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TMI Blog2003 (8) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, duty should have been assessed on the sale price of the appellants' related buyer to their un-related buyers. It is the finding in the impugned order that on account of adopting the lower sale price to the related buyer as the assessable value, there was a short-payment of duty of about Rs. 60 lakhs. The order has confirmed this duty demand for the period January, 1996 to June, 2001. Further, a short levy demand of about Rs. 31,000/- has been confirmed on the ground that there was clandestine removal of 552 water meters during 1998-99. In addition to the duty demands, the impugned order has imposed a penalty of about Rs. 59 lakhs on M/s. Progressive Thermal Controls Pvt. Ltd. and a further penalty of Rs. 2 lakhs has been imposed on Shri G.C. Narang, Managing Director of M/s. Progressive Thermal Controls Pvt. Ltd. on the ground that "he had the knowledge and was responsible for the evasion of Central Excise duty". Further, duty demand of about Rs. 53,000/- has been imposed on the scrap arising out of manufacture. The present appeals contest the duty demands and penalties except for the duty demand of Rs. 53,000/- on the scrap. 2. The main duty demand has been made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. Progressive Thermal Controls Pvt. Ltd.; that M/s. Progressive Thermal Controls Pvt. Ltd. has no brand name of its own and is entirely dependent upon M/s. 'Schlumberger Industries India Ltd. for the sale of their products under the brand name owned by Schlumberger Industries India Ltd." (Page 4 of the Order-in-Original) 4. The impugned order has also placed reliance on the decision of the Tribunal in the case of Associated Porcelain (P) Ltd. v. C.C.E., Calcutta-I - 2001 (136) E.L.T. 762 (T) in support of the proposition that since the entire production of the appellant is sold to one single buyer, those sales are to be treated as sale to a related person. 5. The appellants contested the findings as contrary to settled law and facts of the case. They relied on the following decisions in support of their case : "(a) Union of India and Others v. M/s. Atic Industries Ltd. - 1984 (17) E.L.T. 323 (S.C.) (b) Ralliwolf Ltd. v. U.O.I. - 1992 (59) E.L.T. 220 (Bom.) (c) Rallis India Ltd. v. C.C.E., Bombay - 2000 (118) E.L.T. 780m (Tri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the adjudication order and submitted that the margin obtained by the buyer on re-selling the water meters was only Rs. 13 per meter which is by no means an abnormal margin. Learned Counsel for the appellants also pointed out that the appellants buyer was incurring loss on his sale activity while the appellant manufacturer earned a profit by selling at the agreed price. Thus, it is the contention of the appellants that their sale price was a fully commercial price and it was in no way lowered so as to benefit the buyer, irrespective of whether he was related or not. During the hearing the learned Counsel has also submitted that the decision of the Tribunal in the case of Associated Porcelain (P) Ltd. had no application to the facts of the appellant's case inasmuch as in that case, the Tribunal upheld the rejection of the sale price in view of the fact that the sale price had been affected by many factors including the financial arrangements between buyers and the sellers. In this context, he referred in particular to the observations contained in Paragraphs 5 and 5.1 of the Tribunal decision in the case of Associated Porcelain (P) Ltd. which are reproduced below : "5. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the first appellant was transferring the entire stock of production to the second appellant who would complete the process of packing at his premises. The condition in which the 'porcelain insulators' were sold to the second appellant is not the usual condition in which such goods are ordinarily marketed, i.e. the goods are ordinarily sold in cardboard cartons, wooden crates etc. Moreover, this is not a simple case where the first appellant received advances in the normal course of business and in fact, the entire financial dealings between the two establish beyond doubt that there exists a definite financial interest for them in each others business. This has been clearly brought out in the impugned order in the following words : "From the statement of Shri B.K. Sampat, Director of both the noticee company in the show cause notice itself, it becomes clear that M/s. SCPL does not charge any interest from M/s. APL and the production of M/s. APL is controlled by M/s. SCPL as per requirement of the market on the basis of orders secured by M/s. SCPL, 100% production of M/s. APL is sold to M/s. SCPL, the expenditure towards payment for all the purchases, wages and petty expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction was freely supplied by the buyer of the appellant manufacturer. He further pointed out that through their Indian subsidiary, M/s. Schlumberger was trying to enter the water meter market in India, while water meter was reserved for small scale sector according to industrial policy. In his reply, learned Counsel for the appellants has submitted that the know-how supply was of no consequence inasmuch as know-how was brought in by Schlumberger Industries India Ltd. which was a 24% shareholder in the appellant manufacturer. According to him, the know-how being an asset brought in by the minority shareholder in the appellant manufacturer, the know-how has to be treated as belonging to the appellants themselves. In this context, he referred to the decision of this Tribunal in the case of Quality Ice Cream - 2002 (145) E.L.T. 584. 8. A side issue involved is the duty demand of about Rs. 6 lakhs for the period 1-1-96 to 31-3-97, in view of the legal position that a small scale unit which manufactures goods under the brand name of another person was not eligible for small scale exemption. A decision on this issue depends on whether the appellant was affixing the brand name 'Prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roof that M/s. Progressive Thermal Controls Pvt. Ltd. was not affixing the lids before handing over the meters to M/s. Schlumberger Industries India Ltd. 9. With regard to the finding on clandestine removal of 552 water meters, the appellant's explanation is that this allegation is made based on the entries relating to purchase and sales of meters found in the records of M/s. Schlumberger Industries India Ltd. and that this allegation is the result of improper verification of those records. It is being pointed out that first of all, no liability could be fastened on the appellant merely based on the fact that entries relating to purchase and sale in the records of the appellants purchasers did not match. Secondly, it is being mentioned that when all the entries in the appellant's purchaser's records are correlated, it would be clear that allegation of the excess sales of 552 pieces is the result of twice counting as sales of meters which had been returned on account of defects by their buyers. Learned Counsel pointed out that the returned meters had been sent by M/s. Schlumberger Industries India Ltd. to the appellant manufacturer for reconditioning, repair etc. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find the decision of this Tribunal in the case of Associated Porcelain (P) Ltd. to be applicable to the present case. As has been correctly pointed out by the learned Counsel for the appellants, that decision confirmed the rejection of transaction value because of the fact that sale price between the parties was not a commercial price and several financial concession rendered by the buyer to the seller, eroded the commercial nature of the transaction. In the present case there were no concessional transactions between the parties and the transaction was a purely commercial one and price was a commercial price. That decision has no application. In these circumstances, we are of the view that rejection of sale price on the ground of it being transaction between two related persons is not sustainable. 12. The finding that water meters manufactured by M/s. Progressive Thermal Controls Pvt. Ltd. were not entitled to small scale exemption during 1996-97 on the ground that they were affixing the brand name of 'Precimag' during that period and that goods produced affixed with the brand name of another person was not eligible for the exemption. The finding is based on statement of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, learned Counsel has pointed out that brand name 'precimag' is not embossed at all on the water meter caps as stated by Shri V. Thomas. Instead, brand name 'precimag' is to be found only on the lids and these lids with the name 'Schlumberger' 'precimag' cast on it is purchased from the market. Learned Counsel also pointed out that incorrectness of the statement is also clear from the relevant records maintained by parties concerned. In this connection, he referred to the fact that the contemporary records kept by M/s. Schlumberger Industries India Ltd. showed that they procured the lids and issued them at the time of sale of meters, rather than sending the lids for affixing at the time of manufacture to M/s. Progressive Thermal Controls Pvt. Ltd. It is clear that statements in question are in conflict with the contemporary business records kept by the parties. For the period in question, there is no record of purchase or use of lids containing the brand name 'precimag' by the appellants M/s. Progressive Thermal Controls Pvt. Ltd. Simultaneously, the record kept by the buyer, M/s. Schlumberger Industries India Ltd. shows that the lids were being procured by them and issued along ..... X X X X Extracts X X X X X X X X Extracts X X X X
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