Vinaik Spinning Mills Ltd vs C.C.E. Ludhiana

[Arising out of Order-in-Appeal No. 180/CE/CHD/06 dated 28.02.2006 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Chandigarh].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

Vinaik Spinning Mills Ltd. .Appellants

Vs.

C.C.E. Ludhiana .Respondent

Appearance:

Ms. Rupendra Singh, Advocate for the Appellant

Shri R.K. Grover, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

Date of Hearing: 17.09.2015

FINAL ORDER NO. 52948/2015-EX(DB)

Per B. Ravichandran:

The appellants are engaged in the manufacture of articles of plastic for packing of goods. The present appeal is against order dated 28.02.2006 of the Commissioner (A).

2. The facts of the case are that valuation of goods manufactured and cleared by the appellants to M/s. Oswal Woolen Mills Ltd. and other companies of Oswal group was subject matter of dispute in view of the contention of the Revenue that these are related party transactions. The proceedings initiated by the Department resulted in order in Original dated 18.07.2005. It was held by the original authority that the appellants short paid the Central Excise duty as they have not taken 115% of cost of production in respect of goods sold to related persons. The duty demand was confirmed along with equal penalty. On appeal, the Ld. Commissioner (A) vide order dated 28.02.2006 upheld the original order. Aggrieved by the said order the appellant is before us.

3. In the appeal the appellant took strong objection to the proceedings of the lower authority as being without application of mind and not considering the detailed findings on reply submitted by them. They have contended that both the lower authorities have not considered and given their findings on any of the points raised by them in their replies to the show cause notices given to the original authority or in the grounds of appeal before the first appellate authority. They have pleaded that the impugned order is liable to be set aside only on this ground alone. They have also pleaded their grounds on merits.

4. The Ld. AR reiterated the findings of the lower authorities.

5. We have heard both the sides and examined the appeal records.

6. First, we take up the main objection of the appellant against the orders of the lower authorities for decision. We examined the order in original. The said order is of 28 pages. The discussion and findings starts in page 23. Even here substantial portion of discussion of findings are devoted only to the reproduction of legal provisions and facts of the case as alleged in the show cause notice. The relationship of one of the Directors of the appellants with the CMD of M/s. Oswal Woolen Mills Ltd. and the appellants declaration to the income tax authorities to that effect and secondly certain shareholding partners of the two of the Directors of the appellants as declared to income tax authorities / annual balance sheet of M/s. Oswal Woolen Mills Ltd. has been mentioned by the original authority and he concluded that the noticee company is related and controlled by M/s. Oswal Woolen Mills Ltd. Thereafter, the original authority again mentions about the appellants defense of their identity under Companies Act and how their relationship between Directors of two companies will have no impact on valuation. The declaration made to income tax has no relevance for Central Excise valuation. However, we find after reproducing the appellants defense as above the original authority concludes that in view of the foregoing paras reply filed by the notice, I have observed that the noticee has cleared the goods to M/s. Nahar spinning mills, M/s. Oswal Woolen Mills Ltd., M/s. Rishabh Spinning Mills which are controlled by the family members of JawaharLal CMD of M/s. Oswal Woolen Mills ltd. which fall, under section 6 of the Companies Act 1956 and Schedule 1A of the ibid act. Therefore, in terms of rule 8 & 9 read with rule 11 of the Central Excise valuation (Determination of price of excisable goods) Rules, 2000, the assessable value of goods sold to related person, for consumption is to be taken as 115% of cost of production of such goods.

7. We find the original authority neither discussed the various grounds of defense taken by the appellants nor categorically arrived at the conclusion as to which provisions of law have been applied to the facts of the present case to arrive at the conclusion that there is a related party transaction. The original order is totally devoid of any discussion of findings to this effect. Certain facts as declared by the appellant to the income tax authorities and in the balance sheet of M/s. Oswal Woolens Mills ltd. has been taken and the conclusion has been simply drawn by the original authority.

8. Examining the impugned order of the Ld. Commissioner (A) we find in the 4 page order there is no discussion or findings either on fact or on legal provisions. The penultimate para of the impugned order reproduced the allegation made against the appellant and concludes that the Ld. Commissioner (A) fully agrees with the findings of the Adjudicating Authority which are self speaking. We fully agree with the appellants that both the lower authorities have not applied their minds in deciding the case. There has been no discussion on the facts relevant to the issue and the legal provisions applicable to such facts. The various grounds on which the appellants defended the case have not been discussed at all by the lower authorities. As such we find this is the fit case for remand to the original authority to examine the issue afresh and to give clear findings after taking into consideration all the points made by the appellants. Accordingly, we set aside the impugned order and remand mater to the original authority for a fresh decision. The appellants shall be given adequate opportunity to defend their case before the order is passed.

(Operative part of the order pronounced in the open court)

(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)

Bhanu

2

E/2332/2006-EX(DB)