TMI Blog2004 (2) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... and Whale Overseas Incorporated (WOInc.). The appellant-company has also an office at 19, Gurgaon Road, Kapashera, New Delhi. M/s. DPPCL have a manufacturing unit in the same premises. M/s. WGL have a manufacturing unit at Dehradun and a branch office of M/s. DPPCL is also working in the same premises. The Head Office of the Whale Group of Companies is also situated in those premises. Shri Mukesh Gupta, the appellant in appeal No. E/598/2002, is the Managing Director of the appellant-company. He is also M.D. of DPPCL, WGL and WOInc. 2.The Commissioner's order impugned in these appeals was passed in adjudication of three show cause notices (SCNs). It confirmed various demands of duty against Unit-I and Unit-II of the appellant-company under Section 11A of the Central Excise Act as under :- (a) Rs. 36.20 lakhs against Unit-I for the period 1995-96 to 1998-99 (with interest @ 18% p.a. under Section 11AB) as demanded in SCN, dated 30-3-99; (b) Rs. 2.88 lakhs against Unit-I for the period 1995-96 to 1997-98 as demanded in SCN, dated 30-3-99; (c) Rs. 4.38 lakhs against Unit-II for the period 1997-98 and 1998-99 (with interest @ 18% p.a. under Section 11AB) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty. Penalties of Rs. 39.09 lakhs and Rs. 4.63 lakhs have been imposed under Section 11AC read with Rule 173Q on Units-I and II respectively. A redemption fine of Rs. 58 lakhs has also been imposed on the appellant-company in lieu of confiscation of the land, buildings, machinery, etc., of Units-I and II under Rule 173Q. A personal penalty of Rs. 10 lakhs has been imposed on Shri Mukesh Gupta under Rule 209A. The appeals of M/s. Whale Stationery Products Ltd. and Shri Mukesh Gupta are directed against the above decision of the Commissioner. Appeal No. E/143/2003 is by the department. The main grievance raised in this appeal is that interest was not charged under Section 11AB on the duty amounts of Rs. 2.88 lakhs, Rs. 7.76 lakhs, Rs. 5.44 lakhs and Rs. 24,804/-. There is also a grievance that penalty under Section 11AC was not imposed in connection with the duty demands of Rs. 7.76 lakhs and Rs. 5.44 lakhs. 3.Heard both sides. Ld. Counsel for the company and its Managing Director stated four issues as under :- (a) Whether during 1995-96 and 1996-97 Unit-I cleared excisable goods clandestinely without payment of duty amounting to Rs. 25.78 lakhs? (b) Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi Sales Tax authorities for the same period were also supplied to the adjudicating authority to prove the 'trading sales' effected from the Delhi office of the company. Copies of the relevant income-tax assessments were also furnished. But these evidences were not appreciated by the adjudicating authority. Referring to that authority's finding that what was claimed to be sale of paper worth Rs. 50.59 lakhs by the appellant-company to M/s. WGL under bills dated 31-3-97 was not a sale at all for want of transfer of property, Counsel submitted that the goods, which had been purchased by the appellant-company from M/s. WGL on 31-3-97 under bills dated 31-3-97, was resold piecemeal to M/s. WGL during the year and not on 31-3-97 itself. This was evident from the dates of the relevant challans spanning the year. The resale transactions which took place from time to time during the year were accounted on 31-3-97. That was why the entire quantity of paper resold by the appellant-company to M/s. WGL was not reflected in the latter's audited balance sheet as on 31-3-97. The Commissioner's view that there was no transfer of property in the transactions was not correct. In any case, ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est between the appellant-company and any of the other two companies. These companies were independent legal entities and the transactions between them were at arms length and on a principal-to-principal basis. Therefore, Counsel argued, M/s. DPPCL and M/s. WOInc. were not "related persons" for the appellant-company and, therefore, the transaction value of the goods cleared by Unit-I to the said two companies during the relevant period should be the assessable value of the goods for the purpose of payment of Central Excise duty. In this connection, reliance was placed on the Supreme Court's decision in Union of India Others v. Atic Industries Ltd. [1984 (17) E.L.T. 323 (S.C.)], the Rajasthan High Court's decision in Renu Tandon v. Union of India [1993 (66) E.L.T. 375] and the Tribunal's decision in Chloride Industries Ltd. v. CCE, Pune [1999 (113) E.L.T. 956]. 7.On the fourth issue, it was submitted that the demand of duty of Rs. 24,804/- confirmed by the Commissioner in respect of the clearances under the two gate passes was based on an erroneous finding that stencil paper was cleared under cover of the gate passes. As a matter of fact, only empty cartons were cleared under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c.]. On the question of "related persons", the DR relied on the decision in Narendra Industries v. CCE, Rajkot [2001 (132) E.L.T. 141]. On other issues, the relevant findings in the impugned order were reiterated. In the Revenue's appeal, the DR argued that penalty under Section 11AC was liable to be imposed on the appellant-company in connection with the various demands of duty as suppression of facts with intent to evade duty was found against them. DR argued likewise for levy of interest under Section 11AB on the duty amounts. 10.We have carefully considered the submissions. The major demand of duty confirmed against the appellant-company is that of Rs. 36.20. lakhs. A major part of this demand of Rs. 36.20 lakhs, confirmed against Unit-I, is for the period 1995-96 and 1996-97 and the same is on the difference between the value of clearances as per Profit and Loss accounts of Balance Sheets and the value of clearances declared under Rule 173B. This demand has been quantified at Rs. 25.78 lakhs. For the year 1995-96, the Balance Sheet prepared by the Chartered Accountants of the appellant-company showed that the sales turnover of Unit-I was higher by Rs.14.18 lakhs than the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant challans covering the piecemeal transactions were not considered by the Commissioner. If the plea of piecemeal resale is well-founded, the above view of the learned Commissioner would not be so. The Commissioner should have examined the said plea with reference to the challans coupled with the trade tax/sales tax assessment orders for the relevant period. The Commissioner has also found, from the Balance Sheets, that raw materials viz. paper, ink and solvent were consumed during the relevant period and hence goods must have been manufactured out of them and clandestinely cleared. The assessee has, in their appeal, contended that the expression "consumption" used in the Balance Sheets has been misunderstood by the department and the adjudicating authority. The expression did not necessarily indicate utilisation of the above materials in the manufacture of paper. Counsel has also argued that, in any case, no evidence has been found by the Commissioner to establish that the above materials were consumed for clandestine manufacture of any paper products. It has also been claimed that proper examination of the Balance Sheets and the clarificatory notes thereto would disclose that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exemption under the notification. Consequently, the above demands of duty are not sustainable. 12.In the impugned order, the Commissioner rejected the transaction value of the goods cleared by Unit-I to M/s. DPPCL and M/s. WOInc., holding that the latter were related persons/favoured buyers of the former. He determined the assessable value of the goods in terms of proviso (iii) to Section 4(1)(a) of the Central Excise Act (as the Section stood at that time) and confirmed the demand of Rs. 2.88 lakhs against Unit-I on the differential value. M/s. DPPCL and M/s. WOInc. were held to be "related" to the appellant-company on the basis of the findings that the three companies had a common Managing Director; that the wife of Shri Mukesh Gupta (Managing Director) was a common Director in all the companies; that all the companies were known as 'Whale Group of Companies'; that the appellant-company and DPPCL had a common Head Office at 19, Gurgaon Road, Kapashera, New Delhi; that the raw material procurement for Unit-I of the appellant-company was done by DPPCL; that the laboratory test facility for carbon paper manufactured by Unit-I was provided by DPPCL; that directions as to what w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cleared to DPPCL without accountal and payment of duty. The statement was never retracted. Though Shri Ashok Singh had disputed the quantities of goods cleared under the two gate passes, he could not rebut the documentary evidence on the point. Where the confessional statement and documentary evidence were in place, there was no need of any further evidence to establish clandestine removal of the goods. Such clearance already stood established. We, therefore, do not find any reason to interfere with the Commissioner's decision on the point. 14.We have found that the demand of duty of Rs. 25.78 lakhs requires to be adjudicated afresh and that none of the remaining demands of duty except the small demand of Rs. 24,804/- is sustainable. Consequently the confiscation of land, building, plant, etc., of Units-I and II and the penalties on the two Units will have to be vacated. Yet another consequence is that the Revenue's appeal for interest under Section 11AB and for penalty on the assessee under Section 11AC will get dismissed. The penalty on Shri Mukesh Gupta under Rule 209A is also not sustainable for the above reason and for the further reason that there is no finding in the impu ..... 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