- (1.) These two appeals are filed by the Commissioner Central Excise, Aurangabad, wherein the respondent arrayed is same. The issue involved also is common which pertains to the valuation of goods, sold by the assessee, for the purposes of charging excise duty. For this reason, both the appeals were taken up together and are being disposed of by this common judgment. However, keeping in view some distinct feature in the second appeal, viz., Civil Appeal No. 4370 of 2003, the same shall be taken up for discussion separately to address the distinct features.
(2.) The respondent (hereinafter referred to as the 'assessee') holds Central Excise Registration for the manufacture of Tyres, Tubes, Flaps, Bladders, etc., falling under Chapter 40 of the Central Excise Tariff Act, 1985. In the first appeal, the period involved for the purposes of excise duty is 01.03.1997 to 16.04.1998. The assessee was originally M/s. RPG CEAT Group Company. Later on 'RPG SATL' and 'Goodyear' entered into a Joint Venture Agreement dated 10.09.1993 to form a third company in the name of M/s. SATL (the assessee), which came into existence on 30.09.94. The primary objective of the assessee was to manufacture OTR Tyres and Radial tyres exclusively for CEAT and Goodyear under their brand names. The promoters namely Goodyear USA and Goodyear India on one side and RPG CEAT on the other were holding 50:50 equity each in the assessee, and were exclusive buyers of goods manufactured by the assessee. In the said Joint Venture Agreement, various other stipulations were mentioned showing interest of both Goodyear as well as CEAT in the assessee. As per the said agreement, the assessee also received unsecured interest free loan of Rs.85.66 crores from CEAT and Goodyear. Some moulds and other equipments worth Rs. 10 crores free of cost, on loan basis, were also given by these two companies to the assessee.
(3.) This kind of arrangement led to the issuance of show cause notice by the Commissioner of Central Excise and Customs on 25.01.1999, alleging that CEAT and Goodyear are related persons of the assessee within the meaning of Section 4(4)(c) of the Act of 1944 and as such the selling price of CEAT and Goodyear shall be the assessable value of goods produced by the assessee under section 4 of the Act. Alternatively, it was also alleged as to why the additional consideration flowing back to the assessee should not be added in their present selling price in terms of Rule 5 of the Central Excise (Valuation) Rules, 1975 r/w Section 4 of the Act. In this way a Demand cum Show Cause Notice was issued to the assessee demanding differential duty of Rs.8,76,85,385/- for the period from 01.03.1997 to 16.04.1998 for under valuation of the goods. Contravention of Section 4 of the Act read with Rules 9, 9(2), 52, 173C, 173F, 173G of the Rules was also alleged and penal action was proposed under Section 11AC of the Act read with Rules 173 of the Rules, alongwith penal interest under section 11AB of the Act.;