Case: Flash Laboratories Vs. Collector Of Central Excise

1. Both these appeals are filed by Messrs. Flash Laboratories Limited, a company engaged in the manufacture of tooth paste (Prudent), falling under chapter Heading 3306.00 of the schedule of the Central Excise Tariff Act, 1985. The appellant has been selling its products to their holding company, Messrs. Parle Products Limited, which is a subsidiary company of Messrs. Parle Biscuits Limited. The appellant was found paying duty at the price at which the goods were being sold to the holding company, namely, Parle Products Limited. A show cause notice was issued to the appellant company alleging that Messrs. Parle Products Limited and Messrs. Parle Biscuits Limited were related persons and were purchasing goods at lower prices and selling the same at higher prices and that the appellant had not filed the price list in Part IV for the sale to a related person, rather they filed the price list in Part I. The Revenue took objection that this amounted to mis-statement. The appellant was also asked to show cause as to why Rs. 11,30,570.35p should not be demanded from him as differential duty for the period September, 1986 to May, 1989. The appellant was given a personal hearing and the Collector of Central Excise confirmed the demand for differential duty. Aggrieved by the same, the appellant filed an appeal before the Custom Excise & Gold (Control) Appellate Tribunal. The Tribunal confirmed the demand, but reduced the penalty to Rs. 50,000/-. Civil Appeal No. 5619 of 1994 is directed against the decision of the Tribunal.2. Based on the original order dated 26.4.1991, further show cause notices were issued to the appellant. The appellant filed an appeal to set aside the order in original, dated 26.4.1991. The Asstt. Collector, Central Excise, dropped the proceedings against the appellant on the ground that the issue regarding "related person" had already been decided in favour of the appellant by the Collector (Appeals), Central Excise, New Delhi, vide order dated 23.8.1991. The revenue filed an appeal before the Collector (Appeals), Central Excise, New Delhi and the appellant also filed cross-objections. The Commissioner, Central Excise, New Delhi, remanded the case back to the Adjudicating Authority to re-examine the same in the light of the final order passed on 19.5.1994. In the de novo proceedings before the Asstt. Commissioner, the appellant contended that the order of the Tribunal dated 19.5.1994 could not be made applicable as the order of the appellate authority must hold good. The Asstt. Commissioner confirmed the demand by holding that all the three parties were related persons in terms of Section 4(4)(c) of the Act. The appellant then preferred an appeal before the Commissioner of Central Excise (Appeals), Delhi. The appeal was dismissed by the Commissioner of Central Excise (Appeals) and aggrieved by the same, the appellant preferred an appeal before the Custom, Excise & Gold (Control) Appellate Tribunal. By final order No. 828/2000-A, the appeal was dismissed and it was held that the four show cause notices issued to the appellant were sustainable in law. Aggrieved by the same, Civil Appeal No. 7216 of 2000 is filed.

Court's reasoning:
Admittedly, the appellant-company is a subsidiary company of Parle Products Limited. Messrs. Parle Products Limited has also another subsidiary company, that is, Messrs. Parle Biscuits Limited. Sixty per cent of the products manufactured by the appellant are sold to Messrs. Parle Products Limited and forty per cent of the products are sold to Parle Biscuits Limited. According to the respondent, the appellant and Messrs. Parle Biscuits could be treated as "related person" within the meaning of Section 4(4)(c) of the Central Excise Act, 1944.Having regard to the above decision and the plain meaning of the definition of related person, it is to be noticed that the appellant is a subsidiary company of Messrs. Parle Products Limited and Messrs. Parle Biscuits Limited is also a subsidiary company of Messrs. Parle Products Limited. Therefore, the relationship between the appellant and Messrs. Parle Biscuits Limited, though indirect they have matual interest in the business of each other. The facts and circumstances of the case show that there is mutuality of interest between the three companies as sixty per cent of the products of appellant are sold to Messrs. Parle Products Limited and the remaining forty per cent of the total products of tooth paste is being sold to Messrs. Parle Biscuits Limited. Moreover, Messrs. Parle Products Limited are incurring the expenses for sales promotion and advertisement for the sale of the appellants product, namely, "Prudent tooth paste".8. Having regard to the facts and circumstances of the case, we do not find any person to disagree with the views expressed by the Tribunal.9.In Civil Appeal No. 7216 of 2000, the appellant further contended that it received four show cause notices dated 10.6.1991, 20.8.1991, 16.12.1991 and 13.4.1992. The appellant contended that the Asstt. Collector held that the appellant and Messrs. Parle Products Limited and Messrs. Parle Biscuits Limited are "related persons" but this order was reversed by the Collector vide order dated 23.8.1991 and according to the appellant, the department did not challenge the subsequent order and therefore the subsequent order attained finality. The Tribunal has dealt with this aspect in Paragraph 7 of the impugned order. It was held by the Tribunal that the period replied upon by the appellants is July 89 to Jan 91 whereas the SCNs dealt with in thepertained to the period 14.2.1991 and 31.3.1992 and that these SCNs arose out of theNo. 87/CE/01 and this order was not challenged by the appellants and accordingly the tribunal was of the view that the four SCNs and theNo.87/CE/91 are sustainable in law.No other materials are placed before us to show that the finding of the Tribunal is not correct. We are also told that the appellant had paid the excise duty pursuant to these notices and the same must have been passed on to the