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TMI Blog2000 (4) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 260 to Rs. 252 in the case of 21" during the period 1-4-1993 to 28-2-1998, that is, the period with which these appeals relate. Duty on the above produce was paid by SEDL at the above price and SCL availed Modvat credit on its use in the picture tubes manufactured by them. On an average SEDL used to sell about eight lacs electron guns in each financial year to SCL. They also used to export electron guns at prices ranging between Rs. 253 and Rs. 249 during the relevant period, namely, 1-4-1993 to 28-2-1998. After 10-2-1996, SEDL began to sell a very small quantity of electron guns to persons who were engaged in reconditioning television picture tubes. The quantity sold to these re-conditioners was about 0.1% of the total production. To these purchasers electron guns were sold at a price of Rs. 450 for 14" and Rs. 500 for 21". Central Excise Department wanted to adopt the price at which electron guns were sold to re-conditioners as the normal value of the goods sold to SCL as well, on the allegation that SEDL and SCL are related persons. On this basis show cause notice, dated 20-4-1998 was issued to SEDL demanding duty amounting to Rs. 15,80,57,971 under Rule 9(2) of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following points for our consideration : SEDL and SCL are not related persons;(a) Even if it is held that there exists relationship between the(b) two, namely, SEDL and SCL, that relationship did not go to influence the price at which electron guns were sold by SEDL to SCL; Since the Department was aware of the entire transaction(c) between SEDL and SCL right from the very beginning and sale to re-conditioners started only on 10-2-1996, show cause notice covering the period from 1-4-1993 to 28-2-1998 is barred by limitation; and No ground for imposing penalty on the firm or on Shri Satish(d) Kumar Kaura had been established in the case. 5.In the order impugned in this appeal the Commissioner primarily proceeds on the basis that SEDL and SCL are related persons and so the price at which electron guns were sold by SEDL to SCL cannot be taken as the normal price. In such a situation, it is worthwhile to examine the provisions of law where the transaction is between related persons. In other words, it is to be examined whether on account of the mere fact that the manufacturer and purchaser are related the transaction value is to be discarded in its entirety. Is it not required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods; (ii) if the value cannot be determined under sub-clause (i), on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. " 7.SEDL produced sufficient material to establish cost incurred by them in producing electron guns. The margin of profit derived by them was also made available to the departmental authorities. The above materials show that the price at which SEDL sold the goods to SCL was the reasonable price of electron gun available in the market. Data was also made available to the authorities to show that the price at which identical goods were sold by another manufacturer, namely, M/s. JCT was the same. Evidence was also made available to the authorities to show that SCL got identical goods, namely, electron guns imported from foreign countries for the same price at which they were purchasing it from SEDL. SEDL also furnished documentary evidence before the authorities to show that they exported electron guns to foreign countries at the same price at which they sold it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fixation of the price of electron guns taking into consideration the price of picture tube which was the end product was purely a commercial consideration. It cannot be termed as underhand dealing on account of relationship between the two companies. These circumstances go to show that the relationship between SEDL and SCL had no effect on the normal price of electron guns sold by SEDL. 9.Section 4(4)(c) defines 'Related Person'. As per that definition a related person is the one who is associated with the assessee and he should have interest directly or indirectly in the business of each other. This definition of related person must be understood in the context of the third proviso to Section 4(1)(a). While so considered the cumulative effect of Section 4(4)(c) and third proviso to Section 4(1)(a) make it clear that three conditions are required to be satisfied. These three conditions, according to the Division Bench of the Bombay High Court in Ralliwolf Ltd. v. Union of India - 1992 (59) E.L.T. 220, are - there should be mutuality of interest; the price charged should not be normal price but the price lower to the normal price and that extra commercial considerations have red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y any relationship between the two companies, we are not examining the question as to whether these two companies were related person coming within the purview of that term under the Central Excise and Salt Act. Relationship, even if conceded, has not gone to suppress the price of the goods sold to SCL. It therefore follows that the Department was not justified in initiating action pursuant to show cause notice, dated 20-4-1998 for the transaction between SEDL and SCL was not at all tainted. 12.On the basis of evidence before us, we come to the conclusion that the price at which negligible quantity of electron guns were sold to re-conditioners cannot be the basis for finding out the normal price in terms of Section 4(1)(a) of the Central Excise Act. The price realised by SEDL from SCL on the sale of electron guns was the normal price for finding out the assessable value. The so-called relationship between SEDL and SCL having not gone to depress the value, the Department was not justified in passing the impugned order. 13.Since we find that the show cause notice was issued without any justifiable cause, the question of limitation argued by the Learned Counsel representing the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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