9911796707
TMI Blog1992 (1) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,06,564.24 ps as basic duty + 1,04,645.58ps. spl. Ex.duty) Rs. 6,83,928.73 ps (Rs. 6,51,360.69 ps. As basic duty + Rs. 32,568.84 special ex.duty) Rs. 35,95,138.56 ps. The Collector also imposed penalty of Rs. 8 lakhs (rupees eight lakhs only) in respect of the show cause notice dated March 29, 1981 and Rs. 2 lakhs (rupees two lakhs) in respect of the show cause notice dated August 6, 1983 under the provisions of sub-rule (1) of Rule 173-Q of the Central Excise Rules, 1944. 2. The petitioner company is inter alia engaged in the business of manufacturing and selling glassware including hollow wares and press wares falling under Tariff Item No. 23-A of the First Schedule to the Central Excises Salt Act, 1944 as it was in force upto February 22, 1986. Thereafter the said article falls under Chapter 70 of the Schedule to the Central Excise Tariff Act, 1985. 3. A show cause notice dated March 29,1982 covering the period commencing from September 6, 1979 to August 15, 1981 or thereabout was issued to the petitioner company calling upon it to show the reasons as to why the amount of duty of Rs. 29,11,209,83 ps. which was not paid by the company b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Alembic Chemical Works Company Ltd. and Shri Ramanbhai B. Amin was the Chairman of Board of Directors of Alembic Chemical Works Company Ltd. also. To this company, i.e. Alembic Chemical Works Company Ltd. the petitioner company sold substantial portion of its product - hollow wares during the period in question. This buyer company, i.e. Alembic Chemical Works Company Ltd. also held 37,428 equity shares in the petitioner company, i.e. Alembic Glass Works. Thus there were common directors and common Chairman for both the companies and both the companies reciprocally held equity shares of each other and thus both had interest in the business of each other. 5. The petitioner company was supplying hollow wares manufactured by it to different industrial consumers who did not resell the goods purchased by them and used the same for the purpose of their own packing requirements. The largest buyer was Alembic Chemical Works Company Ltd., which purchased about 66 different items during the period commencing from March 1978 and March 1981 or thereabouts. There were other small scale buyers who included M/s. Sarabhai Chemicals, M/s. Parke Davis (India) Ltd., M/s. Swastik Household and I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mical Works Co. Ltd.; and (3) the cost data of other products supplied to other buyers for the years 1978 to 1981. The petitioner company initially sought adjournment for replying to the summons but ultimately submitted reply dated August 26, 1981. Therein it was contended that once price list was filed and approved by the appropriate officer under the provisions of Rule 173-C no such enquiry was permissible. It was also contended that the price list had become final and conclusive and it was binding upon both the sides and it could not be reopened except by filing appeal or revision. The petitioner company did not produce the documents and did not furnish the details as called for by the summons. Thus the summons remained uncomplied. 8. During the course of investigation, Shri C.N. Jani, Assistant Manager, (Sales Execution) Marketing Division, submitted a typed prepared statement before the officer of the department on September 28, 1981. Therein it was stated that for most of their buyers the petitioner company filed price list in Part I and it also filed price list in Part II in respect of supplies made to Government and others. It was stated therein that supplies made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise sixty-two only) declared by the petitioner for determining its liability to pay the duty. 11. In view of the aforesaid position, it was alleged that the petitioner company had suppressed facts and it had wilfully misstated the facts when it filed the price list on 19-6-1980 and 1-3-1981 in respect of other small buyers that is after 6-9-1979 and in respect of the hollow wares manufactured and supplied by it to Alembic Chemical Works Company Ltd., the largest purchaser of its product. It was also alleged that the petitioner company had interest in the business of Alembic Chemical Works Company Ltd. and Alembic Chemical Works Company Ltd. had reciprocal interest in the business of Alembic Glass. It was alleged that the petitioner company did not make upward revision in the prices of the products in question though such upward revision was made in respect of other small scale buyers. It was also alleged that the petitioner company was required to make upward revision of prices in the context of the increase in the cost of the basic material purchased and used by it in the manufacture of hollow wares. As indicated in the Directors' Report dated April 12, 1980, there had been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 13. It is contended that the conclusion arrived at by the Collector is based on obvious misinterpretation, and disregard to the provisions of law particularly Section 4(4)(c) which defines "Related person". At this stage, it would be appropriate to reproduce the relevant part of the provisions of Section 4 of the Act which reads as follows : "Section 4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale : Provided that - (i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of both the companies is also common. In view of this position, it cannot be said that the assessee company and Alembic Chemical Works Company Ltd. have no interest in the business of each other. The shareholding of each in other company cannot be said to be negligible. The Collector has committed no error whatsoever in coming to the conclusion that Alembic Chemical Works Co. Ltd. was related person and also a favoured buyer. 15. There was enough material on record before the Collector to come to the conclusion that the upward revision of prices was necessary in respect of hollow wares produced by the petitioner company and supplied to Alembic Chemical Works Company Ltd. This is evident from the following circumstances : 1. that the Directors' report dated April 12, 1980 which found its place in the 35th Annual Report of the Company for the year 1979 referred to the steep price rise of raw materials namely quartz sand and soda ash. 2. that there was in fact upward revision in prices of other small scale buyers. 3. that the petitioner company did not comply with the summons issued to it and did not produce the correspondence relating to fixation of prices of its products sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in AIR, the Supreme Court has inter alia observed that the new Section 4(1) contains inherently within it the power to determine the true value of the excisable article, after taking into account any concession shown to a special or favoured buyer because of extra-commercial considerations in order that the price be ascertained only on the basis that it is a transaction at arm's length. As observed by the Supreme Court the aforesaid requirement is emphasised by the provisions in the new Section 4(l)(a) that the price should be the sole consideration for the sale. The Supreme Court has observed as follows : "That requirement is emphasised by the provision in the new Section 4(l)(a) that the price should be the sole consideration for the sale. In every such case, it will be for the Revenue to determine on the evidence before it whether the transaction is one where extra-commercial considerations have entered and, if so, what should be the price to be taken as the value of the excisable article for the purpose of excise duty." Thereafter the Supreme Court has further observed that there are certain specific categories of transactions which fall within the tainted class, in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) that the assessee company did not produce the documents called for in the summons; (4) that the assessee company did not file the correct price list i.e. it did not file price list in part II or in part IV as required under the provisions of Section 4(1) of the Act. If the contention advanced by the petitioner is accepted, it would mean that in cases where the goods have been sold to a related person who in turn does not sell the goods in market, but utilises the same for packing purposes or for manufacturing of other goods, it would not be possible for the department to arrive at a correct assessable value of the goods in question and the power conferred upon the appropriate officer of the excise department to determine the correct assessable value would be meaningless. This interpretation would make the provisions of Section 4(1) of the Act unworkable. The interpretation which leads to unworkable results and therefore brings about absurdity cannot be accepted. 20. It was contended that had the Collector come to the conclusion that Alembic Chemical Works Company Ltd. was something more than related person then only he could have come to the conclusion that Alembic Chemi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be much more has no merits. In the case of Union of India v. Atic Industries Ltd. reported in 1984 (17) E.L.T. 323, the Supreme Court inter alia observed that it is essential to attract the applicability of the first part of the definition of related person that the assessee and the person alleged to be a related person must have interest, direct or indirect, in the business of each other. Each of them must have a direct or indirect interest in the business of the other. The quality and degree of interest which each has in the business of the other may be different and interest of one in the business of the other may be direct, while the interest of the latter in the business of the former may be indirect. That would not make any difference, so long as each has got 'some interest', direct or indirect in the business of the other. Thus as observed by the Supreme Court even some interest in the business of each other would be sufficient to hold that a person is a related person. In the instant case, the assessee company is holding 34,152 equity shares of Rs. 100/- each in Alembic Chemical Works Company Limited and it is little over 9% of the total shareholding. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of the directors are common. In view of this position, the petitioner knew about the business of each other. The petitioner company had the knowledge about the upward rise in the prices of raw materials. The petitioner company, in fact, charged higher prices in respect of small scale buyers. The petitioner withheld the information with regard to the different prices charged to different classes of buyers. It also withheld the information regarding interests in the business of Alembic Chemical Works. The petitioner also withheld the information as regards the alleged contract of sale with Alembic Chemical Works Company Limited. Though called for by issuing summons, the petitioner did not disclose the correspondence as regards the contract and did not furnish the cost data. Therefore, it cannot be said that the petitioner is not guilty of wilful suppression and wilful misstatement. 24. It was contended that once the price list is approved under the appropriate provisions of Rule 173C, it becomes final and it cannot be reopened unless the same is set aside in appeal as provided under Section 35E of the Act. Section 11A of the Act provides for recovery of duties not levied and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into the provisions of Section 11A, Section 11A and particularly the proviso thereto could never be implemented. Virtually the proviso to Section 11A would become redundant if the contention advanced by the learned counsel for the petitioner is accepted. There is no reason to adopt such unreasonable construction. 26. It may be noted that in relation to the classification once filed and approved by the department, the provisions of Section 11A can be resorted to by the department. This is the view expressed by the Supreme Court in the case of Tata Iron and Steel Company Limited v. Union of India reported in 1988 (35) E.L.T. page 605 (S.C.). While considering the question of limitation, the Supreme Court observed that in that case there was no suppression or misstatement of facts or fraud by the assessee and therefore the proviso to Section 11A of the Act would not be attracted. In that view of the matter, the demand was limited to the period of six months prior to the service of the show cause notice. This decision clearly points out that the classification list approved by the department under the provisions of Rule 173B can be reopened by having recourse to the provisions of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isled. It also appears that only one Additional Collector during his visit noticed the suppression of facts. As observed in para 27 of the order passed by the Collector other officers did not take care to verify the price aspect. This observation indicates that there was probably collusion also. In view of this position, the contention that the larger period of five years could not have been invoked has no merits. 28. No other contention is raised. 29. There is no substance in the petition. Hence the petition is rejected. Rule discharged. Interim relief granted earlier stands vacated. 22-1-1992 30. After the judgment is pronounced, learned counsel for the petitioner requests for keeping the order vacating interim relief in abeyance for six weeks so as to enable the petitioners to approach the Supreme Court and obtain appropriate orders. Learned counsel for the respondents objects to the request being granted. It is pointed out that if the interest benefit accrued to the petitioner during the pendency of the petition is taken into consideration the amount earned by the petitioners by way of interest would be almost two to three times the principal amount involved in the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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