TMI Blog2022 (9) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order holds that as per bylaw no.5.2.9, it is incumbent on GCMMF to plan overall production programme for the federation and its members keeping in view the market strategy. Bylaw no. 5.2.13 casts obligation on M/s. GCMMF to purchase or assist in purchasing raw material, etc and manufacture or collaborate with someone when required and bylaw no. 5.2.19 authorizes GCMMF to advise the members on price fixation, price policy, public relations and allied matters. All the bylaws cited by the Commissioner shows some kind of control of GCMMF over the member unions/dairies and on the appellant however, there is not an iota of evidence to suggest that the appellant had any control over the dairies or vice-versa. There are no evidence to hold that the appellant and the dairies are related in terms of Section 4(3)(b) of Central Excise Act - appeal allowed. - Excise Appeal No.13084-13088 of 2014 - A/11106-11110/2022 - Dated:- 8-9-2022 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri Amal Dave, Advocate for the Appellant Shri Dinesh Prithiani, Assistant Commissioner (AR) for the Respondent ORDER These appeals have been filed by M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected among the members (i.e., the Chairpersons of the village level co-operatives) with its own Chief Executive called the Managing Director. The third level is at the State, where the co-operative (GCMMF in Gujarat) is formed with district level milk unions (and certain other milk unions from other states) as members. The State level organization is called as Federation. The Board of Directors of this Federation consists of the Chairpersons of the district level co-operatives. (3) The whole process is carried out at three different levels, where the village level co-operatives work for the procurement, the district level perform the transportation and processing, and the GCMMF provides marketing of the final product. It is also the responsibility of the GCMMF to meet the objectives that have been laid down in the bye-laws by way of strategic planning and investment. Therefore, it can also be established that the farmers themselves are the owners of the Federation and they all are interlinked and are inter-dependent on each other. (4) Further, as per Article 5.2.1 of the Bye-Laws, to achieve the objective, the Federation may arrange for the sale of dairy and allied produce of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and allied produce under different brand name / and trade marks as may be directed by the Federation. Further, Voting Rights has been prescribed under Article 15: Under Article 15.1, each member shall have one vote by virtue of its ordinary membership. Besides this, the ordinary member shall have one additional vote for every 5 lakh units transaction through the Federation in the previous financial year. Distribution of profits has been prescribed under article 29. Under Article 29.1 25% shall be carried over to the Reserve Fund. Under Article 29.2 To contribute towards education fund of the Gujarat State Co-operative union as required under Co-operative Societies Act. Under Article 29.3 Out of the remaining profit a sum not exceeding 15% per annum shall be distributed as dividend on the paid up share capital. The balance amount will be taken to general fund and will be distributed as Bonus to members in proportion to their produce marketed through the Federation or will be utilized for research and development as may be decided by the General Body. 1.3 On the basis of the above facts, it was alleged that there is a mutuality of interest between the member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom M/s. Kaira District Co-Operative Milk Producers Union Ltd. The case was also made out on the basis of bylaws. In the year 1985 Special CA No. 3236/1981 was filed by M/s. Kaira District Co-Operative Milk Producers Union Ltd before the High Court. The Hon ble High Court in the said case held that M/s. Kaira District Co-Operative Milk Producers Union Ltd. and GCMMF are not related persons and the transaction between the two were on principal to principal basis. The said decision of Hon ble High Court of Gujarat was challenged by revenue before the Hon ble Apex Court. The Hon ble Apex Court in the year 2002 dismissed the revenue appeal against the said decision of Hon ble High Court of Gujarat as reported in 2002 (146) ELT 502 (SC). 2.1 The appellant in the instant case have been manufacturing and selling the PPF to various buyers on payment of excise duty at the transaction value i.e. price actually charged by the appellant from the dairies and the returns filed by the appellant have been accepted and assessed by the Excise authorities. Learned counsel for the appellant argued that even if it is held that the appellant and the buyers DCMPUs/associated members are inter-connecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the scheme of Rule 10 of the Central Excise Valuation Rules and the value has to be determined as if the manufacturer and the buyer were not related persons unless it was held that they are related in terms of Sub clause (ii), (iii) or (iv) of clause (b) of Sub-section (3) of Section 4 of the Act. He also pointed out that extended period of limitation has been invoked. He argued that the federation is not a private entrepreneur who would have any intention to evade payment of duty or personal gain. He pointed out that the federation is a co-operative society and allegation of fraud against such co-operative society engaged in the upliftment of farmers and agriculturists is incorrect. 03. Learned AR relies on the impugned order. He took us through the various provisions of the bylaws of the dairies and GCMMF. Learned AR relied on the decision of tribunal in the case of Delite Kom Ltd. Vs. CCE, Delhi-II- 2016 (336) ELT 675 (Tri.-Del.) to assert that the audit of facts and circumstances determined the question of related person. He also relied on the decision of Tribunal in the case of Dipareena Investments P Ltd.- 2014 (314) E;T 571 (Tri.-Mum) and in the case of Sanjay Bahadur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such goods are not sold to such buyers, to buyers (being related person), who sells such goods in retail Provided that in a case where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in rule 8. Rule 10. When the assessee so arranges that the excisable goods are not sold by him except 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 (il) or (ili) 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 subsidiary company shall have the same meanings as in the Companies Act, 1956 (1 of 1956). (b) in any other case, the value shall be determined as if they are not related persons for the purpose of sub- section (1) of section 4. 4.2 The issue regarding inter- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managing director or manager of one such body corporate is the managing director or manager of the other; or iii. if one such body corporate holds not less than (one fourth) of the equity shares in the other or controls the composition of not less than (one fourth) of the total membership of the Board of Directors of the other; or iv. if one or more directors of one such body corporate constitute, or at any time within a period of six months immediately preceding the day when the question arises as to whether such bodies corporate are under the same management, constituted (whether independently or together with relatives of such directors or the employees of the first mentioned body corporate) one fourth of the directors of the other; or v. if the same individual or individuals belonging to a group, while holding (whether by themselves or together with their relatives) not less than (one-fourth) of the equity shares in one such body corporate also hold (whether by themselves or together with their relatives) not less than (one-fourth) of the equity shares in the other; or vi. if the (same body corporate or bodies corporate belonging to a group, holding, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom goods are sold by the assesses which may be held as related person under the new definition. It may be noted that under the erstwhile provisions under Section 4, except for the specifically named categories, namely, holding company, subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor, buyer was held to be related to selling assessee only if they were so associated that they have interest directly or indirectly in the business of each other. In contrast no such general condition/restriction applies for inter-connected undertakings to be related under new Section 4. However, a provision has been made in the new valuation rules that even if the assessee and the buyer are inter-connected undertakings, the transaction value will be rejected only when they are related in the sense of any of Clauses (ii), (iii) or (iv) of sub-section 4(3)(b) or the buyer is a holding company or a subsidiary company of the assessee. In other words, while dealing with transactions between inter-connected undertakings, if the relationship as described in Clauses (ii), (iii) or (iv) does not exist and the buyer is also not a holding company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the federation. She also pointed out that GCMMF is empowered to liquidate membership of any union faulty to the federation as per bylaw no. 5.2.30. She also relied on the balance sheet of GCMMF reflects the financial performances of the units owned by the federation as well as by the member unions of the federation. 4.4 On the basis of the above facts, she concludes that there is mutuality of interest in the business of each other. We find that the arguments of the Commissioner are misplaced in so far as in the entire discussion, she has focused on the control that GCMMF has over the appellant and the dairies. All the bylaws cited by the Commissioner shows some kind of control of GCMMF over the member unions/dairies and on the appellant however, there is not an iota of evidence to suggest that the appellant had any control over the dairies or vice-versa. 4.5 The Commissioner has sought to distinguish the order of the Hon ble Gujarat High Court in the case of M/s. Kaira District Co-Operative Milk Producers Union Ltd. dispute was that GCMMF was charging commission as distributor and therefore, there was only one way interest. She has argued that in the instant case since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in the business of the shareholder. The ratio laid down in this case would fully cover the present case. In this case also, the Union, being a member of the Federation, may have an interest in the Federation. However, the question would be whether the Federation has any interest in the business of the Union. Merely because the Federation purchases milk from the Union would not be sufficient for the purposes of making the Federation a related person. 5 . Reliance was placed on bye-laws 23.21, 23.15 and 5.2.18 of the Federation. It was submitted under these bye-laws, the Federation could decide the pricing policy of the Union; fix the rate of service charges for manufacturing, processing or marketing and render financial, technical, administrative or other necessary assistance to the members and enter into corroboration agreements. It was submitted that these clauses clearly indicate that the Federation could exercise control over the Union. It was submitted that this was sufficient for the purposes of making the Federation a related person of the Union. We are unable to accept this submission. In our view, the High Court is right in holding that this is not suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X
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