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2020 (3) TMI 839 - AT - Central ExciseMethod of Valuation - Rule 11 read with Rule 4 or Rule 10(b)(ii) of Central Excise Valuation Rules, 2000 - related party transaction - inter-connected undertakings - mutuality of interest - the department’s entire case is based on the fact that the appellant in its Annual Returns and Balance Sheets reflected the transaction with JBSL, SRBSL and JBIL as “related party transactions” - extended period of limitation - penalty - HELD THAT:- The show cause notice as well as the impugned order has mis-understood the difference in the concept of “related party” under the Companies Act, MRTP Act and Central Excise Act. In the present case, the department has failed to prove mutuality of interest between the appellant and its buyers. It is settled law that mutuality of interest is a two way street. Further, common directorship is not evidence enough to establish mutuality of interest. Also, the three companies did not have cross-shareholding at any point of time. It is settled law that there has to be extra commercial consideration or flow back of money and free flow of money from one company to another, cumulatively, for indicating interdependence of the units with each other. In the instant case, there has been no free flow of money from one company to another nor has there been any money given by the two companies to the appellant company - the allegation of mutuality of interest fails. Further, there is nothing on record to show that the price charged by the appellant company from the said two buyer companies i.e. JBIL and SRBSL, had been influenced by either the common directors on the Board of the companies involved or due to the shareholding of the promoter group in the appellant and the said two buyer companies - The price agreed by the appellant company to the said two buyer companies at the time of entering into contracts were for bulk quantities to be supplied over the next twelve months. Such rates were in consonance with the price then prevailing and the difference of 20-30% alleged in the show cause notice is in respect of rates charged to other independent buyers under changed market conditions at a later point of time, for much smaller quantities. No additional consideration flowed to the appellant company from either of the two buyer companies. Extended period of limitation - HELD THAT:- The demands of duty are barred by limitation as the show cause notices were issued beyond the prescribed period of one year as contained in Section 11A(1) of the Central Excise Act. Penalty u/r 26 of CER - HELD THAT:- No allegations against Mr.S.Mohapatra have been proved to conclude that he had reason to believe that the said goods were liable to confiscation. No material evidence has been placed on record in respect of the same. In view of the aforesaid, penalty under Rule 26 of the Central Excise Rules cannot be imposed. Application disposed off.
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