2005 (3) TMI 514 - AT - Central Excise

Summary

Issues: Application for waiver of pre-deposit of central excise duty and penalty based on related party transaction and valuation rules.

In the judgment delivered by the Appellate Tribunal CESTAT, CHENNAI, the issue at hand was an application by M/s. Jagajothi Spinning Mills for the waiver of pre-deposit of central excise duty and penalty amounting to Rs. 1,45,700/- and Rs. 1,55,700/- respectively. The crux of the matter revolved around the contention that a significant portion of the cotton yarn manufactured by the appellant was sold to a related person, Mr. Jayakumar, who was the proprietor of M/s. Jayakumar Fabrics. The revenue authorities treated this transaction as related party dealing and confirmed duty based on Rule 8 of the Central Excise Valuation Rules, 2000. The appellant argued that despite this related party connection, the valuation of goods was not impacted as they were also selling a substantial portion to unrelated parties at similar or lower prices. The Tribunal heard submissions from both sides, with the appellant's consultant emphasizing the lack of impact on valuation due to the sales to unrelated parties, while the respondent's representative reiterated the findings of the impugned order.

Upon careful consideration of the arguments presented, the Tribunal noted that the impugned goods were indeed sold to the related person, M/s. Jayakumar Fabrics, at a higher price compared to sales to other parties. It was highlighted that Rule 8 of the Central Excise Valuation Rules pertains to captive consumption of goods and not related party transactions. In light of this, the Tribunal found that the appellant had established a strong prima facie case for the waiver of duty and penalty. Consequently, the Tribunal decided to stay the recovery of the entire amount of duty and penalty during the pendency of the appeal, providing temporary relief to M/s. Jagajothi Spinning Mills in this matter.