[Order per: A.K. JYOTISHI]

M/s Philips Electronics India Ltd (hereinafter referred to as appellants) are in appeal against OIO dt.18.03.2013 to the extent aggrieved by the said order (Impugned Order).

2. The brief facts of the case are that one M/s Quad Electronic Solutions Pvt Ltd (Quad) entered into an agreement with the appellant for manufacture of certain items in terms of agreement dt.01.04.2009. Based on the terms and conditions of the agreement, as also purchase agreement dt.01.04.2009, the department felt that M/s Quad and the appellant are ‘interconnected undertakings’ and therefore, they will be deemed to be related persons in terms of section 4(3)(b) of Central Excise Act, 1944 (CEA). Thereafter, value has to be determined in terms of Rule 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (CER). In other words, the assessable value declared by M/s Quad in terms of said agreement was not considered as true transaction value for the purpose of discharging Central Excise duty and the price at which the appellants were selling to their related customers was considered as value for the purpose of discharging Central Excise duty in terms of Rule 9 of CER read with section 4(3)(b)(iv) of CEA. On adjudication, after examining the submissions made by M/s Quad, appellants and one Mr. Raminder Singh Soin, Managing Director of M/s Quad, the adjudicating authority, inter alia, confirmed the demand against M/s Quad along with equal penalty. In addition, penalty was imposed under Rule 26 of Central Excise Rules, 2002, against the appellant as also against Mr. Raminder Singh Soin. The impugned order passed is a common order in respect of 2 SCNs OR Nos.47/2012 & 130/2012. As against the said order, all the three aggrieved persons filed appeal before this Tribunal. M/s Quad filed Appeal No. E/26985/2013 and Mr. Raminder Singh Soin filed Appeal No. E/26986/2013.

3. Learned Advocate for the appellant has explained the background of this case and has relied on catena of judgments in support that correct appreciation of the terms and conditions of the agreement between the appellant and M/s Quad would show that the transaction was on principal-to-principal basis and they are not related within the meaning of section 4(3)(b) of CEA. He has further pointed out that though it has been alleged that they are interconnected undertakings and therefore, related persons, however, between them, there is no mutuality of interest and they are not related within the meaning of clause (ii) or (iii) or (iv) of section 4(3)(b) of CEA. Therefore, even if it is presumed that they are related undertakings, unless the department establishes that there exists relationship as described in clauses (ii) or (iii) or (iv), then for the assessment purpose, they cannot be considered as related persons.

4. Another ground taken is that no penalty could have been imposed on the appellant under Rule 26 of the CER, inasmuch as, in order to invoke Rule 26, the goods have to be liable to confiscation, whereas, in this case, as the charges of undervaluation is unsubstantiated, this essential ingredient for invoking Rule 26 is missing. Additionally, he has further argued that the appellants are a body corporate, which does not have an independent mind like human being, thus, it could not have knowledge that goods were liable for confiscation and hence, no penalty can be imposed on them under Rule 26. In this regard, they have relied on the following judgments, including the judgment of the Larger Bench of the Tribunal in the case of Steel Tubes of India Ltd Vs CCE [2007 (217) ELT 506 (Tri-LB)].

a) Indian Roadways Corporation Ltd Vs Commissioner [2005 (187) ELT 321 (Tri)]

b) Ispat Industries Ltd Vs CCE & C, Aurangabad [2008 (226) ELT 218 (Tri-Bom)]

c) Nasik Strips Pvt Ltd Vs CCE, Nasik [2008 (226) ELT 410 (Tri-Mum)]

5. He has further argued that in the absence of any one of the four sub-clauses of Rule 25(1) of the Rules