Devilal Kutir Soap vs Cce, Jaipur-Ii

(Arising out of OIA No.101-110 (HKS) CE/JPR-II/2006 dt.8.2.2006 passed by the CCE(Appeals), Jaipur)

Date of Hearing/Decision 08.10.2015

For approval & Signature:

Honble Smt.Sulekha Beevi C.S., Member (Judicial)

Honble Mr.B.Ravichandran, Member (Technical)

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? yes

Devilal Kutir Soap Appellant

Devilal Kutir Soap

Shri Ladu Ram Somani, Director,

Devilal Kutir Soap,

Devilal Kutir Soap,

Devilal Kutir Soap,

Shri Ladu Ram Somani, Director

Vs.

CCE, Jaipur-II Respondent

Appearance:

Present for the Appellant: Ms.Priyanka Goel, Advocate

Present for the Respondent: Shri R.K.Mishra, AR

Coram: Honble Smt.Sulekha Beevi C.S., Member (Judicial)

Honble Mr.B.Ravichandran, Member (Technical)

Final Order No.53170-53176/2015

Per: Sulekha Beevi C.S.

The appellants are small scale unit and approved by the KVIC as Kutir Udyog and engaged in the manufacture of laundry soap. The appellants being a Kutir Udyog were exempt from levy of Central Excise duty and their product was exempt under notifications. The department entertained a view that the director of M/s.Washwell Soap (P) Ltd. being relative of the proprietor of the appellants, they fall under the category of related person. Accordingly, show cause notices raising above allegation for different periods proposing the duty demand with interest and imposition of penalties were issued apart from notice issued to Shri Ladu Ram Somani, Director of M/s.Washwell Soap (P) Ltd. proposing for imposition of penalty. The notices finalized in the order which confirmed the duty demand, interest and penalties. In appeals, the same were confirmed by the Commissioner (Appeals). Aggrieved the appellants are before this Tribunal.

2. Learned Counsel for the appellants Ms.Priyanka Goel strenuously argued that the appellant and trading company cannot be treated as related persons. There is no evidence of mutuality of interest or sharing of finance between the two concerns. Both are independent concerns and their dealings are on principal to principal basis. One is a proprietorship concern and the other is private limited company separately registered under Sales Tax and Income-tax Act. It is submitted that the department has arrived at a conclusion that they are related persons purely on presumption merely for the reason that the proprietor of one concern and director of other are related persons. It was also submitted that the declaration filed under Rule 173C (3A) of Central Excise Rules, 1994 was filed by the appellants while paying duty under protest and the same cannot be made basis for alleging that they are related persons.

3. Learned DR Shri R.K.Mishra, supported the impugned order and submitted that in the declaration filed by the appellant under Rule 173C (3A) the appellants indicated their market agencies as related persons. M/s. Washwell Soap (P) Ltd. being the market agency of the appellant, they are related person to appellant.

4. We heard both sides and perused the records.

5. Both concerns are owned by close family relations. Shri Devilal Somani, proprietor of Devilal Kutir Soap, his wife and his father Shri Ladu Ram Somani are directors of M/s.Washwell Soap Pvt.Ltd. It is seen stated that Shri Devilal Somani had relinquished the directorship of M/s.lWashwell Soap (P) Ltd. on 1.6.1999. Be that as it may, there is no evidence placed before us to bring out any mutuality of interest between two concerns to treat them as related persons. Literal meaning cannot be imputed to levy duty under Central Excise Act, 1944. In the impugned order, the Commissioner (Appeals) has observed as under:

Even if the financial flow-back between these two concerns is not shown in their accounts, I find that both of the enterprises were family concerns and all the members of the family were the beneficiaries of their ventures and the benefit of both the concerns were being shared by one and the same family.

6. We are unable to endorse the above view of the Commissioner (Appeals). In a catena of decisions, it has been held that commonness of the directors or even one or two directors being relatives of the director/partner of other concern cannot make the two as related persons unless there is evidence of mutuality of interest of two concerns, or interest of one in the business of the other. With regard to the declaration filed under Rule 173C (3A), the submission made on behalf of the appellant is tenable. The declaration has been made while paying duty under protest. Further in the same column 6 of the declaration which pertains to market agencies, the appellant has marked NA (not applicable). There is no categorical statement in the declaration that they are related persons. Moreover, the department has not carried out any investigation to ascertain whether there is mutuality of interest. For the said reasons, we hold that the demand of duty, interest and penalties are unsustainable.

7. In the result, the impugned orders are set aside and the appeals filed by Devilal Kutir Soap are allowed. With regard to the appeals filed by Shri Ladu Ram Somani, learned Counsel for the appellant submitted that he died on 25.4.2010. As such, the two appeals filed by Shri Ladu Ram Somani are dismissed as abated.

(pronounced in open court)

(B.Ravichandran) (Sulekha Beevi C.S) Member (Technical) Member (Judicial)

mk

5