2011 (1) TMI 49 - AT - Central Excise

Determination of price - interconnected undertakings - Rule 11, 9 and 10 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Held that - The undisputed factual position is that SFL cleared the goods both to related persons (interconnected undertakings) as well as to independent buyers. This being so, the provisions of Rule 9 which prescribes that when an assessee so arranges that the excisable goods are not sold by assessees except to or through a person who is related in the manner specified .. value of the goods shall be the normal transaction value at which these are sold by the related person at the time of removal, to buyers (not being related person); or .. , are not attracted, in the light of the apex court s decision in CCE Vs Aquamall Water Solutions Ltd. 2004 -TMI - 53600 - CESTAT, SOUTH ZONAL BENCH, BANGALORE . The apex court accepted the contention that duty is to be paid on the price at which the goods are sold to independent third parties. Following the ratio of the above decision, we set aside the demands confirmed against and penalties imposed upon the assessees and allow Appeal Nos.E/711 & 712/2005 and E/698/2007 on merits, without going into the argument raised in these appeals that the demands are barred by limitation. As a consequence, Appeal Nos.E/755 & 1056/2005 and E/865 & 866/2006 challenging the dropping of the demands on the ground that mutuality interest is not required to be established between the interconnected undertakings in order to invoke the provisions of Rule 9 and 10 of the Valuation Rules, are rejected.

Summary

Issues Involved:
Valuation of goods for excise duty based on related party transactions.

Detailed Analysis:

The judgment by the Appellate Tribunal CESTAT, CHENNAI, involved the issue of determining the value of goods for excise duty purposes in relation to transactions between related parties. The dispute centered around whether the value adopted by a manufacturing company, SFL, for clearances to its divisions, SM and MAS, should be based on the price at which the goods were sold by the divisions, as per the provisions of the Central Excise Act and Valuation Rules.

Upon hearing both sides, the Tribunal noted that SFL cleared goods to both related parties and independent buyers. The Tribunal referred to Rule 9, which pertains to situations where goods are not sold except to related persons. However, the Tribunal relied on a Supreme Court decision in CCE Vs Aquamall Water Solutions Ltd., which held that duty is to be paid based on the price at which goods are sold to independent third parties. Therefore, the Tribunal set aside the demands and penalties imposed on the assessees, allowing their appeals on merits without addressing the argument of limitation.

As a result of the above decision, the Tribunal dismissed the appeals by the Revenue challenging the dropping of demands based on the argument that mutuality interest is not required between interconnected undertakings to invoke the Valuation Rules. The appeals of the assessees were allowed, while those of the Revenue were dismissed. Additionally, certain comments and replies by the Revenue were also dismissed as they were deemed to be in the nature of comments and replies rather than substantive appeals.

In conclusion, the judgment clarified the valuation of goods for excise duty purposes in cases involving related party transactions. By following the Supreme Court decision and interpreting the relevant provisions, the Tribunal resolved the dispute in favor of the assessees, setting aside demands and penalties while dismissing the Revenue's appeals.