2015 (2) TMI 1090 - AT - Central Excise

Waiver of pre deposit - Duty demand - Related person - Valuation - Captive consumption - Held that - Merely because the assessee and his buyers are interconnected undertakings in terms of section 2(g) of Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of valuation, the two cannot be treated as related person and the transaction value cannot be rejected merely on this basis, that for rejecting the transaction value in such cases the conditions prescribed in Rule 10 of the Central Excise Valuation Rules have to be satisfied which are that - (a) all the sales of the excisable goods are to or through the interconnected undertaking; and (b) either the assessee or its buyer are the holding company or subsidiary company or they are also related in terms of clause 2nd, 3rd or 4th of section 4 (3)(b) and only when the above conditions are satisfied , the transaction value can be rejected and has to be determined in the manner prescribed in Rue 10. In this case according to the appellant, these conditions are not satisfied, but the commissioner (Appeals) in the impugned order has not examined this plea. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Interpretation of related person under Central Excise Valuation Rules based on interconnected undertakings.

Analysis:
The case involved manufacturers of motor vehicle parts facing a duty demand due to their clearances to another company for captive consumption. The Department considered both companies as interconnected undertakings under the Monopolies and Restrictive Trade Practices Act, 1969, leading to the application of Rule 9 of the Central Excise Valuation Rules. The Department proposed charging duty based on 110% of the sale price due to the lack of cost of production details provided by the appellants. The duty demand was confirmed by the Assistant Commissioner, and penalties were imposed. The Commissioner (Appeals) upheld this decision without addressing the appellants' argument that they should not be considered related persons under Rule 9 unless conditions specified in Rule 10 are met.

The appellants argued that even if they are interconnected undertakings, they should not be treated as related persons for valuation purposes unless specific conditions in Rule 10 are satisfied. These conditions include all sales being to or through the interconnected undertaking, or the buyer being a holding or subsidiary company, or related in specific ways as per section 4 (3)(b). The appellants contended that since these conditions were not met, the Commissioner (Appeals) erred in upholding the duty demand without considering their submissions.

The Tribunal observed that being interconnected undertakings does not automatically make the parties related persons for valuation purposes. Rule 10 of the Central Excise Valuation Rules specifies conditions that must be satisfied for rejecting transaction value in such cases. These conditions were not examined by the Commissioner (Appeals) before upholding the duty demand. Therefore, the Tribunal set aside the impugned order and remanded the matter to the Commissioner (Appeals) for a fresh decision, emphasizing the need to consider the conditions under Rule 10 for determining related person status and valuation under the Central Excise Valuation Rules.