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TMI Blog2024 (6) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,97,209/- along with interest and penalty. Aggrieved against the impugned order, the appellant has filed this appeal. 3. The Appellant submits that they used to sell their finished goods to different buyers, including their group Company Units, as per the prevailing market price on the date of clearance. The officers of the Directorate General of Central Excise Intelligence (DGCEI), Shillong Regional Unit, Guwahati, conducted investigation on 24.03.2009 and alleged that the Appellants sold their finished goods to their group companies on grossly undervalued price during the period from April 2005 to January 2008 and thereby evaded Central Excise Duty. The appellant submits that they have cleared their finished goods to other unrelated units also at the same price. The appellant further submits that their group company units are not Related Persons in terms of Sec. 4(3)(b) of the Central Excise Act,1944 and the price so charged to their group companies is the sole consideration for the sale. The appellant submits that the price fixed by them was on the basis of prevailing market price at the time and place of removal and no extra consideration was collected by them either directly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise Act, 1944? 7.1. The first issue to be examined in this appeal is whether the appellant company and the Group companies to whom the appellant sold the goods are related persons as Central Excise Act, 1944. We observe that Sec. 4(3)(b) of the Central Excise Act, 1944 which defines Related Person as (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 undertakings shall have the meaning assigned to it in cluse (g) of section 2 of the Monopolies and Restrictive Trade Practice Act, 1969 (64 of 1969). 7.2. In the present case the appellant M/s. Meghalaya Cast Alloys Pvt. Ltd., and the Group companies M/s. Shree Ganapati Rolling Mills Pvt. Ltd. and M/s. Pawan Casting (Meghalaya) Pvt. Ltd. are registered under the Companies Act, 1956 as separate and distinct legal entities. The Group Companies are not holding or subsidiary companies of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring in clause (c) of sub-section, (4) of section 4 of the amended Central Excises and Salt Act, 1944 was outside the legislative competence of Parliament under Article 246 read with Entry 84 in the Union List and was, therefore, unconstitutional and void. This ground found favour with the High Court in view of the earlier decision given by the same Bench on 20/21 February, 1979 in Special Civil Application No. 119 of 1976. But, this decision of the High Court striking down clause (c) of sub-section (4) of section 4 of the amended Act cannot stand in view of the decision of this Court in Union of India v. Bombay Tyres International Limited (1984) 1 SCC 467 = 1983 E.L.T. 1896 (SC) where an identical challenge to the constitutional validity of the definition of the term related person was negatived by this Court. The definition of the term related person was read down and it was held by this Court that On a proper interpretation of the definition of related person in sub-section (4) (c) of section 4, the words relative and a distributor of the assessee do not refer to any distributor but they are limited only to a distributor who is a relative of the assessee within the meaning of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that they have interest directly or indirectly in the business of each other . The second part of the definition which adds an inclusive clause was admittedly not applicable, because neither Atul Products Limited nor Crescent Dyes and Chemicals Limited was a holding company or a subsidiary company nor was either of them a relative of the assessee, so as to fall within the second part of the definition. But we do not think that even the limited contention urged by the learned Attorney General on behalf of the Revenue based on the first part of the definition can succeed. What the first part of the definition requires is that the person who is sought to be branded as a related person must be a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other. It is not enough that the assessee has an interest, direct or indirect, in the business of the person alleged to be a related person nor is it enough that the person alleged to be a related person has an interest, direct or indirect, in the business of the assessee. It is essential to attract the applicability of the first part of the definition that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in reard to Crescent Dyes and Chemicals Limited is much stronger than that in regard to Atul Products Limited. Crescent Dyes and Chemicals Limited is not even a shareholder of the assessee and it has, therefore, no interest direct or indirect in the business of the assessee. It is Imperial Chemical Industries Limited, London which holds 50 per cent of the share capital of the assessee and this foreign company also holds 40 per cent of the share capital of Crescent Chemicals and Dyes Limited. Imperial Chemicals Industries Limited, London would admittedly have an interest in the business of the assessee in its capacity as a shareholder, but how can Crescent Dyes and Chemicals Limited of which 40 per cent of the shares are held by Imperial Chemical Industries Limited, London which in its turn is a shareholder of the assessee, can be said to have any interest, direct or indirect, in the business of the assessee. Equally the assessee has no interest direct or indirect in the business of Crescent Dyes and Chemicals Limited, which is just a wholesale dealer purchasing dyes from the assessee in wholesale on principal to principal basis. It is obvious that for the same reasons whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.1. The issue to be decided here is whether the price charged by the appellant to their group companies can be considered as Transaction Value for the purpose of payment of duty. We observe 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. We observe that 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, we hold that 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. Accordingly, the answer to question no. (II) at paragraph 6 (supra) is in the negative. 9. The next issue to be decided is: whether the demand confirmed in this case is barred by limitation. We observe that the appellant Unit is a New Industrial Undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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