TMI Blog2015 (8) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4(4)(c) of the Act does not get satisfied. The matter is squarely covered by the decisions of this Court in the case of Atic Industries Ltd. We have gone through the judgment in the case of Atic Industries Ltd. [1984 (6) TMI 51 - SUPREME COURT OF INDIA] wherein this court categorically held that there should be mutuality of interest in the business of each other. No doubt, the two buyers had given ₹ 85.66 crores interest free loan to the assessee. However, that by itself may not be a reason to hold them as related persons within the meaning of Section 4(4)(c) of the Act. In the absence of any mutuality of interest existing between them, giving of this interest free loan could have been a basis to include the notional interest while arriving at the cost of product sold by the assessee to the two buyers. However, instead of doing that, the appellant wanted to make use of this factor to hold that the assessee and the two buyers are “related persons” which position is difficult to comprehend having regard to the principle laid down in Atic Industries Ltd's case. After taking over of the assessee company by Goodyear, more than 70 per cent of the sales by the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issuance of show cause notice by the Commissioner of Central Excise and Customs on 25.01.1999, alleging that CEAT and Goodyear are related persons of the assessee within the meaning of Section 4(4)(c) of the Act of 1944 and as such the selling price of CEAT and Goodyear shall be the assessable value of goods produced by the assessee under section 4 of the Act. Alternatively, it was also alleged as to why the additional consideration flowing back to the assessee should not be added in their present selling price in terms of Rule 5 of the Central Excise (Valuation) Rules, 1975 r/w Section 4 of the Act. In this way a Demand cum Show Cause Notice was issued to the assessee demanding differential duty of ₹ 8,76,85,385/- for the period from 01.03.1997 to 16.04.1998 for under valuation of the goods. Contravention of Section 4 of the Act read with Rules 9, 9(2), 52, 173C, 173F, 173G of the Rules was also alleged and penal action was proposed under Section 11AC of the Act read with Rules 173 of the Rules, alongwith penal interest under section 11AB of the Act. The notice also invoked extended period under proviso to Section 11A(1) of the Act for suppression of facts and willful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary in view of the definition of related persons contained in clause (c) of Sub-Section (4) of Section 4 of the Central Excise Act (hereinafter referred to as 'Act') which reads as under: - (c) related person means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor. Explanation. - In this clause holding company , subsidiary company and relative have the same meanings as in the Companies Act, 1956 (1 of 1956). The expression 'in the business of each other' clearly denotes that interest of the two persons have to be mutual, i.e., in each other, in order to treat them as related persons. We find from the order of the Member Judicial that only on the ground that the two companies had given a loan of ₹ 85.66 crores to the assessee company, was treated as sufficient to establish the relationship between the assessee and the buyers. That only shows one way traffic whereas requirement is that of two way traffic. The other Member, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are capital of the assessee and has interest as share holder in the business carried on by the assessee. But it is not possible to say that the assessee has any interest in the business of Atul Products Limited. There are two points of view from which the relationship between the assessee and Atul Products Limited may be considered. First, it may be noted that Atul Products Limited is a shareholder of the assessee to the extent of 50 per cent of the share capital. But we fail to see how it can be said that a limited company has any interest, direct or indirect, in the business carried on by one of its shareholders, even though the shareholding of such shareholder may be 50 per cent. Secondly, Atul Products Limited is a wholesale buyer of the dyes manufactured by the assessee but even then, since the transactions between them are as principal to principal, it is difficult to appreciate how the assessee could be said by virtue of that circumstance to have any interest, direct or indirect, in the business of Atul Products Limited. Atul Products Limited buys dyes from the assessee in wholesale on principal to principal basis and then sells such dyes in the market. The assessee is not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of each other. This position was not denied even by the assessee. However, their submission was that provisions of Rule 9 of the Valuation Rules are not attracted as this Rule applies only when assessee so arranges its affairs that the excisable goods are not sold by it except to or through a person who is related in the manner specified in either of the sub clauses (ii), (iii) or (iv) of Section 4(3)(b) of the Act. [Rule 9 does not cover clause (i)] This contention of the assessee is accepted by the CEGAT and the CEGAT is justified in adopting this course of action. It is clear that the two are companies and therefore, they are not relatives and therefore, clauses (ii) and (iii) are not applicable on the basis of it. Insofar as clause (iv) is concerned, what is to be shown is that they have interest, directly or indirectly, in the business of each other. The expression each other would signify the element of mutuality and we have already held above that this mutuality principle has not been satisfied in the instant case. Apart from the above, it would be significant to mention that after taking over of the assessee company by Goodyear, more than 70 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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