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TMI Blog2006 (8) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... se Act got violated causing injury to the Revenue. It was also inferred that M/s. Punjab Anand Lamp Industries (hereinafter referred to as 'PALI') and M/s. Philips India were related persons in terms of Section 4(4)(c) of the Act and as a result, Central Excise Duty on excisable goods cleared by PALI to Philips India were to be charged at a price at which Philips India sold the said goods to their first independent buyer. In the result, a sum of Rs. 5,13,78,778/- was demanded from PALI. Penalty of equal amount was also imposed on them. In addition, a penalty of Rs. 2.50 crores each was imposed on Philips India and on Philips Holland under the impugned order, the Commissioner went ahead confiscating the land, building, plant and machinery giving, however, an option to PALI to redeem the same on payment of a redemption fine of Rs. 1 crore. 3. As both the stay applications pertain to the same order of the Commissioner, we deal with the matter jointly. 4. A perusal of the record indicates that the whole issue has boomeranged from a seemingly innocuous looking agreement entered into between Philips Holland with Punjab State Industrial Development Corpn. and Punjab Anand Lamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval from PALI. The smart investigation conducted by the Directorate General of Central Excise Intelligence in this case also brought the cat out of the bag: a secret understanding between PIL and PALI dated 9-9-1985. The text whispers as follows : "SECRET September 9, 1985 Understanding between PEICO and PALI "To Compensate Mr. C.L. Anand for his investment and efforts in PALI, it was decided that Mr. C.L. Anand will receive an interest-free advance of Rs.15 mm which, in ten years, would be written off. This amount was made available to PUNJAB ANAND BATTERIES LTD. on October 10, 1984 and is constructed in such a way that it is connected with the deliveries of batteries from this company to Peico. In case Mr. Anand would not fulfil the undertakings as mentioned hereinafter, we can, at any time, legally insist on repayment of the remaining amount of this advance. In case of such a situation, we propose to recover the amount by non-payment of pending invoices of batteries supplied to us. The total supply on a yearly basis in 1985 f.i. is about Rs. 40 mn. Mr. C.L. Anand has accepted the following undertakings as conditions for this agreement: (1) &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reed to stand by them, as we from the Peico side have assured him." 6. According to this understanding, it is evident that Shri C.L. Anand of Anands would receive an interest free advance of Rs. 1.50 crore from PIL, which was to be written off in 10 years. This amount was made available to Anands on 10-10-1984 and was constructed in such a way that it was connected with the delivery of batteries from Anand to Philips India. In lieu of the amount of Rs. 1.50 crore, Shri C.L. Anand was expected to fulfil the following conditions : "(i) that he would have no further claims on Peico/NVPG for the PALI and execution thereof. (ii) that Peico would have the right to take up 100% of the lamps manufactured by PALI, if Peico desired so. (iii) that Shri C.L. Anand also agreed to honour a margin of 15% on lamps as stated in the selling agreement. And that Peico's deliveries to the PALI (of raw material etc.) would be normal commercial prices. (iv) that Shri C.L. Anand would act in every respect according to the existing agreements between NVPG, Peico and himself." What is more glaring here is the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perseded by yet another agreement on 5-7-1996 and the various facts and facets of this investigation - some pulpy and some creamy - namely, transfer of a sum of Rs. 1.50 crores to Shri C.L. Anand, security deposit of Rs. 90 lakhs given to PALI by PIL, supply of one TLD Lamp Machine/Chain to PALI by PIL and all other relied upon documents for several hours, of course with the able assistance from rival parties has enabled us to take a position in this fact-finding mission at a timer footing as we would be discussing below. 10. A copy of Articles of Association of Philips Anand Lamp Industries Ltd. (PALI) placed on record clearly reveals that PALI has clearly functioned as a subsidiary of PIL, clearly proving that they are "related persons" as defined under Section 4(4)(c) of the Central Excise Act. Even being subsidiary, PIL and Philips Holland were treated as a single entity in the Articles of Association. The arrangements made through various agreements made between the players reveals that the price at which PALI would sell to PIL were to be arrived at by reducing the next selling price charged by PIL to its dealers by an amount equal to 15% of the net selling price. In add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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