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2002 Supreme(SC) 947
2002(6) Supreme 483
SUPREME COURT OF INDIA
(From Central Excise Customs and Gold Control Appellate Tribunal, New Delhi)
Syed Shah Mohammed Quadri & S.N. Variava, JJ.
Collector of Central Excise, Ahmedabad -Appellant
versus
I.T.E.C. (P) Ltd., Bombay -Respondent
Civil Appeal No. 736 of 1995
Decided on 18-9-2002
Counsel for the Parties :
For the Appellant : Soli J. Sorabjee, Attorney General, Rajiv Nanda, B. Krishna Prasad, Advocates.
For the Respondent : R.P. Bhatt, Sr. Advocate, M.N. Shroff, Chirag, M. Shroff, Advocates.
IMPORTANT POINT
Tribunal was wrong in holding that there is no material on record to hold that respondent and M/s. International are related persons. But Tribunal was right in its further holding that larger period of limitation provided in Section 11-A of Central Excise Act, 1944 is not available to the Revenue.
Headnote:Central Excise Act, 1944-Section 4(4)(c)-Definition of related person-Two parts-Meaning of first part-Tribunal holding there is no material to hold that respondent and M/s. International Talkie Equipment Co. (P) Ltd. are related persons-Whether correct? (No)-Whether on the facts and in the circumstances it is open to the revenue to invoke the provisions of Section 11-A of the Act? (No)-Result-Appeal partly allowed.
Held : 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. (Para 5)
Held thereafter : We may point out here that the Tribunal s observation, quoted above, that no evidence regarding mutuality of interest 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 related persons. (Para 8)
Held, however : 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 Section 11-A of 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. (Para 10)
Held consequently : The appeal is allowed in part to the extent indicated above, in regard to related person in other respect it is dismissed. There shall be no order as to costs. (Para 11)
ORDER
This appeal, filed by the Revenue, is from the judgment and order No. 532 /91-A of the Customs, Excise and Gold (Control) Appellate Tribunal in Appeal No. ED/SB. A. No. 777/83-A dated July 25, 1991.
2. The respondent-assessee 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 was 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 Section 11-A of the Excise Act, the Tribunal found that there was no suppression of fact by the respondent and, therefore, the benefit of Section 11-A was not available to the Revenue. The Tribunal allowed the appeal of the respondent herein on July 25, 1991. That is the order under challenge before us.
3. The learned Attorney General, appearing for the appellant, contends that without anything more the findings accepted by the Tribunal are sufficient to show that the requirements of related person are satisfied. Learned counsel for the respondent invited our attention to the following findings of the Tribunal:
"No evidence regarding mutuality of interest has been brought on record except the evidence of sale of goods by the appellants to or through M/s. International."
He contends that as there is no material to hold that the respondent and M/s. International are related persons the Tribunal has rightly allowed the appeal.
4. The question as to whether the respondent and M/s. International are related persons has to be determined in the light of the definition of that expression in Section 4(4)(c) of the Excise Act. It reads as follows :
"(c). "related person" means a person who is so associated with the assessee that they have interest directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor.
Explanation-In this clause "holding company", "subsidiary company" and "relative" have the same meanings as in the Companies Act, 1956 (1 of 1956)."
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 any sub-distributor of 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.
6. In Union of India & Ors. etc. etc. vs. Bombay Tyre International Ltd. etc. etc. [1
