Case Law Details
Khyati Ispat Private Limited Vs Principal Commissioner (CESTAT Delhi)
The facts of the case, in brief, are that M/s Khyati Ispat Pvt. Ltd., Raipur3, is a private limited company engaged in manufacture of Iron and Steel products, such as, angles, channels & joists falling under Chapter 72 of Schedule II to the Central Excise Tariff Act, 1985. During audit, it was observed that it had cleared MS Angles and MS Channels to M/s Ashutosh Engineering Industries, Raipur which is a subsidiary of M/s Ashutosh Structures Pvt. Ltd., Raipur. It was further found that the assessee has two Directors (1) Shri Virender Kumar Agarwal; and (2) Shri Basant Kumar Agarwal. Both these Directors along with Shri K.L. Agarwal and Shri O.P. Agarwal were also found to be the Directors of M/s Ashutosh Structures Pvt. Ltd. which is the holding company of the buyer M/s Ashutosh Engineering Industries, Raipur4. It was further found that the assessee was clearing similar goods sold to Ashutosh and to independent buyers on the same date on different prices and was paying duty on such prices.
It appeared that the assessee and Ashutosh were interconnected undertakings and therefore, related persons in terms of Section 4 of the Central Excise Act, 1944 and that it was selling goods at a lower price to Ashutosh and was paying excise duty on a lower value. It was felt that the value of the goods sold to Ashutosh must be determined as per Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 20005 upto 30.11.2013 and thereafter through cost plus method under Rule 8 of the Valuation Rules. Accordingly, the SCN was issued demanding differential duty of Rs. 3,27,90,997/- under Section 11A of the Central Excise Act along with interest under Section 11AB (upto 07.04.2011) and under Section 11AA (after 07.04.2011) on the duty short paid. It was also proposed in the SCN to impose a penalty upon the assessee under Section 11AC.
In this case, it is undisputed that the buyer Ashutosh is owned by M/s Ashutosh Structures Pvt. Ltd. which has four Directors, two of whom are the same as the Directors of the assessee. In other words, Shri Virender Kumar Agarwal and Shri Basant Kumar Agarwal who are the two Directors of the assessee are also the Directors of M/s Ashutosh Structures Pvt. Ltd. whose subsidiary is the buyer Ashutosh.
In fact, this aspect has come to light from the assessee’s own disclosure under the head of “related party disclosure” as per the Accounting Standard 18 of Institute of Chartered Accountants of India in the assessee’s balance sheet. Under the head “list of enterprises over it key managerial persons or the relatives have significant influence with whom transactions have taken place”, the assessee had declared the name of M/s Ashutosh Structures Pvt. Ltd. It is also not disputed that the buyer Ashutosh is a subsidiary of M/s Ashutosh Structures Pvt. Ltd. In view of these facts, we find that the assessee as well as the buyer Ashutosh are controlled by the same persons Virender Kumar Agarwal and Basant Kumar Agarwal. When these facts were disclosed by the assessee in its own balance sheets, we find no reason to accept the contention of the assessee and that they are not inter-connected undertakings in these appeals before us. We, therefore, find that the assessee and M/s Ashutosh are interconnected undertakings in terms with Section 4 (3) (b) (i) of the Act.
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