2015 (8) TMI 298 - AT - Central Excise

Valuation - Related person - whether there was short payment of duty in the clearance of the goods by respondent to M/s ITL due to the reason both of them is having mutuality of interest and are related persons - Held that - The correctness of demand for extended period is also to be decided. It is relevant to note that the allegation of Show Cause Notice says since the noticee also exclusively sold their entire production of excisable goods to their related M/s ITL, the assessable value of the said excisable goods is required to be determined in terms of the provisions of Section 4(3)(b)(iv) Central Excise Act, 1944 read with Rule 6(c)(ii) and Rule 6(b)(ii) of the Valuation Rules, 1975 upto 1.7.2000 and as per amended Section 4(i)(b) read with Rule 8, 9 and 10 of the valuation Rules 2000 w.e.f. 1.7.2000. - This allegation is examined in detail by the ld. Commissioner (Appeals). He observed that only holding of share of 50% and selling of entire production by the appellants to M/s ITL is not enough to prove the mutuality of interest in the business of each other. Detailed examination and categorical finding of the ld. Commissioner (Appeals) in respect of both limitation and on merits could not be faulted and we find no reason to interfere of the order of the ld. Commissioner (Appeals) - Decided against Revenue.

Issues:
1. Central Excise valuation of transactions between two parties.
2. Determination of related persons and mutuality of interest.
3. Invoking the extended period of limitation for demand.
4. Applicability of case law in establishing mutuality of interest.
5. Examination of the decision by the ld. Commissioner (Appeals).
6. Dismissal of the appeal by the Revenue.

Central Excise Valuation:
The case involved an appeal by the Revenue against an Order-in-Appeal passed by the ld. Commissioner (Appeals) regarding the Central Excise valuation of transactions between the Respondent, engaged in manufacturing Tractor Parts, and M/s International Tractor Ltd. (ITL). The original authority confirmed a demand against the respondent for under valuation due to the transactions being considered between "related persons." However, the ld. Commissioner (Appeals) set aside the order and held that the extended period of limitation was not applicable in this case.

Related Persons and Mutuality of Interest:
The Revenue contended that the respondent and ITL were 'interconnected undertaking' and related persons, as two partners of the respondent firm held 50% of the shares in ITL and exercised control over its functioning. The Revenue argued that the percentage of shareholding and 100% sale to the buyer were not sufficient proof of mutuality of interest. The key issue was whether there was short payment of duty due to the alleged mutuality of interest between the parties.

Extended Period of Limitation:
The Revenue raised concerns regarding the limitation period, stating that the declaration filed by the respondent did not disclose full details to establish mutuality of interest, as shareholding patterns were crucial. The ld. AR relied on a Supreme Court decision to support the grounds of appeal, emphasizing the importance of establishing mutuality of interest for valuation purposes.

Applicability of Case Law:
The ld. Commissioner (Appeals) examined the allegations in detail and concluded that mere shareholding and selling of production to ITL were insufficient to prove mutuality of interest. The department's failure to establish such mutuality of interest affected the valuation of excisable goods. The Revenue mentioned filing a Special Leave Petition (SLP) in the Apex Court against the case law relied on by the ld. Commissioner (Appeals).

Examination and Dismissal of Appeal:
Upon careful examination, the Tribunal found no fault with the ld. Commissioner (Appeals)'s detailed findings on limitation and merits. The Tribunal noted that the Apex Court decision cited by the ld. AR was based on different facts compared to the present case, where the respondent was a partnership firm and ITL was a Limited Company. Consequently, the Tribunal dismissed the appeal by the Revenue, upholding the ld. Commissioner (Appeals)'s order.

This detailed analysis of the judgment highlights the key issues surrounding Central Excise valuation, related persons, mutuality of interest, limitation period, applicability of case law, and the final decision to dismiss the Revenue's appeal.

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