2024 (6) TMI 1003 - AT - Central Excise

Distinct legal entities or related persons to the appellant in terms of Sec.4(3)(b)(i) and (iv) of the Central Excise Act, 1944? - price determined by the appellant on the basis of prevailing market price at the time of removal of the finished goods was the Transaction Value in terms of Section 4(3)(d), and the price is to be determined in terms of Sec.4(1) of the Centra Excise Act, 1944 or not - extended period of limitation. Whether M/s. Meghalaya Cast Alloys Pvt. Ltd., M/s. Shree Ganapati Rolling Mills Pvt. Ltd. and M/s. Pawan Casting (Meghalaya) Pvt. Ltd., private limited companies registered under the Companies Act, 1956, are distinct legal entities or related persons to the appellant in terms of Sec.4(3)(b)(i) and (iv) of the Central Excise Act, 1944? - HELD THAT - The department failed to establish business interest of the appellant in their other Group companies. Thus, the contention of the appellant is agreed that the customers in this case cannot be considered as related persons merely because they have a common director and the appellant company holds some percentage of shares as mentioned above in the Group companies. In view of the above discussion, it is observed that the department has not brought in any evidence to substantiate the allegation that the appellant company is related to the group companies to whom the appellant has sold the goods - question answered in negative. Whether the price determined by the appellant on the basis of prevailing market price at the time of removal of the finished goods was the Transaction Value in terms of Sec. 4(3)(d), and the price is to be determined in terms of Sec.4(1) of the Centra Excise Act, 1944? - HELD THAT - The transactions between the appellant and their customer were on principal-to-principal basis and the price charged by the appellant to the customer was the sole consideration for the sale. There was no evidence brought on record to establish that the appellant has collected any extra commercial considerations from the customers - the price charged by the appellant was on the basis of prevailing market price at the time and place of removal and the same price has been adopted by them for other independent buyers also. Accordingly, the price charges by the appellant to their group companies is the Transaction Value and there is no evidence available on record to conclude that the price is an influenced price - question answered in negative. Whether the entire issue is barred by limitation of time? - HELD THAT - The period of dispute is for the period from April 2005 to January 2008, whereas the impugned Show Cause Notice has been issued on 22.04.2010 i.e., after a lapse of one year from the relevant date, by invoking extended period of limitation - there is no suppression of fact with an intention to evade payment of tax exists in this case. Accordingly, the demand cannot be raised by invoking extended period of limitation and hence the demand confirmed in the impugned order is barred by limitation - answer is in the negative. The demand of duty along with interest and penalty confirmed in the impugned order is not sustainable on merits as well as on limitation - Appeal allowed.

Summary

The issues involved in the judgment are:

1. Whether the appellant company and the group companies are "related persons" u/s 4(3)(b) of the Central Excise Act, 1944.
2. Whether the price determined by the appellant was the "Transaction Value" u/s 4(3)(d) of the Central Excise Act, 1944.
3. Whether the demand is barred by limitation.

Issue 1: Related Persons
The first issue examined was whether M/s. Meghalaya Cast & Alloys Pvt. Ltd. and its group companies are "related persons" u/s 4(3)(b) of the Central Excise Act, 1944. The Tribunal observed that although Shri Madan Lal Mittal was a common Director and had shares in these companies, the shareholding was less than 50% in M/s. Meghalaya Cast & Alloys Pvt. Ltd. and the companies were not holding or subsidiary companies of each other. The Tribunal referred to the Hon'ble Apex Court's decision in Union of India Vs. ATIC Industries Ltd. and concluded that having a common director or shareholding does not automatically make companies "related persons" without mutual business interest being established. Therefore, the Tribunal held that the appellant and the group companies are not "related persons."

Issue 2: Transaction Value
The second issue was whether the price charged by the appellant to their group companies could be considered as "Transaction Value" u/s 4(3)(d) of the Central Excise Act, 1944. The Tribunal found that the transactions were on a principal-to-principal basis, the price was the sole consideration for the sale, and no extra commercial considerations were collected. The price charged was based on the prevailing market price and was consistent for other independent buyers as well. Consequently, the Tribunal held that the price charged by the appellant to their group companies is the "Transaction Value" and not an influenced price.

Issue 3: Limitation
The third issue was whether the demand was barred by limitation. The Tribunal noted that the appellant was eligible for exemptions under Notification No. 32/99-CE, and regularly filed monthly ER-I returns and refund claims which were verified and approved by the authorities. Since there was no suppression of facts with intent to evade tax, the extended period of limitation could not be invoked. The Show Cause Notice was issued after more than a year from the relevant date, thus the demand was barred by limitation.

Conclusion
The Tribunal concluded that:
1. The appellant company and the group companies are not "related persons" u/s 4(3)(b) of the Central Excise Act, 1944.
2. The price charged by the appellant to their group companies is the "Transaction Value."
3. The demand is barred by limitation and hence not sustainable.

The Tribunal set aside the impugned order and allowed the appeal filed by the appellant.