2008 (9) TMI 832 - AT - Central Excise

Summary

Issues involved: Determination of assessable value of Methanol sold to inter-connected units, applicability of Rules 8 and 9 of Central Excise Valuation Rules, 2000, imposition of duty demand, penalty under Section 11AC of the Central Excise Act, 1944.

Summary:
The case involved the appellant, a public sector enterprise, manufacturing Methanol in their factory and selling it to various consumers, including their own units in Bhatinda and Panipat. The Revenue treated the sales to these units as sales to "related persons" and sought to determine the assessable value based on 115% of the cost of production, resulting in a duty demand and penalty under Section 11AC of the Central Excise Act, 1944. The Assistant Commissioner and Commissioner of Central Excise (Appeals) upheld this decision, leading to the appeal.

The appellant argued that even though their units in Bhatinda and Panipat were inter-connected undertakings, they were not related in the manner specified under the Central Excise Act, and thus, the sale price to these units should be considered for valuation. They also highlighted that no discounts were given to these units compared to other buyers. Citing precedent cases, the appellant contended that Rule 9 of the Valuation Rules should not be invoked when sales are made to related and independent buyers simultaneously.

After hearing both sides, the Tribunal concluded that even if the units were related, Rule 10 read with Rule 8 should not be applied as substantial sales were made to independent buyers. Relying on previous judgments, the Tribunal held that Rule 9 is inapplicable in cases where goods are sold to both related and independent buyers, and the price to independent buyers should be considered. As the price to Panipat and Bhatinda units was higher than to independent buyers, the Tribunal set aside the duty demand and penalty imposed.

Therefore, the impugned order was deemed unsustainable, and the appeal was allowed.