TMI Blog2005 (12) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... al price for the period from 1997-88 to 2001-2002 is not correct because it is based on assumptions and presumptions without any corroborative evidence. M/s. Balaji Trading Corporation (hereinafter referred to as BTC ) is one among several others to whom Commercial Flush Doors (hereinafter referred to as CFD ) were supplied and prior to 1-4-2000, Balaji Trading Corporation was not in existence. In fact sales to BTC were only about 12% for two years and subsequent to 2004-05 there were no supplies to BTC which is alleged to be a favoured buyer or a related person. Since sales were made to several traders at the same price the concept of related person cannot be pressed into service. He filed a list of citations in support of his contentions. 3. The representative of revenue submitted that clandestine removal of goods involved a duty demand of Rs. 10,44,393/- and undervaluation of goods alleged to have been sold to M/s. BTC and others involved duty demand of Rs. 56,39,443/-. No corroborative evidence could be adduced for amount in excess of the admitted amount. 4. Shorn of the details the brief facts for the case are as under : (i) M/s. Standard Doors is a partnership firm wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly collected by BTC for sale of CFDs and ply wood of SD have to be adopted for arriving at the assessable value of the clearances of SD and for computation of SSI exemption limit and payment of duty by SD. Accordingly they have reassessed the clearances of SD for the period April 1997 to March 2002 and proposed to recover an amount of Rs. 56,39,443/- alleging undervaluation. The applicant contests that since the price charged to BTC is the same as the one charged to others (excepting certain specified instances of admitted undervaluation) the prices charged by BTC are not relevant and accordingly the proposed demand of Rs. 56,35,443/- is not justified except to the extent of Rs. 3,14,708/- which is admitted. 5.1 The Commissioner (investigation) was asked to verify inter alia whether the duty demanded in the SCN beyond the admitted amount is supported by any corroborative evidence and whether the concept of related person adopted by the department was applicable during the relevant period with reference to the facts and circumstances of the case and also whether the applicant and M/s. BTC are related persons. The investigation report dated 23-9-2005 submitted by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated persons. 5.3 According to the Commissioner (Inv) even after introduction of new Section 4 from 1-7-2000 the ingredients present in the erstwhile Section 4 have been largely retained and the language of the erstwhile Section 4(iii) has been totally retained in Rule 9 of the valuation Rules, 2000. In view of the above, the ingredients required for treating SD and BTC as related persons and loading the value of BTC on the whole transactions of SD for purposes of demand of duty will not stand the test of law. Relying on an Apex Court judgment in the case of Dy. Commissioner of Sales Tax (law) Board of Revenue (Taxes) v. Kalakutty, AIR 1985 S.C. 1143 (1144, 1145, 1147) regarding the identity and relationship between two partnership firms, he came to the conclusion that SD and BTC are two different partnership firms on the following grounds :- (a) The composition of partnership is different from each other. (b) The object and intention of the partnership in each firm is different from each other (c) The business of BTC is substantially different from the business of SD. While BTC acts as the distributor of NOVOPAN brand products, wooden or plywood or other materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of SD and BTC etc. has been discussed at length in paras 5 and 6 of SCN, there are plethora of judgments from various judicial fora that mere availability of the above are not sufficient to prove the related persons concept in the absence of flow back of sale proceeds or other funds between the two parties. In the instant case flow back of funds is alleged in para 7 of the SCN and it is mute point as to whether this evidence is sufficient to prove that there is a flow back of finances between SD and BTC. If these instances of flowback of finances are treated as adequate, then there appears to be merit in the allegation that SD and BTC are related persons. 5.5 In view of the foregoing, the Commissioner (Inv) concludes that the concept of related person appears to be inapplicable in the instant case. He also quotes the revenue s reply vide letter dated 31-8-2005 as under : As stated above, without discussing the relationship of other firms i.e SA, BT, TA and AE with SD for the period prior to 1-4-2000 it would be premature to demand the duty even for the years 1997-98, 1998-99 and 1999-2000 on the basis of related person concept. For the years 2000-01 and 2001-02 duty may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales to BTC. In both the cases the prices charged in the invoice are same, although part sales from Standard Doors to other buyers were admitted to have been undervalued based on specific evidence obtained. In this connection, the applicant s Advocate cited the decision in 2005 (186) E.L.T. 219 (Tri. - Bang) CCE, Cochin v. Excel Thread Industries in terms of which even if 2% goods are sold to independent buyers at the same price at which 98% goods are sold to company which is allegedly related person, and when the goods are available to the independent buyers, the price at which goods are sold to them is normal price of the goods. 8.2. The Revenue admits vide its letter dated 31-8-2005 that BTC has been in existence from 1-4-2000 and prior to this period, M/s. Srinivasa Agencies, M/s. Balaji Traders, M/s. Tirumala Enterprises and M/s. Archana Enterprises, are in existence and that being so it is intriguing as to how BTC has been alleged to be related to SD even for the years 1997-98, 1998-99, 1999-2000 and that too without discussing the relationship between SD and other firms mentioned above in the SCN. It was further observed by the Revenue that it is not known whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be revised with reference to the actual collections made by BTC alleged to be related person. However the price charged to BTC and others on the invoices is the same. In such a case the decision of the Tribunal referred to by the learned Advocate in 2004 (170) E.L.T. 341(Tri. - Del). Ultra Refrigerators Pvt. Ltd. v. Commissioner of Central Excise, Delhi IV, 2004 (163) E.L.T. 478 (Tri. - Del). Pepsico India Holdings (P) Ltd. v. Commissioner of Central Excise, Mumbai, 1986 (26) E.L.T. 289 (S.C.) in Union of India and others v. Kantilal Chunilal and others and 2004 (170) E.L.T. 237 (Tri. - Del). Commissioner of Central Excise, New Delhi v. Kanam Foam Industries are relevant. 8.5 In Ultra Refrigerators Pvt. Ltd case it was held inter alia that when there are sales to both related and unrelated persons, provisions of Valuation Rules with regard to sale to related persons are applicable only when manufacturer so arranges that goods are not sold except to or through related persons. In Pepsico India Holdings (P) Ltd. the Tribunal held inter alia that when part of goods are sold to unrelated dealers and part of goods through a related person, special provision under proviso 3 to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he preceding paragraphs, the allegations of undervaluation beyond the admitted portion are not sustainable. Consequently we find that the applicant has admitted the duty liability correctly and has co-operated with the settlement proceedings. The admitted amount has also been paid by him. Therefore the immunities sough merit favourable consideration although we are not inclined to grant total immunity from interest in view of the belated payment of duty. Since the immunities are being considered for the applicant company, the co-applicant is also entitled for immunities sought. 9. Accordingly the case is settled under sub-section (7) of Section 32F of the Central Excise Act, 1944 as per the terms and conditions mentioned below : - (a) The duty liability is settled at Rs. 7,58,378/-. Since this has already been paid, no further duty is payable. (b) Immunity from interest in excess of 10% simple interest per annum on the aforesaid amount is granted. The Department shall calculate the interest liability and communicate the same to the applicant company within 15 days from date of receipt of this order and the applicant company shall pay the same within a fortnight there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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