COMMISSIONER OF CENTRAL EXCISE Vs. FUTURA POLYMERS LTD.

JUDGEMENT

(1.) THE respondents are engaged in the manufacture of polyester chips. During the material period (December, 1994), they were engaged in the said activity as a 100% EOU and they were permitted to clear a part of their production in the Domestic Tariff Area (DTA, for short). They adopted the price of Rs. 43 per kg for DTA sale of polyester chips to M/s. Indian Organic Chemicals Ltd. (M/s.IOCL, for short) from 24.12.1994 to 30.12.1994. During the same period, their unit price of goods sold to other independent units in DTA was in the range of Rs. 55.81 to 65.89. The goods cleared to DTA were to be assessed to Central Excise Duty in terms of the provisions of the Customs Valuation Rules, 1988 read with Section 14 of the Customs Act by virtue of the proviso to Section 3(1) of the Central Excise Act read with Section 12 of the Customs Act. The duty on the goods sold by M/s. IOCL was on an assessable value so determined on the basis of the price of Rs. 43/ - per kg (transaction value). The department, after investigations, found that the assessee was related to M/s. IOCL in terms of Rule 2(2)(iv) of the Customs Valuation Rules, 1988 and hence they took the view that the transaction value was not acceptable. In a show -cause notice, the department proposed to determine the assessable value on the basis of the minimum price of Rs. 55.81 per kg charged to other independent buyers. Accordingly, a demand of differential duty was raised on the assessee in respect of 299.347 MTs of polyester chips sold to M/s. IOCL during the above period. The demand was contested. The original authority, which adjudicated upon the dispute, found that the assessee and the buyer M/s. IOCL were 'related persons' in terms of Rule 2(2)(iv) ibid. This finding was based on the following facts:

(2.) LEARNED SDR reiterates the grounds of this appeal. It is submitted by the appellant that, as M/s. IOCL indirectly controlled the operations of the assessee by nominating a Managing Director for them, they should be held to be related to the assessee in terms of Rule 2(2)(v) of the Valuation Rules. It is also stated that the finding of mutuality of interest between the two companies was reached by the Commissioner (Appeals) by overlooking "other relevant facts" like lifting of huge quantity by M/s. IOCL. It is also stated that the Tribunal's decision in Commissioner of Central Excise v. Maruthi Udyog Ltd.

(3.) LEARNED Counsel for the respondents has argued in defence of the Commissioner (Appeals)'s order on the strength of Rule 2(2) of the Customs Valuation Rules, 1988. It is submitted that, as held by learned Commissioner Appeals), though the buyer held 29% of the subscribed capital in the assessee -company, the latter did not hold any share in the former and, therefore, there was no mutuality of interest between them. After examining the records and considering the submissions, we find that it is not in dispute that the assessee -company did not have any shareholding in the buyer -company. The appellant has no case that any third party directly or indirectly owned, controlled or held not less than 5% of the outstanding voting stock or shares of the two companies. In other words, the appellant has abandoned Rule 2(2)(iv). Their present claim is that, as the buyer -company held 29% of shares in the assessee -company, the former should be held to be directly or indirectly controlling the latter, thereby satisfying the requirement of Clause (v) of Rule 2(2) of Customs Valuation Rules. For better understanding of this plea of the appellant, we reproduce below Sub -rule (2) of Rule 2 of the Valuation Rules as it existed during the period of dispute: