2011 (4) TMI 156 - AT - Central Excise

Arms length price - The relationship has not influenced the price - The demand on account of the alleged undervaluation of the impugned goods cannot be sustained Non-payment of full duty on branded goods - The appellants does not press the appeal Hence , the duty demand and consequent demand of interest and equal penalty are sustainable.

Summary

Issues:
1. Undervaluation of impugned goods due to alleged relationship between appellants and buyer.
2. Non-payment of full duty on branded goods from May 1999 to March 2000.
3. Challenge to cum-duty benefit granted to the appellant-assessee.

Analysis:

Issue 1: Undervaluation of impugned goods
The major part of the demand in this case is related to the enhancement of the value of the impugned goods due to the alleged relationship between the appellants and the buyer. The jurisdictional Commissioner held that the buyer supplied raw material to the appellants at a lower price, leading to the demand. However, the Tribunal referred to a previous case law where it was established that the buyer supplied the raw material at an arm's length price. Since the relationship did not influence the price and there was no other evidence of a related party transaction, the demand on account of alleged undervaluation of the impugned goods was not sustained. The Tribunal found in favor of the appellants on this issue.

Issue 2: Non-payment of full duty on branded goods
Regarding the second part of the demand concerning the non-payment of full duty on branded goods for the period from May 1999 to March 2000, the appellants did not contest the appeal. Consequently, the Tribunal held that the duty demand, along with interest and equal penalty, was sustainable. The matter was remanded to the adjudicating Commissioner to quantify the duty amount, interest, and penalty in relation to the branded goods cleared during the specified period.

Issue 3: Challenge to cum-duty benefit
The Department's appeal to challenge the grant of cum-duty benefit to the appellant-assessee was deemed not maintainable by the Tribunal. Therefore, the appeal by the Department was dismissed, along with the cross-objection filed by the appellant-assessee. The Tribunal upheld the benefit granted to the appellant-assessee in this regard.

In conclusion, the Tribunal ruled in favor of the appellants regarding the alleged undervaluation of impugned goods due to the relationship between the parties. However, the duty demand on branded goods was upheld, and the matter was remanded for quantification. The challenge to the cum-duty benefit was dismissed by the Tribunal.