Whether or not the respondent who is public limited company is to be treated relative of buyer who has paid central excise for sale of final products.

PJ/Case Law /2016-17/3263

Case:- COMMISSIONER OF CENTRAL EXCISE, RAIPUR Versus AKASH ISPAT LTD.

Citation:- 2016 (337) E.L.T. 295 (Tri. - Del.)

Brief Facts:- The brief facts of the case are that the respondent are engaged in the manufacture of M.S. Ingots liable to Central Excise duty. The proceedings were initiated against them for short payment of Central Excise duty on the goods cleared to related buyers. After due process, the Original Authority vide order dated 13-11-2006 held that the respondents are liable to pay the differential duty of Rs. 16,78,974/- with interest. He imposed penalty of Rs. 1,50,000/- on the appellant. On appeal, the Commissioner (Appeals) vides order dated 22-3-2007 set aside the order and allowed the appeal.

Appellant’s Contention:-Ld. AR reiterated the grounds in the appeal. He submitted that the Directors, Partners, Proprietors of the respondent and the buyers’ units were common/relatives in terms of Schedule-IA of Section 6 of the Companies Act, having relationship and running, controlling and managing the inter-connected undertakings. The profit accruing from the sale through related persons goes to the same family or relative, as deemed in Section 4(3)(b) read with Section 2(41) of the Companies Act, 1956 and thereby mutuality of interest gets established and Section 4(1)(b) of Central Excise Act, 1944 is invokable.

Respondent Contention:-None appeared for respondent.

Reasoning of Judgment:-On perusal of records it is found that issue arising whether or not the respondent paid correct Central Excise duty for sale of final products to five buyers, who are said to be related to them or the declared sale value is vitiated. M/s. Cosmos Ispat Pvt. Ltd is a Private Limited Company having three Directors. The Original Authority held that the respondent and the four buyers, who are proprietary concerns, do not fall under the category of inter-connected undertakings under Section 2(g) of MRTP Act. The Original Authority found that the respondent and M/s. Cosmos Ispat Pvt. Ltd. are “inter-connected undertakings” in terms of sub-clause (iv) of Explanation-I in Section 2(g) of MRTP Act. The Original Authority further held that the respondent and all the buyers are “related in terms of sub-clause (ii) of Clause (b) of sub-section (3) of Section 4 of the Central Excise Act. He arrived at this conclusion treating the companies also as natural person and being “relative” of one another. The impugned order rejected the findings of the Original Authority regarding the respondent and the buyers being “relative”. It was further held that since all goods produced were not sold to these buyers, the scheme as contemplated under Rule 9 of Valuation Rules will not be applicable regarding the respondent and M/s. Cosmos Ispat Pvt. Ltd. being “inter-connected undertakings”. The lower Appellate Authority held that the transaction value under Section 4(1)(a) of the Act is applicable as there is no evidence that the price charged is not the sole consideration for sale or any additional consideration was flowing directly or indirectly from the buyers to the respondent.

Decision:-The appeal is accordingly dismissed.

Comment:-The crux of the case is that the provisions of MRTP Act talks about inter-connectivity between two body corporate. it is an admitted fact that four out of the five buyers are proprietary concerns. The respondent is a Public Limited Company. The “relative” as defined under Section 2(41) should be in such way as specified in Section 6 of the Companies Act. In terms of Section 6, a person shall be deemed to be a relative of other, if, and only if, they are members of a HUF or husband and wife or one is related to other, in a manner like father, mother, daughter, brother, etc. A corporate entity, the respondent being a Public Limited Company, cannot be called a “relative”.

Prepared by:- Bharat

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PJ/Case Law /2016-17/3263

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