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2015 (7) TMI 543 - AT - Central ExciseValuation - Invocation of extended period of limitation - whether Valuation of the HDPE/ PP Bags manufactured by the appellants sold through related person, as inter-connected undertakings, can be made under Rule 11, read with Rule 10(a) of the Valuation Rules, 2000 as they existed prior to 01.12.2013 - Held that - It has been clearly brought out by the Revenue that the persons who are calling the shots in the case of the appellants and the interconnected undertakings are relatives hence by virtue of express language of Rule 10(a) of the Valuation Rules the appellants will be held to be related. Adjudicating authority in Para 23.3 and 23.4 of the order-in-original dated 10.1.2011 17.1.2011 has held that in the present proceedings Rule 11 of the Valuation Rules is put into service according to which for determining value Rule 10(a) falls within reasonable norms. - No reason to interfere with the orders passed by the lower authorities and the same are upheld on merits. Issue involved in these proceedings was a contentious one and appellant had certain judicial pronouncements on the interpretation of Section 4 of the Central Excise Act, 1944 with respect to related persons . Under the existing factual matrix of facts, it can not be held that there was any intention on the part of the appellants to evade payment of duty. Accordingly, extended period is not invokable to the demands and no penalties are imposable upon the appellants. Demands have to be thus limited to the period under Section 11A of the Central Excise Act, 1944 without invoking extended period. - Decided partly in favour of assessee.
Issues Involved:
1. Whether the valuation of HDPE/PP Bags sold by the appellants through inter-connected undertakings should be made under Rule 11 read with Rule 10(a) of the Central Excise Valuation Rules, 2000. 2. Whether the inter-connected undertakings can be considered "relatives" under Section 4(3)(b)(ii) of the Central Excise Act, 1944. 3. Whether the demands are time-barred and if penalties are imposable. Issue-wise Analysis: 1. Valuation of HDPE/PP Bags under Rule 11 read with Rule 10(a): The core issue is whether the valuation of HDPE/PP Bags sold by the appellants through inter-connected undertakings can be determined under Rule 11 read with Rule 10(a) of the Valuation Rules, 2000. The appellants argued that their sales to inter-connected undertakings (ICUs), which are related persons, should be valued based on the transaction value of goods sold to independent buyers under Section 4(1) of the Central Excise Act, 1944. The adjudicating authority, however, held that the valuation should be done under Rule 11, read with Rule 10(a), as the ICUs are related persons. The Tribunal observed that the law laid down by the Apex Court in earlier cases did not consider the concept of inter-connected undertakings as related persons under the amended Section 4. The Tribunal upheld the adjudicating authority's decision, stating that the valuation of goods sold through inter-connected undertakings should be done under Rule 11, read with Rule 10(a), as the appellants and the ICUs are related persons. 2. Inter-connected Undertakings as "Relatives": The appellants contended that inter-connected undertakings cannot be considered "relatives" under Section 4(3)(b)(ii) of the Central Excise Act, 1944. They argued that only biological persons could be relatives, not inter-connected undertakings. The Tribunal referred to Section 2(41) and Section 6 of the Companies Act, 1956, which define "relative" and include various familial relationships. The Tribunal noted that the legislature, by including sub-sections (ii) and (iii) in Section 4(3)(b) and Rule 10(a) of the Valuation Rules, intended to cover relationships within inter-connected undertakings as well. The Tribunal found that the persons controlling the appellants and the ICUs were indeed relatives, thus justifying the application of Rule 10(a) for valuation purposes. 3. Time-bar and Penalties: The appellants argued that the demands for an extended period were time-barred and that penalties should not be imposed as there was no intention to evade duty. The Tribunal acknowledged that the issue involved was contentious and that the appellants had judicial pronouncements supporting their interpretation of Section 4. Given the complex nature of the issue and the absence of any intent to evade duty, the Tribunal held that the extended period could not be invoked. Consequently, the demands were limited to the normal period under Section 11A of the Central Excise Act, 1944, and no penalties were imposed on the appellants. Conclusion: The Tribunal upheld the orders passed by the lower authorities on the merits, confirming that the valuation of goods sold through inter-connected undertakings should be done under Rule 11, read with Rule 10(a) of the Valuation Rules. However, the Tribunal allowed the appeals to the extent that the demands were limited to the normal period, and no penalties were imposed, recognizing the contentious nature of the issue and the absence of intent to evade duty.
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