2017 (9) TMI 1718 - AT - Central Excise

Valuation - related party transaction - case of Department is that one Shri Manish Dhanuka was a common Director in both the companies namely assessee- Appellants and M/s Dhanuka Laboratories Ltd. so it was presumed that both are related persons and that is why goods were sold at a lower price to M/s Dhanuka Laboratories Ltd. Held that - Hon ble Supreme Court in the case of Alembic Glass Industries Ltd. vs CCE 2002 (4) TMI 75 - SUPREME COURT OF INDIA has observed that if Directors are common in two different Companies then they may not be considered as the related persons - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Order-in-Original passed by Commissioner of Central Excise, Jaipur for the period October 2008 to December 2011.
- Allegation of related party transaction due to common directorship.
- Demand of duty and penalty raised by adjudicating authority.
- Interpretation of related party concept in the context of common directors.
- Application of Rule 9 of Valuation Rules in cases involving related persons.

Analysis:
The appeal before the Appellate Tribunal CESTAT New Delhi was lodged by the assessee-Appellants challenging the Order-in-Original issued by the Commissioner of Central Excise, Jaipur for the period from October 2008 to December 2011. The dispute arose from the sale of Bulk Drug Intermediate, GLCE, by the assessee-Appellants to M/s Dhanuka Laboratories Ltd., with a common director, Shri Manish Dhanuka, in both companies. The Department alleged a related party relationship due to the common directorship, leading to the sale at a lower price and subsequently raised a duty demand along with penalties.

During the proceedings, the Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Alembic Glass Industries Ltd. vs CCE, highlighting that common directors in different companies may not necessarily establish a related party relationship. Additionally, the Tribunal cited a previous case involving a similar issue, M/s Surya Wires Pvt. Ltd. vs CCE, Raipur, where it was emphasized that the transaction value should be accepted unless there is a mutual interest between the manufacturer and buyer, as clarified by the Supreme Court in the case of CCE, Aurangabad vs. Goodyear South Asia Tyres Pvt. Ltd. The Tribunal noted that Rule 9 of Valuation Rules applies only when excisable goods are sold to or through a related person in specific manners outlined in the law.

Based on the precedents and the facts of the case, the Tribunal set aside the impugned order and allowed the appeal filed by the assessee-Appellants. The decision was made after considering the totality of the circumstances and the legal principles governing related party transactions and valuation of goods under the Central Excise Tariff Act, 1985. The ruling clarified the interpretation of related party concepts in the context of common directorship and the application of valuation rules in cases involving alleged related persons.