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2016 (9) TMI 731 - CESTAT MUMBAI

2016 (9) TMI 731 - CESTAT MUMBAI - TMI - Valuation - interconnected / related parties - allegation of evasion of duty of excise by undervaluation where goods are sold through related persons - Held that:- there is nothing on record to show that PSML had interest in the business of KBX. PSML had no interest in the business of KBX but for selling of the products to them. The loans advanced by KBX to PSML were also on an interest which was higher than the bank rate, the fact undisputed in the proce .....

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appeals are directed against order-in-appeal No. PI/131 to 133/04 dated 27.10.2004 and are filed by the Revenue. 2. The relevant facts that arise for consideration are M/s. Precision Seals Manufacturing Ltd. (PSML) is engaged in the manufacture of goods falling under Chapter 40 of the Central Excise Tariff Act, 1985. The lower authorities were of the view that PSML was indulging in evasion of central excise duty by undervaluing their products by selling the same at substantially higher prices th .....

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of cost, PSML had taken trade advances from KBX with higher rate of interest and KBX had given corporate guarantee to the banks for the loans taken by PSML and PSML is the subsidiary company of KBX. The first appellate authority has set aside the impugned order. 3. The learned departmental representative, after taking us through the facts of the case, would submit that the impugned order is incorrect as there is clear evidence to show that PSML and KBX were interconnected undertakings. He would .....

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Laboratories Ltd. vs. CCE, New Delhi reported in 2003 (151) ELT 241 (SC), CCE, Mumbai-V vs. J Foundation reported in 2015 (324) ELT 422 (SC), Narendra Machine Works (P) Ltd. vs. CCE, Rajkot reported in 2001 (128) ELT 118 (Tri.-Del.) and LMS Tool Room vs. CCE, Rajkot reported in 2002 (139) ELT 199 (Tri.-Del.), for the proposition that the value in respect of the finished goods sold by the related person needs to be considered for discharge of duty liability. 4. The learned Advocate, on the other .....

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on Neyrpic Ltd. reported in 2006 (193) ELT 16 (SC), for the proposition that KBX may have an interest in the unit of PSML by virtue of holding 60% of the shares but PSML has no interest in KBX as nothing is on record to indicate that PSML had shares or had some interest in the business of KBX. It is the submission that they are not related parties as there is no mutuality of interest. She would draw our attention to the cross objections filed by them and submit that the decision of the Flash Lab .....

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subsequently sold the same. 7. The main argument of the Revenue is that PSML and KBX are interconnected/related parties and hence the value for discharge of excise duty needs to be based upon the prices of KBX. The reasoning given by the adjudicating authority is that KBX is holding 60% of the shares of PSML, KBX had corporate guarantee and had extended advances and also technology for manufacturing of finished goods. This would indicate mutuality of the interest. 8. We find that the first appe .....

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at M/s. KBX is the holding company having 60% equity shares in M/s. PSML; that technical information and assistance were provided by M/s. KBX to M/s. PSML; that M/s. KBX have provided 8 moulds free of charge to M/s. PSML; that M/s. PSML has produced goods as per specifications provided by M/s. KBX; that as they are holding subsidiary companies there is an inbuilt mutuality of interest in the business of each other which is evident from the substantial interest shown by M/s. KBX in the business o .....

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he parties in the business of the other is not sufficient to satisfy the definition of related persons as both parties must have interest in the business of each other. In the present case in view of the facts on record if at all, at best, it can only imply that M/s. KBX has interest in the business of M/s. PSML, but the facts in no way go to prove that M/s. PSML has any interest in the business of M/s. KBX. In the present case therefore the mutuality of interest in the business of each other is .....

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