2015 (5) TMI 979 - AT - Central Excise

Demand of differential duty - valuation - related partly - Penalty u/s 11AC - respondent did not pay correct Central Excise duty in respect of the supplies of sanitary ware products made to interconnected undertaking by the original authority - Held that - Commissioner (A) in the impugned order has considered the provisions of law such as Section 4(3)(b), Rule 10 of Valuation Rules, the Circular issued by CBEC F.No.354/81/2000-TRU dated 30.6.2000 and the Circular No.643/34/2002-CX dated 1.7.2002 and came to the conclusion that in view of the fact that appellants were supplying to independent suppliers also and as required under Rule it could not be said that appellants were not selling their product except or through an interconnected undertaking or a related person, the price at which goods are sold to RAK, Mumbai, cannot be rejected in terms of Rule10(b) of Valuation Rules. Therefore he came to the conclusion that in the absence of any evidence to show that RAK Mumbai was a related person, when there were independent sales to other buyers, as per provisions of Rule 10(b), the sales to RAK, Mumbai has to be considered as a sale to an unrelated person. In the appeal memorandum as well as the submissions of learned AR, what is being stated is that this order is not correct and the decision of the appellate authority taking a view that valuation should be done on the Rule 10(b) is not correct and Rule 11 should have been applied - two parties to the transactions in this case can be considered as related persons and in the absence of any evidence to show the same in the appeal memorandum or in the submissions of the learned AR, we do not find any reason to interfere with the conclusions reached by the learned Commissioner (A) in the impugned order. - Decided against Revenue.

Summary

Issues:
Differential duty demand on sanitary ware products supplied to interconnected undertaking.

Analysis:
The case involved a demand for differential duty of over Rs. 20 lakhs on sanitary ware products supplied to an interconnected undertaking, with interest and penalties imposed under Section 11AC of Central Excise. The original authority alleged that the correct Central Excise duty was not paid for these supplies. The respondent appealed, and the Commissioner (A) allowed the appeals, stating that the transaction value cannot be rejected solely based on supplies to an interconnected undertaking unless it is proven that the undertaking is related as per Section 4. The Revenue appealed against this decision.

During the hearing, it was established that the respondent supplied ceramic tiles and sanitary ware to a company shown as an associate in their balance sheet. The respondent claimed to be a subsidiary of a company holding a significant share in the recipient company. The Commissioner (A) considered various legal provisions and circulars to conclude that the sales to the interconnected undertaking should be treated as sales to an unrelated person, as there were independent sales to other buyers as well. The Revenue argued that the valuation should have been done under Rule 11 instead of Rule 10(b).

The Tribunal rejected the Revenue's arguments, stating that the recipient company was an interconnected undertaking as per the MRTP Act. The Tribunal referred to Section 4(3)(b) to define related persons, emphasizing that if certain clauses are not present in transactions between interconnected undertakings, they will not be considered related for assessment purposes. Rule 10(b) of the Central Excise (Valuation) Rules, 2000 was found applicable in this case, as there was no evidence to establish a related person relationship between the parties involved.

In the absence of proof of a related person relationship and considering the findings of the Commissioner (A), the Tribunal upheld the decision to treat the sales to the interconnected undertaking as sales to an unrelated person. Consequently, both appeals filed by the Revenue were dismissed.