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TMI Blog1987 (12) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... 70% of their production is sold to Anand Traders and 30% to others. The prices charged by Diamond to Anand Traders are, on an average, about 9.17% less than the prices to others. 2. The Collector of Central Excise issued a show cause notice to the appellants threatening to cancel the concession of assessment on invoice price under Notification 120/75-CE, which was granted to them and proposing assessment of the goods under S. 4 of the CES Act. This value was to be worked out on the basis of the sale price of Anand Traders to their customers. He alleged that both Diamond and Anand Traders were one and the same unit and that the two units colluded with each other, manufactured and cleared excisable goods without paying duty on the prices charged by Anand Traders to their customers. It was alleged that these deeds were done knowingly and that the appellants suppressed facts deliberately without disclosing them to Central Excise Department. The Collector besides asking them to show cause why the concession granted under Notification No. 120/75-CE should not be withdrawn, also asked them to show cause why differential Central Excise Duty for the period 1.10.1980 to 30.9.1985 should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est. 7. The learned Consultant argued that the two units in question were separate legal entities and not one and the same. He cited Madras High Court judgment in Bapalal and Co. (Manufacturing) v. 1. The Secretary to the Government of India, Ministry of Finance Department of Revenue, New Delhi. 2, The Appellate Collector of Customs, and Central Excise, Madras-1. 3. The Assistant Collector of Central Excise, Madras-1, reported in 1981 ECR 279D (Madras) and the judgment in Aroma Apparels, Bombay v. Collector of Central Excise, Bombay reported in 1986 (25) E.L.T. 90 (Tribunal). 8. Shri Khosala submitted that the Collector wrongly held that Anand Traders was created for the purposes of evading Central Excise duty. This firm was founded in 1963 whereas- the Central Excise duty under Tariff Item 68 was introduced in 1975. Citing a decision of the Supreme Court in M/s. MacDowel and Co. Ltd. v. Commercial Tax Officer (1985 I.T.R. page 148 (referred to by the Collector in his orders), the learned Consultant argued that tax avoidance within law is not evasion. 9. Advancing alternative arguments Shri Khosala submitted that the cost of bought-out items purchased by Anand and supplied to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In his brief rejoinder, the learned Consultant submitted that the case law cited by the learned SDR was not applicable to the facts of the present matter. He argued that the two units cannot be relatives as only individuals can be so. He pleaded that clandestine removal is a physical activity and filing a wrong price list does not amount to clandestine removal. He also pleaded bona fides on the part of the appellants. 13. We have considered the arguments of both sides. Before proceeding further we would like to discuss, in passing, the appellant s argument that there is no question of related person in this case as both the units involved are not individuals but consist of a limited company and a partnership. We do not consider that the word related person occurring in Section 4(4)(c) should be given such a narrow restricted and unrealistic interpretation. It is clear from the very wording of the sub-section that a related person would consist of a company also. 14. Section 4(4)(c) reads as follows : Related person means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to others, especially Bajaj. 16. We have considered the case law cited by the appellants where such case law appeared to be relevant. In Bapalal and Co. case (supra) the Madras High Court held that the two registered companies are separate legal entities even if all the partners in one are also partners in the other. Similarly, in Delton Cable Industries Ltd. the Government of India held that though the Directors in the two companies were common, the two units in question were separate firms. In Industrial Engineering v. Collector of Central Excise, Chandigarh cited by the appellants the CEGAT ruled that where all the partners are common in different firms, each such partnership is a separate legal entity for the benefit of the Notification 89/79-C.E. 17. We refer to these judgments, as reference was made to them by the appellants. As mentioned earlier the question before us is not whether the two units are different legal entities or not. The question is whether in terms of Notification 120/75-C.E. there is any relationship between them that disentitles them to the concession. We have referred above to the various other circumstances that came to our notice and to the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voice price is not influenced by any commercial, financial or other relationship whether by contract or otherwise than the relationship created by sale of the goods. Our earlier discussion shows that the relationship between the appellants and the Anand Traders cannot be described as an independent one. If there is any doubt left about the relationship between the two firms and the mutuality of interest between them, it would be dispelled by a perusal of three undated letters from appellants to Anand Traders whereby in the name of Rate difference on sales made (to Anand Traders) the appellants simply charged them Rs. 2 lakhs, 4 lakhs and Rs. 3.09 lakhs. Copies of these undated letters were filed by the appellants and seem to pertain to the years 1982, 1981 and 1980; except for the figures and items the letters are similar. We reproduce below one letter to illustrate the relationship between the two parties and the nature of transaction referred to. DIAMOND CLOCK MFG. CO. PVT. LTD. Anand Traders, 1180, Budhwa Peth, PUNE 411 002 Dear Sir, We hereby confirm as follows : We have charged you rate difference on sales made to you during the calendar year 1981 on faremeters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han 50% of their sales are in initial packing only and not in wooden crates. The question of secondary packing is a well settled matter now and the Tribunal has passed a number of orders following the Supreme Court decision in Union of India v. Bombay Tyre International and others [1983 (14) E.L.T. 1896]. We also followed the judgment of the Supreme Court in Union of India others v. Godfrey Philips India Ltd. and others reported in 1985 (22) E.L.T. 306 (S.C.). The matter may be decided in the light of these judgments. (ii) Interest charged by Diamond on delayed payments. If by arrangement and according to the condition of sale interest has to be paid on delayed payment, such interest should not be included in the assessable value. The Supreme Court orders in ACCE v. MRF, reported in 1987 (27) E.L.T. 5.53 should be followed in this regard after verifying the facts. (iii) Expenses incurred after removal. The Supreme Court has held, quite clearly [1987 (27) E.L.T. 553 (S.C.)] - Assistant Collector of Central Excise others v. Madras Rubber Factory Ltd. and others that it is only those expenses incurred on account of factors which contributed to its value upto the date of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier referred to three debit notes each for lakhs of rupees. The appellants passed on the legitimate duty of manufacturer (testing for quality and grant of warranty) to Anand. Viewing all these facts together we hold that there was Mens Rea and there was deliberate suppression of facts, we, therefore, uphold the extended period of limitation for this demand. 27. In this view we order that (i) the differential duty payable by the appellants should be re-calculated on the basis of our observations made above. Where we have not indicated anything, the claim for deductions will be decided on the basis of the judgments of Supreme Court and High Courts, (ii) The assessable value in respect of clearances to Anand should be revised in the light of our orders, (iii) Before revising the demand for differential duty the appellant should be given an opportunity to represent so that their claims are taken note of, examined, and disposed of according to law. 28. There are two penalties on the appellants amounting to Rs. 2,45,000.00. We note that some of the demands overlap and some legitimate deductions have not been granted. Taking all circumstances in consideration we reduce the penalti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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