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TMI Blog2025 (4) TMI 1533X X X X Extracts X X X X X X X X Extracts X X X X ..... n finished goods cleared by them to their related unit, M/s. H.D. Consortium India Ltd. 2.1. The said Show Cause Notice was adjudicated vide the Order-in-Original No. 14/Addl.Commr/JKS/CE/GHY/2016-17 dated 14.02.2017 wherein the demand proposed in the Show Cause Notice was confirmed, along with interest; penalty was also imposed. 2.2. The appellant challenged the said order before the Ld. Commissioner of Central Tax (Appeals), G.S.T. and Central Excise, Guwahati who, vide the impugned order, has upheld the order dated 14.02.2017 passed by the ld. adjudicating authority. 3. Aggrieved from the said order, the appellant is before us. 4. The Ld. Counsel appearing on behalf of the appellant submits that in their own case for an earlier period, vide Final Order No. 76168 of 2024 dated 27.06.2024, this Tribunal has examined the issue and dropped the demands confirmed against the appellant. Accordingly, it is submitted that the impugned demands are not sustainable against the appellant. In view of this, it is prayed that the impugned order be set aside. 5. The Ld. Authorized Representative of the Revenue supported the impugned order. 6. Heard the parties and considered their submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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', since the Partners of the Appellant-Firm hold more than 50% share of M/s. H.D. Consortium India Ltd. 7.3. It is to be mentioned here that if the transactions between the manufacturer and his customer were on principal-to- principal basis and the price charged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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. 189 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice 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 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hon'ble Apex Court, we observe that having shareholding in the company alone cannot be a reason to allege that they are related persons. In absence of direct and/or indirect interest in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 India Ltd., is not sustainable. 9. The appellant further submits that there is no loss of revenue to the exchequer due to sale of finished goods from the appellant-un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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