ORDER
P.G. Chacko, Member (J)
1. The appellants M/S. United Bleachers Limited are aggrieved by a demand of differential duty on a quantity of processed grey fabrics sold to M/s. Shiv Sales, Bangalore and M/s. Swastik Corporation Ltd. Coimbatore during the period 11.7.96 to 31.7.96. It appears from the records that they had purchased 80,000 L.Ms (liner metres) of grey fabrics from M/s. Swastik Corporation Ltd. at a price of Rs. 200/- per LM. M/s. Swastik Corporation Ltd. had purchased the said goods from M/s. Lakshmi Apparels & Woven Limited at the same price (Rs. 200/- per LM). Out of the 80,000 DMs of fabrics purchased by the appellants from M/s. Swastik Corporation Ltd. they sold 69,255.90 L.Ms to some traders in the market (price not known). The remaining quantity of 10,744.10 LMs of grey fabrics were processed and 10,156 LMs of the processed fabrics were sold to M/s. Shiv Sales, Bangalore at a price of Rs. 74.50 per LM (price for sound quantity) and the remaining 588.10 LMs of processed fabrics were sold to Swastik Corporation Ltd. at a price of Rs. 59.64 per LM (price for seconds). Having found common Directors in M/s. United Bleachers Limited (assessee) and M/s. Swastik Corporation Ltd. the Department suspected ‘relationship’ between the two companies and, on this basis, refused to accept the price charged to M/s. Swastik Corporation Ltd. as the basis of assessable value of the goods sold to them by the assessee. The price charged to M/s. Shiv Sales also was not accepted as basis of assessable value of the goods sold to them by the assessee. The Department also found that no declaration under Rule 173 C of the Central Excise Rules, 1944 had been filed by the assessee in respect of the said goods. The original authority and the first appellate authority rejected the transaction value and determined the assessable value of the goods (10,744.10 L.Ms fabrics) processed and sold by the assessee to M/s. Swastik Corporation Ltd and M/s. Shiv Sales, on the basis of raw material price (Rs. 200/- per LM) charged by M./s. Swastik Corporation Ltd. on 80,000 LMs grey fabrics purchased by the assessee. In the result, the demand of duty raised by the department on the assessee for the period 11.7.96 to 31.7.96 stands confirmed against the party-in adjudication of a SCN dated 14.9.1999.
2. In the present appeal of the assessee, the demand of duty is challenged on merits as well as on the ground of limitation. Reiterating the challenge, ld. Counsel submits that the lower authorities have enhanced the value of the goods erroneously in terms of the Supreme Court’s judgment in Ujagar Prints v. UOI 1989 (39) ELT 493 (SC), regardless of the fact that the appellants had sold the goods as owners thereof. According to ld. Counsel, the ratio of the decision in Ujagar prints (supra) is not applicable to the facts of the case. In this connection, reliance is placed on the apex Court’s judgment in the case of CCE, Indore v. S. Kumars Ltd. . It is also submitted that there was no requirement, at the material time, for the appellants to file any declaration with the Department under Rule 173C and, therefore, there is no question of misdeclaration. In such circumstances, it was not correct for the lower authorities to invoke the larger period of limitation for demanding differential duty on the goods. Adverting again to the facts of the case, ld. Counsel, submits that, in the then prevailing market conditions, the assessee was constrained to sell the processed fabrics to M/s. Shiv Sales and Swastik Corporation Ltd. at the price of Rs. 74.50 per LM and Rs. 59.60 per LM respectively. Nevertheless, Counsel argued, those prices reflected the transaction value of the goods as there was no extra-commercial consideration flowing to the assessee from the buyers. The transaction was at arms length. Ld. Counsel submits that there is no evidence whatsoever in the hands of the Department for rejecting the transaction value of the goods.
3. Ld. SDR reiterates the findings recorded in the impugned order. The focus of her submissions is the difference in price between the raw material (grey fabrics) and the subject goods (processed fabrics). It is submitted that this gigantic difference, which was not satisfactorily explained by the assessee, reflects an extra-commercial element in the transaction and therefore, it cannot be said that the transaction value was erroneously rejected.
4. After giving careful consideration to the submissions, we find that, admittedly, the raw material (grey fabrics) was purchased by, the assessee at Rs. 200/- per L.M. The supplier, M/s. Swastik Corporation Ltd. had purchased the same goods from the market at the same price (Rs. 200/- per LM). Out of the total quantity of grey fabrics purchased by the assessee from M/s. Swastik Corporation Ltd. a major portion (69,255.9b LMs) was sold in the market. The appellants have not furnished the price at which this sale was made. By no stretch of imagination can it be supposed that they are not aware of this sale price. If the market conditions are reflected by earlier transactions, the sale of 69,255.90 L.Ms of grey fabrics by the appellants in the market should also be held to have taken place at a price not below Rs. 200/- per L.M. We shall look at the rest of the transactions in this backdrop. It is the appellant’s claim that 10,744.10 L.Ms of processed fabrics were sold at the low prices of Rs. 74.50 per L.M and Rs. 59.60 per L.M in the peculiar market conditions. In our assessment, this claim is unrealistic, having regard to the market conditions already reflected in the earlier transactions. Where the raw material was purchased at unit price of Rs. 200/-, the final product resulting from chemical processes involving costly chemicals would not normally be priced at such low levels as Rs. 74.50 and Rs. 59.6). As rightly found by the lower authorities, these prices cannot represent the normal price of the goods, especially, where the assessee has failed to account for the big gap between the prices of raw material and finished goods. On merits, therefore, the appellants do not have a case.
5. However, ‘he assessee seems to have a case against the demand of duty on the ground of time-bar. The demand was raised in the Show-cause notice issued in September 1999 for the month of July 1996. The larger period of limitation was invoked on the ground of non-declaration (suppression). Both the lower authorities have found that the assessee did not file Rule 173C declaration in respect of the goods in question. After consulting the provisions of Rule 173C, we find that it was not incumbent, on them to file any such declaration. The proviso to Sub-rule (1) of the Rule, as the. Rule stood at the material time, reads thus:
Provided further that where an ; assessee,-
i) sells goods to or through related persons as defined in Section 4 of :the Act; or
ii) uses such goods for manufacture or production of other goods in his factory; or
iii) removes such goods in any free distribution; or
iv) remove such goods in any other manner which does not involve sale; or
v) removes goods of the same kind and quality from his factories located in the jurisdiction of different Commissioners of Central Excise or Assistant Commissioners of Central Excise,
vi) he shall file, with the proper officer a declaration, in such form and in such manner and at such intervals the Central Board of Excise and Customs or Commissioner of Central Excise may require declaring the value of the goods under Section 4 of the Act, the duty and other elements constituting the price of such goods along with such other particulars as the Central Board of Excise and Customs or the Commissioner of Central Excise may specify.
We have not found any “relation” between the assessee and their buyers in terms of Section 4 of the Central Excise Act. It is settled law that there can be no such relation between two corporate entities. This law is applicable to the transaction between the assessee-Company and M s. Swastik Corporation Ltd. The Revenue has no case that the assessee used the goods in question captively for manufacture of other goods, nor do they have a case that the goods were cleared for free distribution. Again it is not the department’s case that the transaction did not involve sale or that like goods were removed by the assessee from any factory of theirs situate within the jurisdiction of other Commissioners or Assistant Commissioners. Thus the appellants’ case did not fall under any of the five clauses of the proviso to Rule 173C(1), and therefore they were not required to file any declaration under the Rule. Hence they cannot be held to have suppressed am fact from the Department by way of non-declaration or misdeclaration before the Department. Therefore the invocation of the larger period of limitation for demanding differential duty from the assesses is without any basis. The demand of duty is time-barred and the same is vacated along with the penalty on the assessee.
6. In the result, the appeal of the assessee stands allowed. The remaining appeal (filed by Swastik Corporation Ltd.) against the penalty imposed on them under Rule 209A of the Central Excise Rules, 1944 is consequentially allowed.
(Order dictated and pronounced in open Court)