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TMI Blog2007 (4) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Intelligence in the year 2002 into the transactions of KKCPPL and M/s. K.C Palanisamy Co. (KCP Co.), a proprietary firm owned by the Chairman and Managing Director of KKCPPL, a Show Cause Notice was issued to KKCPPL and Shri V. Sudarsan, DGM, KKCPPL, alleging evasion of Central Excise duty by undervaluing the paper and paper products manufactured and cleared by KKCPPL to KCP Co. during the period 1-4-2000 to 31-3-2001. M/s. KCP Co. purchased paper from KKCPPL and manufactured and cleared paper bags suitable for packing cement. Sales of the appellants were almost solely to KCP Co. The investigation had revealed that KKCPPL and KCP Co. were related entities for the purpose of the Central Excise Act, 1944. After considering the reply to the Show Cause Notice, the Commissioner found that the two firms had mutuality of interest. He observed that in the case of Narendra Machine Works v. CCE, 2001 (128) E.L.T. 118, the Tribunal had found the following aspects to be determinative of mutuality of interest between two entities: (a) The sale of entire goods manufactured by one unit to another related unit. (b) Advancement of interest free loans between the two u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table even if it was less than the cost of production in view of the decision of the Supreme Court in the case of Commissioner v. Gurunanak Refrigeration reported in 2003 (153) E.L.T. 249 (S.C.). (ii) The transaction could not be considered as one involving evasion merely because the sale price was less than the cost of production. (iii) An analysis would show that the payment of duty through PLA by KCP Co. had been much higher than the duty demanded from the appellants. During the material period KCP Co had paid an amount of Rs. 2,40,45,790/- as duty on its clearances, whereas the differential duty demanded for goods received by it from KKCPPL was only Rs. 1,15,18,485/- for the period 1-4-2000 to 31-3-2001. Even after absorbing the additional duty demanded by way of Cenvat credit, the appellants would still have paid an amount of Rs. 1,25,57,438/- through PLA. (iv) As per the impugned order, KCP Co. had advanced an interest free loan of Rs. 31.03 crores and that machinery worth Rs. 5.83 crores had been sold to KCP Co. at an inflated value of Rs. 13.65 crores. This had indicated that financial transactions had taken place both ways and no adverse inference coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computing the cost. It was also held that the appellant had not suppressed the relevant facts and that larger period of limitation could not be invoked. 7. In Ganganagar Sugar Mills case supra, the Tribunal had in a case of similar facts held that the certificate produced by the appellants had shown that they had clearly stated the basis of the costing .Thus there was no suppression of material particulars. If the costing arrived was not reliable, it was for the revenue to raise objection as provided in the normal period under Section 11A of the Act. The Tribunal allowed the assessee s appeal on the ground of limitation. The civil appeal filed by the department against the above order of the Tribunal was dismissed by the Hon ble Supreme Court. 8. In Pragathi Concrete Products Pvt. Ltd. case supra dealing with another similar case, the Tribunal had made the following observations : It is on record that the appellants had submitted the Chartered Accountant s certificate in 1995 itself. The department had not taken action for more than 5 years. The appellant s unit had also been audited several times. They had also filed their periodical records properly. In these circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to allege suppression of facts and to invoke larger period. The ld. Sr. Counsel argued that during the financial year 2000-2001, KCP Co. had paid a total amount of Rs. 11,69,25,780/- out of which they had paid from PLA 2,40,45,790/- and from modvat account Rs. 9,26,61,541/-.Therefore, it was submitted that even if the duty demanded in the impugned order had been charged from KCP Co. by the appellants, KCP Co would still have paid Rs. 1,25,27,305/- from PLA. 11. Ld. SDR submitted that the appellants were not required to furnish the cost certificate when they had submitted the same. The department had therefore not verified the correctness of the same. She submitted that in the Annexure filed on 7-4-2000 along with the price declaration in terms of Rule 173C (3A), the appellants had suppressed the relationship between them and KCP Co. In view of this willful misdeclaration suppressing the relationship between KKCPPL and KCP Co. the larger period was correctly invoked. The ld. SDR cited the decision of the case Jay Yuhshin Ltd. v. CCE New Delhi - 2000 (119) E.L.T. 718 (Tri.- LB) in support of her argument that the revenue neutral situation came about in relation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till have been required to pay from PLA Rs. 1,25,27,305/ Duty paid by KCP Co in the year 2000-01 COLLECTION PAYMENT EXCISE DUTY COLLECTED RG - 23 A-PART 11 RG - 23 C-PART 11 PLA DEPOSIT TOTAL 116,924,158.00 92,661,541.00 218,452.00 2,40,45,790.00 116,925,783.00 In the circumstances, the revision in value attempted and demand made would turn out to be a revenue neutral exercise, especially in view of the fact that the department has found the two entities to be related persons. 15. We find that the appellants had declared the break up of the sale price of its products supported by a cost certificate certified by a Chartered Accountant as early as on 7-4-2000. The department had accepted this price declaration and did not verify its correctness till 2004 when the demand notice was issued alleging suppression of facts on the basis that the cost certificate had excluded certain elements of cost. The case law Asoka Spintex Ltd. v. CCE, Ahmedabad, Ganganagar Sugar Mills v. CCE, Jaipur and Pragathi Concrete Products Pvt. Ltd. v. CCE, Bangalore (supra), cited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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