9911796707
TMI Blog2024 (6) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... of central excise duty in this case is not sustainable in law. Accordingly, the demand confirmed in the impugned order by rejecting the 'Transaction Value' declared by the appellant in the invoices raised to M/s. H.D. Consortium India Ltd., is not sustainable. The appellant has been availing the benefit of Notification No. 20/2007-C.E. wherein they are eligible for refund of the whole of the duty of excise paid by them. Thus, there are merit in the contention of the appellant that there is no revenue loss to the exchequer on account of the clearance to M/s. H.D. Consortium India Ltd. at a lower price. The Appellant has adopted a higher value addition and duty was paid at a higher side. Thus, there is no evidence available on record to substantiate the allegation that the appellant has undervalued the finished goods sold to M/s. H.D. Consortium India Ltd. Accordingly, the demand confirmed in the impugned order on the allegation of undervaluation of the final product is without any basis and liable to be set aside. Time Limitation - HELD THAT:- The appellant is eligible to claim refund of the duty paid by them in PLA as per Notification No. 20/2007-C.E. dated 25.04.2007. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confirmation of the demands in the impugned order, the appellant has filed this appeal. 3. The appellant submits that their unit is located in the North East Region in the State of Assam, where they are eligible for the benefit of Notification No. 20/2007-C.E. dated 25.04.2007; as per the said Notification, they are eligible for refund of the duty paid through PLA for clearance of the goods manufactured by them. Since whatever duty paid would be refunded to them by the Department, they would not be benefitted any way by resorting to undervaluation. 3.1. The appellant submits that the Department has alleged that they have cleared their finished goods through M/s. H.D. Consortium India Ltd. who are a 'related person' as defined under Section 4(3)(b) of the Central Excise Act, 1944. It has been alleged that the appellant and M/s. H.D. Consortium India Ltd. are 'inter-connected undertakings' since the Partners of the appellant-firm hold more than 50% share of M/s. H.D. Consortium India Ltd. In the impugned order, it has been held that they have interest directly or indirectly in the business of each other and hence they are related as per the definition of related per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable. 3.3. The appellant has also contended that the demand is barred by limitation. They have submitted that they are filing monthly E.R.-1 returns, regularly, and declaring the total clearances during the material period. They were regularly filing their applications of refund claims for the particular months wherein they were submitting invoices and duty paid challans to the Range Superintendent; that refund claims were verified by the concerned authority and refund orders were issued every month by the Assistant / Deputy Commissioner, Central Excise Division. In these circumstances, the refund sanctioning authority never raised any objection on erroneous refund under Notification No. 20/2007-C.E. dated 25.04.2007. Accordingly, it is contended by the appellant that the demand raised by invoking the extended period of limitation is not sustainable. 4. The Ld. Authorized Representative appearing on behalf of the Revenue submits that M/s. H.D. Consortium India Ltd. is a related person to the appellant. He has cited the shareholding pattern of Partners of the appellant firm in M/s. H.D. Consortium India Ltd. and contended that as per the definition of related person provided in cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons 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 clause (g) of section 2 of the Monopolies and Restrictive Trade Practice Act, 1969 (64 of 1969). 7.2. From the above, we observe that in order to consider the appellant firm as a related person to M/s. H.D. Consortium India Ltd, the appellant has to satisfy any one of the four criteria mentioned in Section 4(3)(b) (supra). In the present case, the appellant is a partnership firm and M/s. H.D. Consortium India Ltd. is a company registered under the Companies Act, 1956. We observe that they are both distinct legal entities having separate existence under law. From the impugned order, we find that the Department has considered the appellant and M/s. H.D. Consortium India Ltd as related persons, as they are 'inter-connected undertakings', sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany cannot be treated to be a 'related person . 7.5. We observe that this view has been held the Hon'ble Apex Court in the case of Union of India ors. vs. ATIC Industries Ltd. [1984 (17) E.L.T. 323 (S.C.)], wherein it has been held as under: 4. The assessee urged several grounds in support of the writ petition before the High Court but it is not necessary to refer to them in detail, because the High Court ultimately decided the writ petition in favour of the assessee only on two grounds and it will, therefore, be enough if we refer to those two grounds alone and consider whether the decision of the High Court is correct in so far as it decided those two grounds in favour of the assessee. The first ground was that the concept of related person occurring 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts Limited and Crescent Dyes and Chemicals Limited on the other were not related persons and the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals Limited and not the price at which the latter sold the dyes to the dealers or the consumers, represented the true measure of the value of the dyes for the purpose of chargeability to excise duty. This conclusion reached by the High Court was assailed before us by the learned Attorney General appearing on behalf of the Revenue. He fairly conceded that the only part of the definition of related person in clause (c) of sub-section (4) of section 4 on which he could reply was the first part which defines related person to mean a person who is so associated with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the assessee could be said by virtue of that circumstance to have any interest, direct or indirect, in the business of Atul Products Limited. Atul Products Limited buys dyes from the assessee in wholesale on principal to principal basis and then sells such dyes in the market. The assessee is not concerned whether Atul Products Limited sells or does not sell the dyes purchased by it from the assessee nor is it concerned whether Atui Products Limited sells such dyes at a profit or at a loss. It is impossible to contend that the assessee has any direct or indirect interest in the business of a wholesale dealer who purchases dyes from it on principal to principal basis. The same position obtains in regard to Crescent Dyes and Chemicals Limited. Perhaps the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch other. The following are the relevant clauses of the agreement between M/s. Kwality Ice Cream and BBLIL/HLL based on which and applying the principles referred to herein above, a view is required to be taken as to whether they are related persons . 6 (i) - Kwallty Ice Cream (K-North) agrees to exclusively source and produce products for BBLIL. (i)(a) - The products will be manufactured and produced by K (North) in accordance with the specifications, particulars of which are set out in Appendix-2 of the Agreement which inter alia provides that reasons for change in raw material will be intimated by the party to BBLIL and approved list of suppliers of material will be intimated by BBLIL and K (North) . . 19. What is of importance is certain interdependence and reciprocity beyond the relationship of either a distributor or manufacturer so as to consider as to whether the parties are related persons . On the facts it is noticed, essentially the relationship between M/s. Kwality Ice Cream and BBLIL/HLL is one sided and the facts do not suggest that each one of them have interest direct or indirect, in the business of each other. 7.7 From the above interpretation of Section 4 by the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. 8.2. As per the provisions of Section 4(1) of the Central Excise Act, 1944, we observe that the price determined by the appellant is the sole consideration for sale of the finished goods and it is the Transaction Value for determination of Central Excise Duty by the appellant. Accordingly, we observe that there is no need to resort to Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 to determine the assessable value in this case. Hence, we hold that the demand confirmed by interpreting Rules 8 and 9 of the Central Excise Valuation Rules, 2000, to confirm the demand of central excise duty in this case is not sustainable in law. Accordingly, we hold that the demand confirmed in the impugned order by rejecting the 'Transaction Value' declared by the appellant in the invoices raised to M/s. H.D. Consortium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also contended that the demand is barred by limitation. They have submitted that they are filing monthly E.R.-1 returns, regularly, and declaring the total clearances during the material period. They were regularly filing their applications of refund claims for the particular months wherein they were submitting invoices and duty paid challans to the Range Superintendent; that refund claims were verified by the concerned authority and refund orders were issued every month by the Assistant / Deputy Commissioner, Central Excise Division. In these circumstances, the refund sanctioning authority never raised any objection on erroneous refund under Notification No. 20/2007-C.E. dated 25.04.2007. Accordingly, it is contended by the appellant that the demand raised by invoking the extended period of limitation is not sustainable. 11.2. We find merit in the contention of the appellant. We find that the appellant is eligible to claim refund of the duty paid by them in PLA as per Notification No. 20/2007-C.E. dated 25.04.2007. The appellant has been filing returns regularly and disclosing all relevant information before the appropriate authority. The Range Superintendent has verified all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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