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TMI Blog2004 (10) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase order raised by the Appellant No. 2 from their Head Office at Mumbai; that it is the case of the Revenue that Appellant No. 2 had raised purchased orders in favour of the Appellant No. 1 at a lesser price than the original contracted price and that both the Appellants have cross share holdings, have common directors, common authorized signatory for operation of bank accounts, common funding, common marketing and common management control; that they are related persons having interest directly or indirectly in the business of each other attracting provisions of Proviso (iii) to Section 4(1)(a) of the Central Excise Act; that consequently the correct price would be the price at which the goods are ordinarily sold by the Appellants No. 2; that it is also the case of the Revenue that they had paid duty on base pipes whereas the contract was for gunited, epoxy painted or tapecoated MS Pipes and no duty had been paid on subsequent value additions on account of epoxy painting and guniting. 3.1 The learned Advocate submitted that both the Appellants No. 1 and 2 are not related person as companies are independent legal entities; that in terms of Section 4 (4) (c) of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; CCE, v. Vikrama Engineering Co. - 1989 (39) E.L.T. 143. (ii) Kirloskar Cummins Ltd. v. Union of India - 1991 (51) E.L.T. 325 (Bom.) wherein the Bombay High Court has held that proviso (iii) is not attracted because the goods are generally not sold by the assessee except to or through related person. 3.3 He also contended that their case is squarely covered by the law laid down by the Supreme Court in the case of Alembic Glass Industries Ltd. v. CCE & Cus., 2002 (143) E.L.T. 244 (S.C.) in which the assessee and its purchaser were holding some share in each other and having common Chairman and the three Directors, the Supreme Court has held that "the shareholders of a public limited company do not, by reason only of their shareholding, have an interest in the business of the company. Equally the fact that two public limited companies have common Directors does not mean that the one company has an interest in the business of the other. It is therefore, not possible to uphold the conclusion of the Tribunal that the assessee and the chemical company were related persons." Reliance has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 209A of the Rules. 5. Countering the arguments, Shri R.C. Sankhla, learned Senior Departmental Representative, submitted that both M/s. Mukut Pipes Ltd. and M/s. Surindra Engg. Co. Ltd. are related persons as both of them have cross shareholding Chairman, Managing Director and Directors are common and also close relatives having blood relations, the authorized signatory of these companies for operation of bank accounts is common, employees are inter transferable within the group companies and the marketing is being controlled from their corporate office; there is common funding among group companies including the Appellants No. 1 and 2; that the Appellant No. 1 supply the goods to Appellant No. 2 at lower price as compared to independent buyers; that Mukut Pipes Ltd. was formed as closely held company by Shri Bhupinder Singh Ahluwalia and his two sons Rajinder Singh and Kuljinder Singh as Directors and person acting in concert hold 60.54% of the total paid up share capital of the company; that Appellant No. 2 enters into agreement with various buyers and the orders so obtained are split up among the Group Companies. The learned Senior Departmental Representative, further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards sale promotion activities, after sales services and maintenance of office were borne by the marketing company. (iii) Nirlex Spares (Pvt.) Ltd. v. CCE, Rajkot - 2001 (133) E.L.T. 161 (T) wherein the marketing company was held to be a related person of the Appellant when mutuality of interest was clearly indicated through supply of entire production to marketing company, Supervision and making of all drawings of the new product by a director of the marketing Co., looking after sales promotion activities and incurring expenditure on advertisement and office expenses and other financial transactions between the two, etc. 6. Regarding epoxy painting charges, the learned Senior Departmental Representative, submitted that the Appellant No. 1 had discharged the duty on bare pipes at a price not quoted in the rate contract and no duty has been paid on subsequent value addition on account of epoxy painting; that the contract rates were inclusive of Excise Duty for cement lined, guinted, epoxy painting or tape coated MS pipes; that moreover the Excise duty is payable on the goods in the State in which the same are cleared from the factory; that since the goods are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act, 1956 (1 of 1956)." 8.1 It has been contended by the learned Advocate that the Proviso (iii) to clause (a) of sub-section (1) of Section 4 of the Central Excise, which provides for treating the price at which the related person sells the goods to be the normal price for the purpose of levying the duty, is not applicable to the facts of the present matter since the Appellants No. 1 has not so arranged that the goods manufactured by them are generally not sold by them in the course of wholesale trade except to or through a related person. In support of his contention, he has submitted that M/s. Mukut Pipes Ltd. has only sold 18% of their total sale to M/s. Surindra Engineering Co. Ltd. and majority of the sales by the Appellant No. 1 was to independent buyers. This factual submission has not been controverted by the Revenue. The language of Proviso (iii) to Section 4(1)(a) of the Act clearly shows that it applies only where all the goods are sold to or through a related person. If some of the goods are also sold to persons other than the related persons, this Proviso will not be applicable. The Bombay High Court has held in the case of Kirloskar Cummins Ltd., supra, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory for operating the bank accounts and the payments were made from one company's account to another Company's account. The learned Senior Departmental Representative has drawn our attention to the allegation contained in Para 9.4 (b) of the show cause notice wherein it is charged that a common fund exists in Punjab & Sind Bank, Fort Branch, Mumbai which can be utilised by either of companies as per requirements by advising the Bank regarding transfer of funds from/to two accounts. Funds were also transferred as per General Ledger Account maintained by the Appellant No. 2 which have not been proved to be commercial transactions by the Appellants. It is also the case of the Revenue that similar facility is available in Punjab National Bank, Rajpura where both the Appellants No. 1 and 2 maintain their accounts and transfer of fund is undertaken between them. Exhibit 'L-1' to the show cause notice contained some transfer of funds entries between the two accounts of Punjab & Sind Bank, Mumbai Accounts of Punjab National Bank, Rajpura were also attached with the show cause notice as Exhibit No. 'L-2'. The Commissioner has also recorded his findings in this regard in Para 37 of the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er excluding all the deductable expenses and taxes in accordance with law. The price to be taken into consideration is the price of M.S. Pipe alone that is supplied by M/s. Mukut Pipes Ltd. through their related person M/s. Surindra Engg. Co. Ltd. The value can not include any activity undertaken by the Appellant No. 2, on the impugned goods as they are not the manufacturer and they are only related person for the purpose of determination of assessable value. We, therefore, remand the matter to the jurisdictional Adjudicating Authority to determine the assessable value and recompute the amount of duty payable by the Appellants who are at liberty to produce the material/evidence in respect of various deductions claimed by them from the actual price. For these reasons, the cost of epoxy painting and guinting the pipes will also not be includible in the assessable value of the pipes as the said process has not been established to have been undertaken by the Appellants No. 1. The jurisdictional Adjudicating Authority would also readjudicate the demand of duty on account of increase in price as it is related to the final price settled between the related person and the Project Authority ..... 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