could not claim any duty difference for the specified period. The Court confirmed the Tribunal's decision on this aspect, partially allowing the appeal.

In conclusion, the Supreme Court held that the respondent and M/s. International are related persons under the Central Excise Act due to mutual interest in each other's business. It also determined that the Revenue could not invoke Section 11A as there was no suppression of facts by the respondent. The Court partially allowed the appeal based on these findings.