S.V. SUGAR MILLS LTD. Vs. CCE

JUDGEMENT

(1.) M /s. S.V. Sugar Mills Ltd., (SVS) cleared molasses to holding company of the assessee M/s. Mohan Breweries & Distilleries Ltd., (MBD), during the period 4/96 to 2/97, discharging duty on a value of Rs. 300/ - per MT. The impugned order demanded an amount of Rs. 22,88,101/ - being differential duty due on the above clearances considering unit price of Rs. 860/ - per MT as the applicable assessable value. The demand is on the basis that SVS and MBD are related persons and the sale price adopted by SVS for sale of molasses to MBD was much lower than price of molasses of similar manufacturers at the material time. M/s. Salem Co -operative Sugar Mills (SCS) and M/s. Madhuranthagam Co -operative Sugar Mills Ltd., (MCS) had sold molasses at prices ranging from Rs. 860 to Rs. 1060/ - per MT. These were reliable comparable prices for assessment of impugned clearances. The Commissioner adopted the lowest of the sale prices namely, Rs. 860/ - for assessment. The instant appeal challenges the demand of Rs. 22,88,101/ - and equal amount of penalty imposed on SVS under Rule 173Q of Central Excise Rules 1944 read with Section 11AC of Central Excise Act, 1944.

(2.) Before the Commissioner Central Excise, the appellants had argued that the fact that SVS and MBD being subsidiary and holding companies was not adequate to hold that they were related persons. It was essential that there was mutuality of interest between the two entities. During the material period, M/s. South India Sugars Limited (SIS) had sold molasses at a price of Rs. 250/ - per MT to MBD, an unrelated buyer. Sale price of Rs. 860/ - by SCS could not be adopted for assessment of clearances of molasses by SVS. SVS paid sales tax at a higher 30% ad valorem as against 4% CST paid by SCS for its sales of molasses to nearby Kerala buyers. The molasses generated in the four co -operative sugar factories in the neighborhood of SVS had higher sugar content and better demand. Such molasses fetched a higher price. The assessee was under compulsion to clear molasses at a lower price due to lack of adequate storage capacity. During 1995 -96 the appellants had produced 21,644.295 MTs of molasses whereas it had storage capacity of only 10,000 MTs. The sale price of molasses of different sugar mills also depended on the quantity, quality, terms of contract, demand, transportation cost etc.

(3.) In the appeal before the Tribunal, it is submitted that SVS and MBD are subsidiary and holding companies; merely because they were subsidiary and holding companies was not sufficient to hold that the two were related persons under Section 4(4)(c) of the Act, unless mutuality of interest between the two was established. They relied on the following decisions.