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TMI Blog2014 (12) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods under sub-heading 7901.10 is that the metal must contain at least 97.5% zinc and when in this regard there is absolutely no evidence, the duty demand based on classification of the goods under heading 7901.10 would not be sustainable. There is no dispute that entire sales of M/s. IZL were not to or through M/s. IMTL and there were substantial sales to independent buyers. In view of this, Rule 6(c) of Central Excise Valuation Rules, 1975 could not be invoked and, as such, the entire basis of duty demand by treating the price at which the M/s. IMTL sold the goods to independent buyers is incorrect. With regard to invoking Rule 6(c) of Central Excise Valuation Rules, 1975 when the sales are to or through a related person, the percentage of sales of an assessee to or through related person is not relevant. For invoking this rule, what is relevant is as to whether entire sales are to or through related person and only in that case, this rule would be invokable and if there is some percentage of sales, however small the same may be, to independent buyers, it is the sale price to independent buyers which would be the assessable value in respect of sales to or through relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere manufacturing prime quality zinc ingots, zinc ingots (secondary) and also the zinc metal residue. 1.2 Sometime in October, 1998, the Jurisdictional Central Excise officers conducted inquiry in course of which they found that IZL had sold zinc metal residue to IMTL who, in turn, had sold the same to M/s. Vishal Pipes Ltd., Sikandrabad; M/s. Agrawal Tubes, Muzzaffar Nagar, U.P. and M/s. Nilkanth Tubes, Bahadur Garh, Haryana at higher prices ranging from ₹ 52/- per kg. to ₹ 70/- per kg. On inquiry with M/s. Vishal Pipes Ltd., M/s. Agrawal Tubes and M/s. Nilkanth Tubes it appeared that these firms had purchased zinc ingots and not zinc metal residue, as Shri Manoj Agrawal, Director, M/s. Nilkanth Tubes in his statement dated 15-12-1998, and Shri Pawan Kumar, Director of M/s. Agrawal Tubes in his statement dated 15-12-1998 stated that they had always purchased zinc ingots from M/s. IMTL while the invoices issued by IZL to IMTL mentioned in the description of the goods as zinc (metal residue). In respect of the zinc metal residue cleared by IZL to IMTL, the classification of the goods in the invoices was shown under Heading 26.20 and the duty was paid @ 8% ad valorem o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of M/s. Indo Zinc Limited was ordered to be confiscated with option to be redeemed on payment fine in lieu of confiscation of ₹ 3,00,000/-. 1.6 IZL, IMTL and Shri Sanjay Agrawal filed appeals to the Tribunal against the above order of the Commissioner. The Tribunal vide Final Order No. 187-89/2005-B, dated 6-1-2005 set aside the Commissioner s order in toto and allowed the appeals with consequential relief. The Tribunal in this order set aside the duty demand based on the allegation of mis-declaration of prime quality zinc ingots as zinc metallic residue observing that there is absolutely no evidence to show that M/s. IZL cleared prime quality zinc ingots to M/s. IMTL which, in turn, had been sold by M/s. IMTL to their customers and on the basis of mere description of the goods by the trading company - M/s. IMTL as zinc ingots in the invoices issued to their buyers, it cannot be inferred that prime quality zinc ingots were cleared by IZL to IMTL by mis-declaring the same as zinc metal residue. The Tribunal has also observed that firstly, the cross-examination of Shri Ashok Singh of M/s. IZL, Shri Pawan Kumar of M/s. Agrawal Tubes and Shri Manoj Agrawal of M/s. Nilkant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from 1995-1996 to 1998-1999 has been made in respect of clearances of zinc metallic residue during the above period by classifying the same under Heading 26.20, by M/s. IZL to IMTL, who, in turn, sold those goods to M/s. Vishal Pipes Ltd., Sikandrabad, M/s. Agrawal Tubes, Muzzaffar Nagar and M/s. Nilkanth Tubes, Bahadur Garh, Haryana, that the basis of the Department s allegation that the goods cleared by M/s. IZL to M/s. IMTL, which were ultimately sold to M/s. Vishal Pipes Ltd., M/s. Agrawal Tubes and M/s. Nilkanth Tubes, were prime quality zinc ingots classifiable under Heading 79.01 and not zinc metallic residue is the statement of Shri Ashok Singh, Manager of M/s. IZL and also the statements of Shri Pawan Kumar, Director of M/s. Agrawal Tubes and Shri Manoj Agrawal, Director of M/s. Nilkanth Tubes, that while Shri Ashok Singh, Manager of M/s. IZL in his statement dated 11-3-1999 has stated that they had sold only Zinc ingots to M/s. Inter Metal Trade Ltd. but on the instructions of Shri Sanjay Agrawal, the description of the goods in the invoices was shown as zinc metallic residue, Shri Manoj Agrawal of M/s. Nilkanth Tubes and Shri Pawan Kumar of M/s. Agrawal Tubes in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the allegation of undervaluation is without any basis. 4. Shri Yashpal Sharma, the learned DR, defended the impugned order by reiterating the findings of the Commissioner. He pleaded that M/s. IZL had cleared zinc ingots in the guise of zinc metallic residue and this fact is clear from the statement of Shri Ashok Singh, Manager of M/s. IZL and also from the statements of Shri Pawan Kumar, Director of M/s. Agrawal Tubes and Manoj Agrawal, Director of M/s. Nilkanth Tubes who have stated that they had purchased only zinc ingots from M/s. IMTL and not zinc metallic residue, that the denial of cross-examination of Shri Ashok Singh, Shri Pawan Kumar and Shri Manoj Agrawal has not vitiated the adjudication proceedings in any manner, that the goods cleared by M/s. IZL to M/s. IMTL which, in turn, were sold by them to M/s. Vishal Pipes Ltd., M/s. Agrawal Tubes, M/s. Nilkanth Tubes were, in fact, prime quality zinc ingots classifiable under sub-heading 7901.10 and not zinc metallic residue of Heading 26.20 and thus the allegation of duty evasion of ₹ 25,73,500/- by mis-declaration of description is on strong footing, more so, when Shri Ashok Singh, Manager of M/s. IZL has stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 15-12-1998 of Shri Manoj Agrawal, Director M/s. Nilkanth Tubes, wherein he stated that their company had purchased the zinc in form of zinc ingots only from M/s. IMTL and they have never purchased zinc metallic residue from them. 7. During the period of dispute Heading 79.01 of Chapter 79 of the Central Excise Tariff covered unwrought zinc and while sub-heading 7901.10 covered zinc not alloyed , the sub-heading 7901.20 covered the zinc alloys . The zinc ingots come under the unwrought zinc . In terms of sub-heading notes of Chapter 79, the expression zinc not alloyed means the metal containing by weight at least 97.5% of zinc and the expression zinc alloys means metallic substances in which zinc pre-dominates by weight over each of the other elements provided that total content by weight of such other elements exceeds 2.5%. In terms of the sub-heading notes to Chapter 79, zinc dust means the dust obtained by condensation of zinc vapor consisting of spherical particles which are finer than zinc powder and it must contain at least 85% by weight of metallic zinc. The goods, in question, on which the duty is sought to be demanded are not zinc dust but are alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination would involve expense and time which is not justified. Therefore, in our view, the duty demand based on the allegation of duty demand of ₹ 25,73,500/- which is based on the allegation of misdeclaration of the goods as zinc metallic residues is not sustainable. 8. The duty demand of ₹ 7,74,218/- is based on the allegation that M/s. IZL and M/s. IMTL are related persons and, therefore, in respect of sale of the goods through M/s. IMTL, the duty should have been paid on the price at which the goods were sold by M/s. IMTL to independent buyers, while M/s. IZL have paid duty on their sale price to M/s. IMTL, which has to be rejected, as the two are related persons . The basis of M/s. IZL and M/s. IMTL as being related persons is that the Directors of the two companies are Members of the same family and there was no activity at the address of M/s. IMTL indicating that all the business of this company was being handled from the premises of Shri Sanjay Agrawal, Managing Director of M/s. IZL. During the period of dispute Section 4(3)(c) of the Central Excise Act, 1944 defined the expression related person according to which this expression means a person who is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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