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2015 (7) TMI 543 - CESTAT AHMEDABAD

2015 (7) TMI 543 - CESTAT AHMEDABAD - TMI - Valuation - Invocation of extended period of limitation - whether Valuation of the HDPE/ PP Bags manufactured by the appellants sold through related person, as inter-connected undertakings, can be made under Rule 11, read with Rule 10(a) of the Valuation Rules, 2000 as they existed prior to 01.12.2013 - Held that:- It has been clearly brought out by the Revenue that the persons who are calling the shots in the case of the appellants and the interconnec .....

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ame are upheld on merits.

Issue involved in these proceedings was a contentious one and appellant had certain judicial pronouncements on the interpretation of Section 4 of the Central Excise Act, 1944 with respect to related persons . Under the existing factual matrix of facts, it can not be held that there was any intention on the part of the appellants to evade payment of duty. Accordingly, extended period is not invokable to the demands and no penalties are imposable upon the appel .....

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. Sivakumar, Authorised Representative ORDER Per : Mr. H.K. Thakur; These appeals have been filed by appellants M/s. Goldjyoti Polymers (Unit No. I and Unit No. III) and its partners against two OIO Nos. 01/OA/VAPI/2011 dated 10.01.2011 and 02/MP/VAPI/2011 dated 17.01.2011, passed by Commissioner of Central Excise and Customs, Vapi and different Orders-in-Appeal passed by first appellate authority. Appellant Shri Premji V. Bhanushali is the partner of appellant M/s. Goldjyoti Polymers. Both side .....

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M/s. Goldcoin Polypack Pvt. Limited, established in 1985 and M/s. Canon Laminators Pvt. Limited also established in 1985. That in addition to the sales to these ICUs, appellants are also selling about 30% of their sales to independent customers like M/s. Chambal Fertiliser and Chemicals Limited, M/s. Zuari Industries etc. Learned advocate made the bench go through the partners/ shareholders of the appellants and ICUs which are admitted by the appellants to be related persons as per Section 4 of .....

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sions of Section 4(1) and 4(3) of the Central Excise Act, 1944. He also read the provisions of Rule 9 and 10 as existed in Valuation Rules, 2000 as issued under original Notification No. 45/2000-Central Excise (NT) dated 22.11.2013. That as per Rule 10 of the Valuation Rules the sales of 100% goods manufactured by an assessee should be sold through the related person (ICUs in appellant s case). It was his case that in addition to the entire sales through related person the conditions specified i .....

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ed by appellants are also sold to independent buyers and also at times the price, at which the goods sold to independent buyers, is higher than the price at which related persons sell the goods to independent buyers. Learned Advocate also argued that the demands for extended period are not sustainable, as it is an interpretational issue, in the light of various judicial pronouncements and there can not be any intention to evade any duty. He relied upon the following case laws in support of his c .....

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Tri. Mum.)] (h) Reliance Industrial Products vs. CCE [2012 (276) ELT 107 (Tri. Mum.) (i) Vinny Overseas Pvt. Limited vs. CCE [2009 (245) ELT 759 Tri. AHmd.)] (j) Victory Paper & Boards (I) Limited vs. CCE [2007 (217) ELT 212 (Tri. Bang.)] (k) Sree Nirmal Spinners vs. CCE [2014 (300) ELT 469 (Tri. Che.)] 2.1 It is also the case of the appellants that commonality of Directors/ Partners cannot be the ground to hold that buyer and Seller are related, in view of the following case laws:- (a) Alem .....

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tatis mutandis, will be Rule 10(a). Learned AR made the Bench go through Para 23.4 of the Order-in-Original No. 01/OA/VAPI/2011 dated 10.01.2011 to drive home the point that appellants are related persons. He also relied upon the judgment of Apex Court in the case of Calcutta Chromotype Limited vs. CCE, Calcutta [1998 (99) ELT 202 (SC)] to argue that courts can lift the corporate veil to find out the true nature of transaction and relationships. He also made the Bench go through Para 14 of the l .....

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sed the case records. The issue involved in these proceedings is as to whether Valuation of the HDPE/ PP Bags manufactured by the appellants sold through related person, as inter-connected undertakings, can be made under Rule 11, read with Rule 10(a) of the Valuation Rules, 2000 as they existed prior to 01.12.2013. 4.1 Section 4(1) and (2) of the Central Excise Act, 1944 reads as follows:- SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. (1) Where under this Ac .....

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may be prescribed. (3) For the purpose of this Section - (a) assessee means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) persons shall be deemed to be related if (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of ea .....

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corporate; Or (III) if the bodies corporate are under the same management; or (IV) if one body corporate exercise control over the other body corporate in any other manner; (D) where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firm,- (I) hold, directly or indirectly, not less than fifty per cent. Of the shares, whether preference or equity, of the body corporate; or (II) exercise control, directly or indirectly, whether as Direct .....

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Rule 9, 10 and 11 of the Valuation Rules, 2000 read as follows before their amendment under Notification No. 14/2013-CE (NT) dated 22.11.2013:- RULE 9. When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in either of sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of Section 4 of the Act, the value of the goods shall be the normal transaction value at which these are sold by the .....

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to or through an inter-connected undertaking, the value of goods shall be determined in the following manner, namely :- (a) If the undertakings are so connected that they are also related in terms of sub-clause (ii) or (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act or the buyer is a holding company or subsidiary company of the assessee, then the value shall be determined in the manner prescribed in rule 9. Explanation. - In this clause "holding company" and &quo .....

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It is primarily the case of the appellants that inter-connected undertakings, when read with the relevant provisions of Companies Act, 1956, can not be relatives of each other as per Section 4(3) (b) (ii) of Central Excise Act, 1944 and thus valuation of the goods sold through inter-connected undertaking can only be done as per transaction value of goods sold to independent buyers under Section 4(1) of the Central Excise Act, 1944. Appellants relied upon several judgments, including of those of .....

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not existing in Section 4. Secondly, mutuality of interest has not been put into service by the Revenue in this case. Thirdly, appellants are not disputing that they are not related person. Fourthly, a Rule like Rule 10 of the Valuation Rules was not required to be interpreted by the Hon ble Apex Court. In the present case, Revenue has made its case on the grounds that the appellants and the other inter-connected undertakings are such that they have become relatives as per Section 4(3)(b)(ii) a .....

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w is relevant and reads as follows:- 14. In M/s. Mcdowel and Company Ltd. v. Commercial Tax Officer [(1985) 3 SCC 230 = (1985) 154 ITR 148], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster [(1936) AC 1] that every assessee is entitled to arrange his af .....

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on the authorities to lift the veil of a company, whether a manufacturer or a buyer, to see it was not wearing that mask of not being treated as related person when, in fact, both, the manufacturer and the buyer, are in fact the same persons. Under sub-section (1) of Section 4 of the Act, value of the excisable goods shall not be deemed to be normal price thereof, i.e., the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at t .....

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nufacturer and the buyer are same, it is apparent that buyer is associated with the manufacturer, i.e., the assessee and then regard being had to the common course of natural events, human conduct and public and private business it can be presumed that they have interest, directly or indirectly, in the business of each other (refer Section 114 of the Evidence Act). It is, however, difficult to lay down any broad principle to hold as to when corporate veil should be lifted or if on doing that, co .....

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xcisable goods and other is the buyer of those goods, the two companies being separate legal entities, the Excise authorities are barred from probing anything further to find out who is the person behind these two companies. It is difficult to accept such a narrow interpretation. True that shareholdings in a company can change but that is the very purpose to lift the veil to find out if the two companies are associated with each other. Law is specific that when duty of excise is chargeable on th .....

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again clause (a) of Section 4(1) will not be applicable to arrive at the value of the excisable goods for the purpose of levy of duty of excise. From the above, it is evident that excise authorities are not barred from probing to find out the persons behind the companies who are calling the shots to know when Section 4(1)(a) of the Central Excise Act, 1944 will not be applicable. 4.5 In the present case adjudicating authority in Paras 21 and 21.1 of the OIO No. 01/OA/Vapi/2011 dated 10.01.2011- .....

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their trading firms and controlled by him and his brother Kanji Bhanushali. 4.6 It is the case of the appellants that only biological persons can be relatives and not inter-connected undertakings. In this regard Learned Advocate appearing on behalf of the appellants made the Bench go through Section 2(41) and Section 6 of the Companies Act, 1965, which are reproduced below:- (41) relative means, with reference to any person, any one who is related to such person in any of the ways specified in .....

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of the Companies Act, 1956 husband and wife and members of Hindu undivided family (HUF) are again mentioned. Legislature by virtue of its knowledge of the facts is aware of all the judicial pronouncements made by the Courts and has chosen to include sub-section (ii) and (iii) of Section 4(3) (b) and Rule 10(a) of the Valuation Rules. The entire Rule 10 is made for inter-connection undertakings. It is a well accepted legal preposition that legislation does not use any word without assigning a mea .....

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learly brought out by the Revenue that the persons who are calling the shots in the case of the appellants and the interconnected undertakings are relatives hence by virtue of express language of Rule 10(a) of the Valuation Rules the appellants will be held to be related. Adjudicating authority in Para 23.3 and 23.4 of the order-in-original dated 10.1.2011 17.1.2011 has held that in the present proceedings Rule 11 of the Valuation Rules is put into service according to which for determining valu .....

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provisions of the Bombay Money Lenders Act vis-a-vis the provisions of other Act upon a purposive and meaningful interpretation held that the banks do not come under the purview of the Assam Money Lenders Act. 61. The Court while interpreting the provisions of a? statute, although, is not entitled to re-write the statute itself, is not debarred from ironing out the crease . The court should always make an attempt to uphold the rules and interpret the same in such a manner which would make it wor .....

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