9911796707
TMI Blog1998 (10) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... under three show cause notices imposing penalty amounts of Rs.5 lakhs on appellant M/s. Pratibha Chemicals (P) Ltd., Kanpur (PCPL, for short) besides imposing penalty of Rs. 2 lakhs on M/s. Carona Cosmetics and Chemicals Ltd., Kanpur (CCCL for short) and Rs.One lakh on Shri P.A. Kharwadkar, Managing Director of PCPL and Rs. 50,000/- on Shrimati P.P. Kharwadkar. The penalty on PCPL was imposed under Rule 173 Q of Central Excise Rules, 1944 (Rules, for short) and on the others under Rule 209A of the Rules. The duty demand related to the period September 1989 to December 1994 and the show cause notices were dated 30-9-1994, 25-10-1994 and 21-3-1995. The first notice covering the period September 89 to March 94 for a sum of Rs. 25,02,818.24 inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to UPFC. (iv) Mrs. Kharwadkar, Director of PCPL had 850 shares of Rs. 100/- each in CCCL. On these grounds it has been alleged that both the companies were managed and controlled by Mr. and Mrs. Kharwadkar. 3. In addition it was alleged that PCPL had bought the raw material Acid Slurry from CCCL but had made no payment for it but adjusted the price against the supplies of detergent cakes and soap and that CCCL made payments on behalf of PCPL to suppliers of raw materials, labour contractor and Security Services. Also CCCL met the advertisement expenses for the detergent cakes and soaps. It was, therefore, alleged that the two companies were mutually interested in the business of each other and the price charged by PCPL was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty as well as imposition of penalty are not justified, it was submitted. 6. Shri K. Srivastva, Senior Departmental Representative opposed the submissions made by the learned Counsel and stated that the two companies were largely supported by the Kharwadkar family and both the companies were mutually supported by each other. There was large flow of funds from CCCL for PCPL to help reduce the cost for the latter and reduce thereby its tax burden and give it an edge in the market. CCCL is favoured buyer of PCPL and the dealings were not on principal to principal basis and consideration other than price was involved. He submitted that when the Commissioner mentioned the term "favoured buyer", he meant "related person". It was necessary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actors that have led the Commissioner to reach such a finding and the submissions made by the learned Counsel challenging the validity of the finding we are of the view that while some of the said factors taken in isolation may not be conclusive for establishing that CCCL is a related person of PCPL within the meaning of Section 4(4)(c) of the Act, all those factors taken together cumulatively clearly support the Commissioner's finding about the transactions between the two being not at arm's length and that they were interested in the business of each other. Thus the fact that CCCL bore the expenses on behalf of PCPL may not by itself justify the adverse inference as such expenses were being adjusted against the price that CCCL was to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inued till 19-7-1991, Mrs. Kharwadkar became Director for the second time on 28-12-1986 and that she continue to be Director. The details provided in their reply show that Kharwadkars had broken spells of Directorship in PCPL. We are not able to accept the point made that because of the position enjoyed by PCPL in the detergent industry, Mr. and Mrs. Kharwadkar were requested by PCPL or the other promoters of PCPL to be promoter Directors of that company. It is possible to accept that they may have been approached to become Directors but to be approached to become promoter Directors does not appear to be an acceptable proposition. The conclusion is that having been in the field for a few years the two promoted the second company PCPL. 8.&e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction to PCPL, the supply of most of the requirement to PCPL of Acid slurry by CCCL and the financial adjustment in the matter of payment for the Acid slurry on the one hand and the finished production on the other also point to the relationship of the two companies for bringing home the charge of their being interested in the business of each other. The Commissioner has dealt with in detail the implications of lifting the corporate veil in the present case in the light of the judgment of the Supreme Court. 9. On a cumulative appreciation of the various factors considered by the Commissioner in the present case, we agree with his finding that CCCL is a related person of PCPL and the assessable value of the goods sold by PCPL should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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