2011 (2) TMI 14 - AT - Central Excise

Determination of Price of Excisable Goods Clearance of goods to related party - percentage of sale of goods to independent distributors was only 3 to 7% - department was of the view that the assessees had undervalued its goods so as to evade payment of duty SCN issued demanding differential duty together with interest and proposing penal action - court accepted the contention that duty to be paid on the price at which the goods sold to independent third parties Demand and penalty set aside Sundaram Fasteners Ltd - 2011 - TMI - 202315 - CESTAT, CHENNAI.

Summary

Issues:
Valuation of goods for excise duty purpose based on relationship with related distributors.

Analysis:
The case involved the valuation of goods for excise duty purposes by the assessees, who sold their products to distributors in different states. The department alleged undervaluation of goods to evade duty, issuing a show cause notice demanding differential duty and proposing penal action. The main contention was whether the sale value of goods to a related distributor should be considered as the transaction value for excise duty calculation. The adjudicating authority dropped the proceedings, stating that the mere relationship between the parties was not sufficient to attract valuation provisions for related persons. The Commissioner (Appeals) upheld this decision, leading to the Revenue's appeal.

The Tribunal, in its analysis, referred to previous judgments, including the apex court's decision in CCE Vs Aquamall Water Solutions Ltd., which established that duty should be paid based on the price at which goods are sold to independent third parties. The Tribunal highlighted that when an assessee sells goods to both related and independent buyers, the provisions of Rule 9 regarding valuation are not applicable. Following the precedent set by the apex court, the Tribunal set aside the demands and penalties imposed on the assessees. The Tribunal emphasized that the duty is to be calculated on the price at which goods are sold to independent buyers, not related persons. Consequently, the Tribunal upheld the impugned order and rejected the Revenue's appeal based on the established legal principles and precedents.

In conclusion, the judgment clarified the valuation principles for excise duty purposes concerning sales to related and independent distributors. It emphasized that duty should be calculated based on the price at which goods are sold to independent third parties, as established by legal precedents and relevant provisions. The decision provided clarity on the application of valuation rules in cases involving related persons and upheld the impugned order while rejecting the Revenue's appeal.