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TMI Blog2019 (5) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... d that while VDI and QMI are both divisions of BMPPL. Ld. Counsel pointed out that the appellants are supplying goods to both QMI and BRML. 2.1 He pointed out that during the period 2007-2008 to 2009-2010, the appellants were supplying 100% of their product to M/s QMI and BRML. He pointed out that from 2010-2011 to 2012-2013, the appellants were supplying to other independent buyers apart from BRML and QMI. Ld. Counsel pointed out that Revenue has sought to revalue the goods cleared by them to VDI and BRML under Rule 8 of the Central Excise Valuations Rules, treating them as related entities. 2.2 Ld. Counsel pointed out that in so far as supplies to QMI are concerned, being a division of same parent company the situation is absolutely Revenue neutral in respect of same legal person. He pointed out that the entire duty paid by VDI would have been available to QMI and thus the situation would be Revenue neutral. He argued that in these circumstances no demand can be confirmed. He relied on the decision of Tribunal in the case lf Mafatlal Industries 2009 (241) ELT 153, which was upheld by Hon'ble Apex Court as reported in 2010 (255) ELT A77 (SC). He pointed out that in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant are a division of a private limited company BMPPL whereas BRML is a public limited company. Ld. Counsel argued that there is no evidence to establish that VDI and BRML are related in terms of Section 4(3)(b) of the Central Excise Act. Section 4(3)(b) of the Central Excise Act defines related person as follows: 4(3)(b) persons shall be deemed to be "related" if- (i) They are inter-connected undertakings; (ii) They are relatives; (iii) Amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) They are so associated that they have interest, directly or indirectly, in the business of each other. Explanation.-In this clause- (i) "inter-connected under takings" shall have the meaning assigned to it in the clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); The rule 8,9 and 10 of the Central Excise Valuation Rules read as follows: "Rule 8. Where the excisable goods are not sold by the assessee but are used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been produced by Revenue. Ld. Counsel pointed out that the impugned order list out the following grounds on which the two have been held to be related: * That VDI and BRML have common directors and promoters. * 100% production of ingots is being transferred to QMI and BRML. * Sh. Vishal Bhushan, Sh. Vikash Bhushan and Nailini Bhushan are directors of both BRML and VDI. BRML has invested .38 Crores in BMPPL and also given deposits of Rs. 1.6 to 2.1 crores to BMPPL. * Sh. Vikash Bhushan and Sh. Vishal Bhushan hold 2,40,000 equity shares to BMPPL. More than 85% equity shares are held by family member or by their interconnected undertakings in BMPPL. * BMPPL has commonly applied for loan and got it sanctioned on account of VDI and QMI. After mortgaging assets of VDI and QMI and they are enjoying common credit facility for both the divisions of the said group of companies. Capital asset of M/s VDI and QMI are owned by M/s BMPPL. The balance sheet and income tax returns are being filed in the name of BMPPL. * They have common administrative office, head office and infrastructure. 2.6 Ld. Counsel pointed out that mere allegation that the VDI and BRML are interconn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon shareholding pattern. He pointed out that a significant amount of common infrastructure is being used. He relied on the decision of Hon'ble Apex Court in the case of J Foundation 2015 (324) ELT 422 (S.C.) to hold that corporate veil has been lifted in the instant case. He also relied on the decision of Tribunal in following cases. * Karan Engineers Pvt. Ltd. 2017 (357) ELT 241 (Tri. Del.) * Raja Dyeing 2015 (329) ELT 121 (Tri. Del.) 4. We have gone through the rival submissions. We find that impugned proceedings proceed on the ground that the appellant are related to the buyers of the goods namely, Quartz Metal Industries (QMI) and Balbir Rolling Metal Pvt. Ltd (BRML). 4.1 In so far as status to QMI is concerned, it is admitted by the appellant that appellant as well as QMI are both divisions of Balbir Metal and Power Plant Ltd. (BMPPL), thus, it is apparent that the two are not only related but they are as essentially one and the same legal person. Ld. Counsel has argued that the entire duty demanded from the appellant is available as credit to the same legal entity viz BMPPL in its another division namely, QMI. He argued that the entire situation is Revenue neutral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry clear from the definition of the term "factories" that all the three units will be regarded as one factory as all the excisable goods are manufactured in the same premises. Similar views were expressed by the Appellate Tribunal in the case of J.K. Synthetics Ltd. (supra) wherein it was held that as two units fall within the same premises within one boundary wall encircling the entire area of the land allotted to the appellants in the industrial area the appellant is entitled to obtain one consolidated licence for the manufacture of its goods within its factory complex as the object behind the grant of consolidated licence is that any person manufacturing different excisable goods within one factory area is entitled to obtain one licence instead of different licences for different commodities. The decisions relied upon by the learned SDR are not applicable as the facts are different. In Devidayal Electonics case the Bombay High Court was interpreting the term "Industrial Unit". In fact in the said case it was observed by the Bombay High Court that as the Notification uses the word "factory and it uses the word industrial unit, it must, therefore, be assumed that the words were in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein either the said directors or their relatives are holding the position of Directors and thereby they have directly or indirectly associated concerned and have substantial mutuality of interest. It is seen from the above allegation that entire assertion in the SCN is based on the fact that there are some common directors. It is seen that BMPPL and BRML are two limited Companies. The Section 4(3)(b) prescribes that persons shall be deemed to be "related" if- (i) They are inter-connected undertakings; (ii) They are relatives; (iii) Amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) They are so associated that they have interest, directly or indirectly, in the business of each other. Explanation.-In this clause- (i) "inter-connected under takings" shall have the meaning assigned to it in the clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); It is seen that BMPPL and BRML did not fall under the category of relatives or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two is based on the admission of the directors that they are relatives and that 100% of the product of the unit are being transferred to the 'Balbeer group of companies', namely QMI and BRML. It has also been asserted that the directors are members of Hindu Undivided Family. We find that these factors are immaterial in so far as relationship between two companies is concerned. The relationship of directors has no relevance whatsoever. Another allegation made in the SCN is that they are using common basic infrastructure and staff. We find that no specific instances have been pointed out. Even otherwise use of certain common basic infrastructure and staff is not relevant in so far as establishing the relationship between two companies is concerned. In these circumstances, we do not find any evidence in support of the allegation that M/s VDI and M/s BRML are related in terms of Section 4(3)(b) of the Central Excise Act. Consequently, the demand of duty made against VDI for clearance made to BRML cannot be sustained. Moreover the Hon'ble Apex Court has in case of Ispat Industries (supra) prescribed that rule 8 can be invoked only when entire sales are made to related persons. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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