Case: Collector Of Central Excise, Ahmedabad Vs. I.T.E.C. (P) Ltd., Bombay

ee was selling projectors and other goods to M/s. International Talkie Equipment Co. Pvt. Ltd. (hereinafter referred to as "M/s. International"). It was also enjoying the benefit of exemption under Notification 71/78 dated March 1, 1978. On the ground that M/s. International as a related person within the meaning of the Central Excise Act, 1944 (for short, "the Excise Act"), the Superintendent of Central Excise issued a notice on April 13, 1982 for the period April 11, 1978 to September 29, 1979 to the respondent to show cause as to why the duty at appropriate rate under Rule 9(2) of the Central Excise Rules on the higher value fetched directly or indirectly by it from the independent buyers should not be charged when they were not paying excise duty, in view of the benefit of the Notification 71/78, and as to why penalty should not be imposed. After adjudication, the duty and penalty were confirmed. On appeal, the Tribunal accepted the findings recorded by the adjudicating authority and held that the respondent and M/s. International were related persons. In regard to the application of larger period of limitation under Sectionof the Excise Act, the Tribunal found that there was no suppression of fact by the respondent and, therefore, the benefit of Sectionwas not available to the Revenue. The Tribunal allowed the appeal of the respondent herein on July 25, 1991. That is the order under challenged before us.

Court's reasoning:
5. From a plain reading of the definition, it is evident that if a person is so associated with the assessee that both of them have interest directly or indirectly in the business of each other, they would be treated as related persons. The definition also includes a holding company, a subsidiary company, a relative and a distributor of the assessee and anyof such distributor, but we are not concerned with the later part of the definition. The ingredients of the first part of definition are: first, a person to be treated as related person must be associated with the assessee; secondly, the person so associated and the assessee must have interest in the business of each other; and thirdly, such interest may be direct or indirect. Mutuality of interest between the other person and the assessee in the business of each other, whether direct or indirect, is necessary to label such a person as a related person.We may now turn to the findings recorded by Customs, Excise and Gold (Control) Appellate Tribunal. It was found that the respondent and M/s. International were having common Directors and that they were relatives of the one another; a further finding was also noted that both the companies were family concerns and were beneficiaries of their ventures and that the benefit of both the concerns are shared by members of one and the same family. From these findings, it is difficult to resist the conclusion that the respondent and M/s. International have a direct interest, in the business of each other and that the mutuality of interest between the two is apparent. We may point out here that the Tribunals observation, quoted above, that no evidence regarding mutuality of interests has been brought on record, is inconsistent with the acceptance of the finding of the adjudicating authority, referred to above. Once those findings are accepted, the conclusion that there is mutuality of interest between the two concerns is inevitable. In this view of the matter, we set aside the finding of the Tribunal that the respondent and M/s. International are not relatedTribunal held that once the respondent declared M/s. International as a "related person" giving the prices at which the goods were sold to the related person and to other dealers and the differential price in the classification list while claiming the benefit of the exemption under Notification 71/78, as is evident from page six of the paper book, it was for the Revenue to deal with the respondent before approving the price list. The respondent declared the prices of their goods in proforma Part IV relating to "sale of goods through related buyers" as follows:11. Thus, it is clear that the respondent had disclosed the correct facts including the price at which the goods were sold to related person and the difference in the price. In view of this declaration, it is futile to contend that there was any suppression of fact on the part of the respondent. The learned Attorney General does not seriously dispute this position. It follows that the larger period of limitation provided in Sectionof the Excise Act is not available to the Revenue. We, therefore, confirm the conclusion arrived at by the Tribunal on this aspect. For the period April 11, 1978 to September 29, 1979 the show cause notice was issued on April 13, 1982 which is far beyond the period of six months, therefore, the Revenue is not entitled to claim any difference of duty.