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

For this reason, both the appeals were taken up together and are being disposed of by this common judgment. However, keeping in view some distinct feature in the second appeal, viz., Civil Appeal No. 4370 of 2003, the same shall be taken up for discussion separately to address the distinct features.The respondent (hereinafter referred to as the assessee) holds Central Excise Registration for the manufacture of Tyres, Tubes, Flaps, Bladders, etc., falling under Chapter 40 of the Central Excise Tariff Act, 1985. In the first appeal, the period involved for the purposes of excise duty is 01.03.1997 to 16.04.1998. The assessee was originally M/s. RPG CEAT Group Company. Later on RPG SATL and Goodyear entered into a Joint Venture Agreement dated 10.09.1993 to form a third company in the name of M/s. SATL (the assessee), which came into existence on 30.09.94. The primary objective of the assessee was to manufacture OTR Tyres and Radial tyres exclusively for CEAT and Goodyear under their brand names. The promoters namely Goodyear USA and Goodyear India on one side and RPG CEAT on the other were holding 50:50 equity each in the assessee, and were exclusive buyers of goods manufactured by the assessee. In the said Joint Venture Agreement, various other stipulations were mentioned showing interest of both Goodyear as well as CEAT in the assessee. As per the said agreement, the assessee also received unsecured interest free loan of Rs.85.66 crores from CEAT and Goodyear. Some moulds and other equipments worth Rs. 10 crores free of cost, on loan basis, were also given by these two companies to the assessee.This kind of arrangement led to the issuance of show cause notice by the Commissioner of Central Excise and Customs on 25.01.1999, alleging that CEAT and Goodyear are related persons of the assessee within the meaning of Section 4(4)(c) of the Act of 1944 and as such the selling price of CEAT and Goodyear shall be the assessable value of goods produced by the assessee under section 4 of the Act. Alternatively, it was also alleged as to why the additional consideration flowing back to the assessee should not be added in their present selling price in terms of Rule 5 of the Central Excise (Valuation) Rules, 1975 r/w Section 4 of the Act. In this way a Demand cum Show Cause Notice was issued to the assessee demanding differential duty of Rs.8,76,85,385/for the period from 01.03.1997 to 16.04.1998 for under valuation of the goods. Contravention of Section 4 of the Act read with Rules 9, 9(2), 52, 173C, 173F, 173G of the Rules was also alleged and penal action was proposed under Section 11AC of the Act read with Rules 173 of the Rules, alongwith penal interest under section 11AB of the Act.The notice also invoked extended period under proviso to Section 11A(1) of the Act for suppression of facts and willfulof Assessable value by assessee with intent to evade payment of Central Excise duty. The notice was also issued to four individuals, working for the assessee.The assessee rebutted the aforesaid allegations in the show cause notice by putting up the defence to the effect that the assessee on the one hand and the CEAT and Goodyear on the other hand, were not related persons as there was no mutuality of interest and that no extra commercial considerations were pointed out regarding price fixation. It was contended that the sale of goods by assessee to these two companies was on principal to principal basis and at arms length. The Commissioner heard the matter and thereafter, passeddated 11.05.2000 confirming the demand in the show cause notice. Some penalties were also imposed. The matter was taken in appeal before the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as CEGAT). A Bench of the CEGAT heard the appeal on 18.05.2001. By an order dated 28.05.2002, the two members of the Bench differed with each other; one member allowing the appeal and the other remanding it. Accordingly, the matter was referred to a third member, who heard the appeals. By her order dated 26.07.2002, she concurred with the view that the appeals were to be allowed. Accordingly, the order of CEGAT was recorded on 31.07.2002 allowing the appeals.This order of CEGAT is the subject matter of Civil Appeal Nos.

Court's reasoning:
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.?