9911796707
TMI Blog2010 (4) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... e Cypermethrin and alpha Cyermethrin, MIL was manufacturing Allethrins, Deltamethrin, and intermediates for the entire range of products. Prior to July 1999, MIL was not manufacturing Esbiothrin and Esbiol falling under the product group of Allethrins. 3.MIL was formed by family members of Bilakhias who were the major shareholders/promoters of MIL. 4.On Feb. 16, 1998, AgrEvo GmbH and MIL signed a Letter of Intent and on 22-11-98, they signed a letter of Memorandum of Understanding expressing their intention to examine their interest and willingness to form a joint venture for research, manufacture, and sale of mainly synthetic pyrethroids products and their intermediates. 5. Pursuant to the above Memorandum of Understanding, AgrEvo GmbH, AgrEvo SA and MIL entered into a Joint Venture Agreement dt. 3-7-1999. Thus, the Joint Venture Agreement was entered into by AgrEvo GmbH, AgrEvo SA and MIL for the purpose of researching, developing and manufacturing agrochemicals and environmental health products and for this purpose MIL agreed to first transfer its entire non-pyrothroid business to another company, namely, Mitsu Pesticides Ltd. 6. On the date of closing of Joint V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he price was agreed to be arrived at on the basis of actual cost of production plus profit margin as mentioned in the table in Annexure 3.1(a) of the supply agreement dt. 3-7-99. Similarly, the allethrin products (Esbiothrin) were also agreed to be sold by BIL to AgrEvo at the actual cost plus mark up of 35% in 1999-2000, 30% in 2000-2001 and 25% in 2002-2003. 12. Esbiothrin products were sold by AgrEvo outside India. BIL arrived at the price in the same manner for its sale to AgrEvo (India) Ltd./Aventis CropScience (India) Ltd. within India. 13. There were several changes in the foreign share holding companies and their Indian counterparts over the period from 1999 to 2004. However, these changes are not being discussed or explained in view of the fact that there would not be any material effect on the overall issue involved in this case. 14. The important factors which have a bearing on this case is that in BIL, AgrEvo SA held 51% of the share capital initially which was increased to 74% subsequently and continues to hold more than 51% thereby BIL becomes a subsidiary of AgrEvo SA. Similarly, as regards Aventis CropScience (India) Ltd., AgrEvo SA has 100% sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce (India) Ltd. Therefore, the matter was listed once again on 25-3-2010 and after obtaining clarifications, the matter was reserved for decision. 16. The first issue to be decided is whether the assessable value should be arrived at on the basis of price charged by Aventis CropScience (India) Ltd. to the end user or the price at which BIL sold to Aventis CropScience (India) Ltd. The impugned order has confirmed the demand of duty on the ground that the BIL has to be held as a related person of Aventis CropScience (India) Ltd. Very detailed arguments were presented and several decisions of Hon'ble Supreme Court were cited before us to show as to why BIL cannot be considered as a related person vis-a-vis Aventis CropScience (India) Ltd. The decision of Hon'ble Supreme Court in the case of M/s. Atic Industries Ltd. as reported in 1978 (2) E.L.T. (J444) (S.C.), was cited to support the contention that just because the goods were sold to a single buyer under agreement, the department cannot allege charging of low price for showing undue favour to the buyer. It was also contended as in the case of M/s. Atic Industries Ltd., the agreement was arrived at on a purely commercial basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 10 of Central Excise Valuation Rules, 2000, when the assessee so arranges that the excisable goods are not sold by himself but sold through interconnected undertaking, the value has to be determined on the basis of price at which the related person sells to the end customers. Learned SDR on behalf of the Revenue submitted that by drawing support from Para 4.12 of the Order-in-Original that buyer and the seller have interest in business of each other in this case. It was pointed out that Shri Naresh P. Pandya, Assistant Manager of BIL had admitted that price at which the goods are sold by related person has to be adopted. There is no dispute that to treat an interconnected undertaking as a related person, it is not sufficient that they are interconnected undertakings. The department has to show that one of the three clauses namely they are relative; the buyer is relative and distributor of the assessee or they are so associated that they have interest directly or indirectly in the business of each other, has to be shown to be in existence. In this case, the Commissioner has held that two parties to the transactions viz. BIL and Aventis CropScience (India) Ltd., subsidiaries of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by the learned advocate that in this case the purchaser subsidiary company Aventis CropScience (India) Ltd. did not hold any shares in BIL, but it was the holding company of both subsidiaries which held shares. He also relied upon the decision of the Hon'ble Supreme Court in the case of M/s. IOC as reported in 1990 (48) E.L.T. 80 (Tri), holding that just because IOC was a subsidiary company of a company which had shareholding in Burma Shell, it cannot be said that IOC and Burma Shell had mutuality of interest. In that case, Tribunal had considered agreement between the parties in detail. Further, he also relied upon the cases of M/s. International Computers India Mfg. Co. Ltd. - 1989 (41) E.L.T. 287 (Tri.), which is directly applicable to the facts of this case since it was held in that case that when buyer and seller are both subsidiaries of the same holding company, they cannot be said to be related persons. Another finding of the Commissioner in support of his conclusion was that non-compete fee was paid to Shri Bilakhia. In this connection, learned advocate relied upon the decisions of the Tribunal in the case of M/s. Kwality Icecream Co. v. CCE as reported in 2002 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evised; the marketing set up and the consumers identified by them would remain intact in the absence of any competitor. The narration of the transactions between the foreign company and two Indian subsidiaries would show that it was a combined operation by which both benefited. If this is not mutual interest, we do not know what mutual interest can be there? Several decisions cited by the learned advocate, dealt with each issue at a time, whereas in this case, it is a combination of all the issues, which have been considered by the Tribunal or by Hon'ble Supreme Court at one time or the other and discussed. But, there is no case wherein all issues existed. In this connection, we find that there are two subsidiaries of the shareholding company, all the product manufactured is entirely sold to subsidiary, know-how has been provided free by the holding company of which the both companies are subsidiaries, non-compete fee agreement entered that the shareholders which is virtually nothing but an agreement with the owners of previous company since it was a Private Limited company and Bilakhias exercised 100% control over the company; price was dictated and took into consideration the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries (P) Ltd., 206/3, 2nd Phase, GIDC, Vapi have contravened the provisions of Section-4 of Central Excise Act, 1944 read with erstwhile Rule 5 of Central Excise (Valuation) Rules, 1975/now Rule 10 of Central Excise (Valuation) Rules, 2000, Rule 173-C & Rule 173F read with Rule 9(1) of erstwhile Central Excise Rules, 1944/Rule 4, 6 & 8 of the erstwhile Central Excise (No. 2) Rules, 2001/Now Rule 4, 6 & 8 of the Central Excise Rules, 2002, inasmuch as they have not determined the correct Assessable Value of their products for discharging Central Excise Duty, inasmuch as they have failed to correct declaration under sub-Rule 3A of Rule 173-C of the erstwhile Central Excise Rules, 1944/Rule 4 of the erstwhile Central Excise (No. 2) Rules, 2001/Now Rule 4 of the Central Excise Rules, 2002; failed to declare correct assessable value and also failed to determine and discharge the correct Central Excise duty leviable on their product i.e. Esbiothrin (Technical) considering the value/price collected from their Depots. All the acts of contravention on their part appear to have been committed by them by recourse to suppression of facts with an intent to evade payment of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esearch and development report, the marketing survey report, post-market surveillance report, information and database of customers, promotional material, feasibility study relating to distribution mechanism. He also taken note of the fact that according to statement recorded more than 19% of the expenses were incurred in research and development of the product. On the ground of above finding, he has held that claim of BIL that amount was paid only for purchasing of marketing lights to market product cannot be considered as consideration for sale of Esbiothrin, cannot be accepted. Learned advocate submitted that in view of the provisions of amended Section 4, the demand is not sustainable at all. According to the provisions of Section 4, additional consideration can be added only when the amount is paid by the buyer to the assessee or by the buyer on behalf of the assessee. In this case, the buyer was Sumitomo, the amount was paid by them to Aventis CropScience (India) Ltd., who bought all Esbiothrin produced by BIL. No evidence has been produced by the Revenue to show that the BIL received any of the amount paid by Sumitomo. It was also submitted that as per the admitted fact, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aventis CropScience (India) Ltd. and BIL. In the result, from 2001 to 2004, BIL sold the product to Aventis CropScience (India) Ltd., who in turn sold to Sumitomo and Sumitomo was selling the goods to the ultimate customer and for the purpose of marketing, Sumitomo had paid the amount of more than Rs. 14.97 crores to acquire marketing rights. We are not impressed by the finding of the Commissioner that the amount paid by Sumitomo can be said to have been reached BIL, because holding company of the BIL and Aventis CropScience (India) Ltd. can be said to have received the amount through Aventis CropScience (India) Ltd. Further, on going through the details of assets as marketing rights, we do not find any ground which can support the finding of the Commissioner that 19% of this amount can be related to the research and development of the product. For that purpose, Sumitomo had paid 150 million Euro and acquired the rights for the product all over the world. If the amount paid to Aventis CropScience (India) Ltd. cover research and development of the product, there was no need for Sumitomo to licence BIL to continue to manufacture. Therefore, the demand of duty of more than Rs. 2.39 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
