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TMI Blog2023 (11) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation against the respondent which revealed that apart from M/s SWPPL, there were also other sister concerns viz., Sterling & Wilson Energy Systems Pvt. Ltd. (M/s SWESPL); (ii) M/s. Sterling & Wilson Pvt. Ltd. (M/s. SWPL) and M/s Sterling & Wilson Co-Gen Solutions Pvt. Ltd. (M/s SWCGSPL). The share-holding pattern in SGPL, SWPPL, SWPL, SWPPL and SWESPL was as under: Name of the Shareholder SWPL SWPPL SWESPL SGPL SWCGSPL M/s Shapoorji Pallonji and Company Pvt. Ltd. 65.77% 56% -- 56% 51% Mr. Khurshed Y. Daruvala 33.33% 40% 50% 17% 24.5% Mrs. Kainaz K. Daruvala -- 04% 49.80% 27% 24.4% Others 0.90% - 0.20% 01. 1.4 It was alleged that, it is clear that all the above firms are under the control of the same management. Thus, they were covered within the meaning of Section 4(3) of Central Excise Act 1944 as 'related person'. Hence, the provisions of Section 4(1)(b) read with section 4(3) of the Act read with Rule 5 and 9 of Central Excise valuation (Determination of Price of Excisable goods) 2000 (hereinafter referred to as 'Valuation Rules') would be applicable in this case. On scrutiny of the records it was noticed by the department that, seller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that they have interest, directly or indirectly in the business of each other in terms of Section 4(3)(b)(iv) of the Act. Therefore, the conclusion arrived at by the adjudicating authority completely ignores the provisions contained in sub-clauses (ii),(iii) & (iv) of clause (b) to Section 4(3) of the Act, and hence erroneous. 2.1 He also submits that in the present matter respondent themselves have admitted that the final products sold by the them to M/s SWPPL and M/s SWPL are consumed by them in the execution of project and not cleared as such for further sales; and they avail duty credit to discharge service tax liability to works contracts on such projects. Therefore from the said admission, it is very clear that even though they may not be selling the excisable goods to their customers/ unrelated buyers, however admittedly these goods are being sold to such customers as part of the works contract services being provided by M/s. SWPPL and M/s. SWPL. In case of works contract services, there is both supply /sales/ transfer of property in goods as well as, provision of services to the customers; and what is leviable to Service Tax under the Finance Act, 1994 is only the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that the assessee and any of the aforesaid four entities are interested in the business of each other even though the shareholders are common. However applying the ratio of decision of Hon'ble supreme court decision in the case of Commissioner of Central Excise, Mumbai Vs. J. Foundation reported at 2015(0324) ELT 0422 (SC) to the facts of the present case, it is clearly brought on record that in the case of respondent i.e M/s SGPL M/s Shapporji Pallonji and Company Pvt. Ltd. holds 56% of shares constituting one group, while the remaining shares constituting 44% is held by Shri Khurshed Y. Daruvala and his wife Mrs. Kainaz K. Daruwala constituting another group. In rest of the 4 firms to whom the respondent have cleared the excisable goods, except in the case of M/s SWESPL held by only Daruwala Group, it is held by the same group of persons, i.e M/s SPCPL and Daruwala (either individually or Jointly). In view of the above, it is clear that apart from the being relatives in terms of sub-clause(ii) of Section 4(3)(b), there also exists mutuality of interest between these parties in terms of sub-clause (iv) of Section 4(3)(b) of the Act. Therefore, the adjudicating authority h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-clause (iii) of Section 4(3)(b). In any case, the respondent and the 4 buyers are not holding or subsidiary companies of each other. Therefore, the second condition of such -clause (iii) is also not fulfilled in the present case. Ld. Commissioner has not erred in examining the relationship of the respondent and the buyer under sub-clause (iv) of Section 4(3)(b) of the Central Excise Act, 1944. 3.3 He also submits that with respect to the goods cleared to SWPL and SWPPL, the Ld. Commissioner has rightly set aside the demand on the ground that provision of Rule 9 and 10 of the Valuation Rules, 2000 are not applicable. Ld. Commissioner in order has rightly held that since the goods are not sold further by SWPL and SWPPL but consumed in providing works contract services, the provisions of Rule 9 and Rule 10 of the valuation Rules cannot be invoked to demand differential duty. Rule 9 read with Rule 10, provide for payment of duty on the value at which the goods are sold further by related person to unrelated/ independent buyer whereas in the case of SWPL and SWPPL, there is no further sale. 3.4. He further submits that, assuming without admitting the respondent and SWPL and SWP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the price charged to them should be treated as transaction value. He placed reliance on the following decisions: (i) CCE Vs. Beacon Neyrpic Ltd. -2006(193) ELT 16(SC) (ii)Philips (I) Ltd. Vs. CCE -2006-TIOL-359-CESTAT-MUM (iii) Aquamall Water Solutions Ltd. Vs. CCE - 2003(153) ELT 428(T) (iv) Xerographers Ltd. Vs. CCE- 1999(108) ELT 372(T) (v) Rallis India Ltd. Vs. CCE - 2000(118) ELT 780 (T) 3.9 In addition to above, he further submits that the Revenue has challenged the Order-In-Original on limited grounds. In fact, the revenue has not claimed that the entire Order-In-Original is bad in law. Demand dropped by the Ld. Commissioner on the grounds, other than the grounds specifically challenged in the appeal of the revenue, has attained finality. The Order-In-Original has not been challenged to such extent and the relief arising therefrom to the Respondent cannot be denied by the revenue. It would be beyond the scope of the revenue's appeals to entertain any plea on other grounds raised in the revenue's appeal, where relief has been granted by the Order-In-Original to the respondent. It is settled legal position that when relief is granted on two independent grounds and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is as under:- "4(3)(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 each other. Explanation. - In this clause - (i) "inter-connected undertakings" shall have the meaning assigned to it in the clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956);" 4.1 The issue regarding inter-connected undertaking has also been clarified by the Circular of C.B.E. & C. No. MF/DR/F/354/81/2020-TRU, dated 30-6-2000 as under:- "23. Where goods are sold through related persons, the transaction value is not applicable. However, there is some change in the definition of 'related persons' vis-a-vis the old definition. It includes "inter-connected undertakings" as defined in the Monopolies and Restrictive Trade Practices Act, 1969. The de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, whether independently or along with its or their subsidiary or subsidiaries, not less than one-fourth of the equity shares) on one body corporate, also hold not less than (one-fourth) of the equity shares in the other; or (vii) if not less than (one-fourth) of the total voting power (in relation to) each of the two bodies corporate is exercised or controlled by the same individual (whether independently or together with his relatives) or the same body corporate (whether independently or together with its subsidiaries); (viii) if not less than (one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 or a subsidiary company, then for assessment purposes, they will not be considered related. "Transaction value" could then form the basis of valuation provided other two conditions, namely, price is for delivery at the time and place of removal and the price is the sole consideration for sale are satisfied. If any of the two aforesaid conditions are not satisfied then, quite obviously, value in such cases will be determined under the relevant rule. 25. In essence, notwithstanding the change in definition of "related" person in the new Section 4, for practical applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated 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 9.- (as existing upto 01.12.2013)- Where the excisable goods are sold by the assessee to or through a person who is related in the manner specified in any of the sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of such goods shall be the normal transaction value] at which these are sold by the related person at the time of removal, to buyers (not being related person); or where 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. (w.e.f. 01.12.2013)-Where whole or part of the excisable goods are sold by the assessee to or through an inter-connected undertaking, the value of such goods shall be determined in the following manner, namely :- (a) If the undertakings are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(3)(b) (i) and (iv). The Adjudicating Authority has rightly examined that whether the appellant and their buyers are related or otherwise, in terms of Sub-Clause (i) & (iv) of Section 4(3)(b) of Central Excise Act, 1944, and dropped the proceedings. The revenue in their grounds of appeal enhanced the scope by contending that the appellants are also related in terms of Sub-Clause (ii) & (iii) of Section 4 (3)(b). It is a settled law in the grounds of appeal, ground cannot be made on the provision which was not invoked in the SCN. In the facts of the present case, the relationship is based on the fact that when Sub-Clause (ii) and (iii) were not invoked, the facts related thereto were also neither required to be examined nor the Adjudicating Authority has rightly examined. Therefore, by making ground of Sub-Clause (ii) & (iii) holding the appellant and their buyer are related person is completely beyond the SCN as well as the impugned order, which is not permissible. In this regard, we take support from the following judgments: 4.4 The Hon'ble Supreme Court in the case of CC Nagpur Vs. Ballarpur Industries Ltd-2007 (215) ELT 489 (SC), has held that the SCN is the foundation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2 of Companies Act ,1956 as per the explanation to Section (4)(3) of the Central Excise Act, 1944 during the relevant period. The meaning of word related under Clause 41 of Section 2 of the Companies Act, 1956 covers only natural persons and artificial persons like companies cannot be relative amongst themselves. Consequently, the buyers who are all companies cannot be treated as relatives for the purpose of sub clause (ii) of Section 4 (3)(b) of Central Excise Act, 1944. 4.8 We also find that the respondents and the buyers are also not covered by Sub-Clause (iii) of Section 4 (3)(b) of Central Excise Act 1944. In terms of Sub-Clause (iii) of Section 4(3)(b) a person shall be deemed to be related if amongst them the buyer is a relative and distributor of the assessee or distributor of such distributor. As discussed above, only natural person can be treated as relatives since the first condition itself of Sub Clause (iii) is not satisfied, the 4 buyers and the respondent cannot be considered as related under Sub-Clause (iii) of Section 4 (3)(b). In any case, the respondent and the 4 buyers are not holding or subsidiaries Companies of each other, therefore the second condition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 transaction 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 on principal to principal basis and then sells such dyes in the market. The assessee is not concerned whether Atul Products Limited sells or does not sell the dyes purchased by it from the assessee nor is it concerned whether Atul Products Limited sells such dyes at a profit at dyes from it on principal to principal a loss. It is impossible to contend that the assessee has any direct or indirect interest in the business of a wholesale dealer who purchases basis. .... We, therefore, affirm the view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Company, it is not shown that the Petitioner Company has any interest directly or indirectly, in the business of these four customer companies. ....... 21. Thus, we are unable to accept the contention of the learned Chief Standing Counsel that these five customer companies fulfil the requirement of the first part of the definition of 'related person'." 4.13 The above judgments were affirmed by the Hon'ble Supreme Court vide its detailed judgments reported at 1989 (43) ELT 161 (SC) relevant portion of the judgment is reproduced below: "7. Shri Sibal placed before us a Chart indicating the similarity of the facts of Atic Industries' case (supra) and the facts of the present case. In Atic Industries' case, 50 per cent of share capital belonged to Atul Products Ltd. and 50 per cent to the Imperial Chemicals (London) Ltd., a foreign company. In the case of the respondent herein, 50 per cent share capital belonged to the Bajaj Electricals Ltd. (Indian Company) and 50 per cent belonged to Philips (17.67%), Mazda (14.86%), G.E.C. (10.59%) and Crompton (6.88%), all foreign companies. In case of Atic Industries' the sale of goods was on principal to principal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the present case. Further the Ld. Commissioner in impugned order dealt with the disputed matter in details and given detail findings. After careful examination of the impugned order, we find no reason to interfere with the impugned order. 4.18 On going through the impugned order and grounds of appeals of the revenue we also find that the Ld. Commissioner has also set aside the demand on grounds - (i) limitation (ii) revenue neutrality (iii) Clearances made by an EOU is required to be raised in terms of Customs Act, 1962 and not under Central Excise Act, 1944 (iv) demand for the period prior to 01.12.2013 on the ground that the respondent had also sold the goods to independent buyers and prior to 01.12.2013, the provisions of Rule 9 and Rule 10 of the valuation rules are applicable only if the entire quantity of goods cleared to related persons. 4.19 In this appeal we find that the Revenue has not challenged finding of the Ld. Commissioner related to the above grounds. Since the finding of the Ld. Commissioner on the other ground is not under challenge the same stands accepted by the revenue, hence the said finding attained finality. We are, therefore of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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