ORDER
1. This is an appeal filed by Revenue against the Order-in-Appeal No. 78/2000-CE Dated 27.03.2000 passed by the Commissioner of Central Excise (Appeals), Bangalore.
2. M/s. Akay Cosmetics (P) Limited were manufacturers of Instant Hair Colour sold under the brand name “BIGEN”. They were selling their entire production to M/s. Nemaru Coiffure, Bombay. M/s. Nemaru Coiffure is a partnership firm trading in the goods manufactured by M/s. Akay Cosmetics (P) Limited, as a sole selling agent. It belongs to the same family group which owns the manufacturing unit.
3. There was a dispute on the valuation of the goods for the period from 01.01.1988 onwards and the issue was settled by CEGAT, Chennai vide its Final Order No. 60-71/2000 dated 06.01.2000. However, by the said order, the case for the period from 01.04.1991 onwards was remanded back to Commissioner (Appeals), to decide the issue of ‘related person’. Therefore, it was pleaded before the Commissioner (Appeals) that M/s. Nemaru Coiffure cannot be considered as ‘related person’ of M/s. Akay Cosmetics (P) Limited. The Commissioner (Appeals) came to the conclusion that after 01.04.1991 M/s. Nemaru Coiffure cannot be considered as a related person of M/s. Akay Cosmetics (P) Limited. The Revenue has filed this appeal against this conclusion of the Commissioner (Appeals).
4. Smt. Radha Arun, SDR, appeared for Revenue and Shri V.N. Doiphode, Advocate, appeared for the respondents M/s. Akay Cosmetics (P) Limited.
5. Smt. Radha Arun pleaded that from the Memorandum and Articles of Association of M/s. Akay Cosmetics (P) Limited, Shri Mahendra Khimji and Shri Uday Khimji are the first and permanent Directors of the company as they were holding one share each and the Memorandum and Articles of Association declares that the Directors shall not be liable to retire by rotation. Shri Mahendra Khimji and Shri Uday Khimji continued as partners in M/s. Nemaru Coiffure. These two persons were not only the first and permanent Directors in M/s. Akay Cosmetics (P) Limited but were also partners of M/s. Nemaru Coiffure even after 01.04.1991 and the entire production of the goods viz. Instant Hair Colour in the brand name of “BIGEN” was sold to M/s. Nemaru Coiffure exclusively. The concept of ‘related person’ for the purpose of Central Excise Valuation as per Section 4(4)(c) of Central Excise Act, 1944 was applicable even after 1991 as there is no change in practical terms constituting a material departure from the earlier facts, as partners of M/s. Nemaru Coiffure are the first and permanent Directors of M/s. Akay Cosmetics (P) Limited.
6. Shri V.M. Doiphode, Advocate, pleaded that after 01.04.1991, due to change in the constitution of the Company, the partners of M/s. Nemaru Coiffure were not the shareholder of M/s. Akay Cosmetics (P) Limited. The issue of ‘related person’ for the period earlier to 01.04.1991 was raised by them before the original Adjudicating Authority who decided that both of these are related persons and they did not pursue that matter. However, from 01.04.1991, when the Constitution of the Company was changed, this issue was raised and the CEGAT has remanded this matter to the Commissioner (Appeals) only on this issue.
7. We have carefully considered the submissions made by both sides. We find that the issue has been correctly decided by the Commissioner (Appeals) in the following terms:-
“The limited issue to be decided is whether the appellants and their buyers (M/s. Nemaru Coiffure) for the period from 01.04.1991 onwards, are related person or not. In this regard, it is observed that with the changes effected in the constitution of the Appellant company, there is no commonality between the directors and the partners of both the concerns. While Shri Mahendra Khimji and Uday Khimji remained as partners of M/s. nemaru Coiffure, they sold of their shares in M/s. Akay Cosmetics (P) Limited and with effect from 01.04.1991, they had no connection with the appellant’s company. This fact is clearly evidenced in the balance sheet of the appellant’s company from 1991-92 onwards. The change in the constitution is clearly reflected in the annual return filed on 31.03.1992 with the Registrar of Companies. Therefore, after 01.04.1991, M/s. Nemaru Coiffure cannot be considered as a related person of the appellant’s company.”
Under section 4(4)(c) of Central Excise Act, “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. We find that in the present case before us, the manufacturing company is a private limited company whereas the seller is a partnership concern. They are neither a holding or subsidiary company nor a relative and a distributor of the manufacturing company. No evidence has been produced before us that they have interest in the business of each other directly or indirectly, as no flow of money from the company to partnership or from partnership to the Company has been established before us. Therefore, we do not find any merit in the appeal of the Revenue. Accordingly, the appeal is rejected.