Case: Commnr. Of Central Excise, Aurangabad Vs. M/S.Goodyear South Asia Tyres P. L.&amp;Ors

per cent of the share capital. But we fail to see how it can be said that a limited company has any interest, direct or indirect, in the business carried on by one of its shareholders, even though the shareholding of such shareholder may be 50 per cent. Secondly, Atul Products Limited is a wholesale buyer of the dyes manufactured by the assessee but even then, since the transactions between them are as principal to principal, it is difficult to appreciate how the assessee could be said by virtue of that circumstance to have any interest, direct or indirect, in the business of Atul Products Limited. Atul Products Limited buys dyes from the assessee in wholesale on principal to principal basis and then sells such dyes in the market. The assessee is not concerned whether Atul Products Limited sells or does not sell the dyes purchased by it from the assessee nor is it concerned whether Atul Products Limited sells such dyes at a profit or at a loss. It is impossible to contend that the assessee has any direct or indirect interest in the business of a wholesale dealer who purchases dyes from it on principal to principal basis. No doubt, the two buyers had given Rs. 85.66 crores interest free loan to the assessee. However, that by itself may not be a reason to hold them as related persons within the meaning of Section 4(4)(c) of the Act. In the absence of any mutuality of interest existing between them, giving of this interest free loan could have been a basis to include the notional interest while arriving at the cost of product sold by the assessee to the two buyers. However, instead of doing that, the appellant wanted to make use of this factor to hold that the assessee and the two buyers are ?related persons? which position is difficult to comprehend having regard to the principle laid down in Atic Industries Ltds case. We thus, do not find any fault or error in the impugned judgment. These appeals are, accordingly, dismissed. Civil Appeal No. 4370 of 2003 The period involved in Civil Appeal No. 4370 of 2003 is from 01.07.2000 to 26.09.2000. It so happened that the joint venture agreement between the parties was terminated and the CEAT transferred its entire shareholding in the Goodyear group of which 97 percent is held by Goodyear USA and 3 per cent is held by Goodyear India Private Limited. Thus, the assessee became the subsidiary of Goodyear USA. On this basis, show cause notice was issued for the aforesaid period treating the assessee and Goodyear as related persons having mutuality of interest. No doubt that the assessee became the fully owned company of Goodyear, the relationship between the two would be that of related persons as they became ?inter connected undertaking? and are covered by the provisions of amended Section 4(4)(3)(b) of the Act which provides that the person would be deemed to be ?related? if: ?i. they are inter-connected undertakings, ii. they are relatives, iii. Amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor, or iv. they are so associated they have interest, directly or indirectly, in the business of each other.? This position was not denied even by the assessee. However, their submission was that provisions of Rule 9 of the Valuation Rules are not attracted as this Rule applies only when assessee so arranges its affairs that the excisable goods are not sold by it except to or through a person who is related in the manner specified in either of the sub clauses (ii), (iii) or (iv) of Section 4(3)(b) of the Act. [Rule 9 does not cover clause (i)] This contention of the assessee is accepted by the CEGAT and the CEGAT is justified in adopting this course of action. It is clear that the two are companies and therefore, they are not relatives and therefore, clauses (ii) and (iii) are not applicable on the basis of it. Insofar as clause (iv) is concerned, what is to be shown is that they have interest, directly or indirectly, in the business of each other. The expression ?each other? would signify the element of mutuality and we have already held above that this mutuality principle has not been satisfied in the instant case. Apart from the above, it would be significant to mention that after taking over of the assessee company by Goodyear, more than 70 per cent of the sales by the assessee company are to the third parties. That apart, there was another contention of the assessee, viz., that the goods sold to the outsiders are at a lesser rates than sold to Goodyear. These two contentions have not been refuted by the Revenue. The case, therefore, would be clearly covered by a recent judgment of this Court in Commissioner of Central Excise, Hyderabad v. M/s. Detergents India Limited and Another [2015 (4) SCALE 631 ] wherein it was held:- ?We are of the view that the ?arrangement? spoken of in the proviso must be something by which the assessee and the related person ?arrange? that the goods are sold at something by which the assessee and the related person ?arrange? that the goods are sold at something below the normal price, so that tax is either avoided or evaded by such arrangement. Secondly, the expression ?generally? also shows that such goods must predominantly be sold by the assessee to or through the related person ? in mathematical terms, sales that are to or through a related person must consist of at least 50% of the goods that are manufactured and sold. The expression ?to or through a related person? again goes back to the ?arrangement? and is another way of saying that such sale can be effected directly to or indirectly through such related person. It is only when all three considerations are cumulatively met that proviso (iii) can be said to be attracted.?

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We thus, do not find any fault or error in the impugned judgment. These appeals are, accordingly,from the above, it would be significant to mention that after taking over of the assessee company by Goodyear, more than 70 per cent of the sales by the assessee company are to the third parties. That apart, there was another contention of the assessee, viz., that the goods sold to the outsiders are at a lesser rates than sold to Goodyear. These two contentions have not been refuted by the Revenue. The case, therefore, would be clearly covered by a recent judgment of this Court in Commissioner of Central Excise, Hyderabad v. M/s. Detergents India Limited and Another [2015 (4) SCALE 631 ] wherein it wasare of the view that the ?arrangement? spoken of in the proviso must be something by which the assessee and the related person ?arrange? that the goods are sold at something by which the assessee and the related person ?arrange? that the goods are sold at something below the normal price, so that tax is either avoided or evaded by such arrangement. Secondly, the expression ?generally? also shows that such goods must predominantly be sold by the assessee to or through the related personin mathematical terms, sales that are to or through a related person must consist of at least 50% of the goods that are manufactured and sold. The expression ?to or through a related person? again goes back to the ?arrangement? and is another way of saying that such sale can be effected directly to or indirectly through such related person. It is only when all three considerations are cumulatively met that proviso (iii) can be said to be attracted.?