1. Appellants are absent and unrepresented in spite of notice of hearing. However, they have sent a request for decision of the appeals on merit. We have heard Shri K. Srivastava, SDR and perused the papers.
2. M/s. Sindhu Chemical Products (for short, SCP) a partnership firm engaged in the manufacture of Ultra Marine Blue was transferring the same in bulk to M/s. Sindhu Agencies (for short, SA) and M/s. New Sindhu Agency (for short, NSA) who pack the same affixing brand name and particulars of SCP and sell the same to wholesale dealers. SCP was availing the benefit of SSI exemption as per Notification No. 175/86 which allowed total exemption for clearances up to the value of Rs. 15 lacs and did not pay duty during the period 1986-87 to 1988-89.
3. Investigation showed that the three concerns are partnership firms with common partners, that the activities of SA and NSA are carried out in the premises belonging to SCP, that SA and NSA were using the brand name and they were receiving the goods from SCP at the rate of Rs. 11/- per kg. and selling the packed product to wholesalers at rates ranging from Rs. 16/- to Rs. 17/- per kg. Accordingly, show cause notice was issued stating that SA and NSA are related to SCP within the meaning of Section 4(4) (c) of the Central Excise Act, 1944, attracting to proviso (iii) to Clause (a) of Section 4, and therefore assessable value of products manufactured by SCP would be based on the wholesale price charged by SA and NSA. Notice also alleged suppression of material facts so as to attract larger period of limitation under the proviso to Section 11A(1) of the Act. The notice proposed demand of differential duty. The three concerns resisted the notice denying any relationship and denying that the price of SA and NSA should be the basis for determining the assessable value of the goods manufactured by SCP and denying liability to pay any differential duty. They also contended that there was no justification to impose penalty.
4. Overruling these contentions, the Additional Collector confirmed the demand and imposed penalty of Rs. 5,000/- on SCP and Rs. 1,500/- each on the other two concerns. These appeals have been filed by SCP, NSA and SA respectively.
5. The Memo of Appeal challenges the correctness of the finding regarding relationship and pleads for allowing admissible deduction, said to be wrongfully rejected by the adjudicating authority.
6. Following tabular statement will determine the relationship of the partners of the three concerns.Name SCP SA NSA_________________________________________________________Ghanshyamdasjeomal Partner Partner -Mrs. Ghanshyamdas - - PartnerChetandas Jeomal Partner Partner -Mrs. Chetandas - - Partnerurlidhar Jeomal Partner - -Mrs. Murlidhar Jeomal - Partner Partnerulchand Jeomal Partner - PartnerMrs. Mulchand Partner - Partner_________________________________________________________ The above will show that while the four brothers are partners of SCP, partners of other two concerns are one or more brothers and wives of one or more brothers. Evidently, the three concerns are under the management of the brothers. SA and NSA are located in two sheds belonging to SCP. Shri Chetan-das Jeomal Manwani gave a statement stating that they are prepared to treat the sales of SA and NSA as the sales of SCP. Shri Ambaram Jesharam Tanwani, an employee of SA admitted that the work of NSA was being done in the premises of SA since NSA did not have the facility for work. All these circumstances clearly point to the correctness of the conclusion of the lower authorities that all the three concerns have mutual interest in the business of each other and are related persons. This was also conceded by the partner of SCP who gave statement as indicated above.
7. Next aspect related to deductions claimed. Page 7 of the impugned order refers to deductions on account of cash discount, quantity discount and octroi. Pages 34-35 of the impugned order refer to deductions on account of cost of packing, cost of transportation, excise duty, sales tax and other taxes and trade discount. The lower authority has specifically rejected the claim for cost of packing as there was no evidence of durability or returnability, cost of transportation as there was no evidence regarding the exact amount spent, duty and taxes as there was no evidence to show that these amounts were included in the assessable value. We do not find any finding recorded in regard to cash discount, quantity discount and octroi. It is also not seen that the appellants were specifically called upon to adduce any evidence in regard to the various items (except packing). So far as cost of packing is concernced, apart form absence of evidence the circumstances probabilise that Ultra Marine Blue would required packing for the purpose of wholesale trade at the factory gate and cost thereof cannot be deducted. Regarding other elements referred to above, we are of opinion that an opportunity must be given to the appellants to establish the case.
8. While confirming the finding that SA and NSA are related to SCP and that the prices charged by SA and NSA should be the basis for determining the assessable value of goods cleared by SCP, we set aside the impugned order and direct that duductions allowable and the quantum thereof should be decided afresh by the adjudicating authority after giving an opportunity to the appellants to produce necessary evidence and of personal hearing.