2016 (6) TMI 1015 - AT - Central Excise

Valuation - relating parties - allowed 25% discount to sole buyer purchasing goods for above ₹ 60 lakhs - It is seen that M/s. Seth Trading Company is a partnership firm of four partners who are wives / sons of Directors of the appellant company. Hence by entertaining a view that the transaction between the appellant and M/s. Seth Trading Company can be considered as transaction between interconnected undertakings in terms of section 2(g) of MRTP Act 1969, proceedings were initiated to demand Central Excise duty short paid due to undervaluation of excisable goods. Held that - As correctly pointed out by Ld. Commissioner (A) for rendering the buyer a related person of the respondent in terms of sub section 4(3)(b) of the Central Excise Act 1944, relationship as described in clauses (ii), (iii) or (iv) has to be established and it is to be true that the buyer is also holding company or a subsidiary company of the assessee. There is no reason to consider the existence of outstanding amount as a reason for rejecting the transaction value including the trade discount offered to all. Working in the same premises or the trading firm using the logo and name of the manufacturing firm by itself are of no consequence to consider the transaction value as tainted. - Demand set aside - Decided in favor of assessee.

Summary

Issues: Valuation of excisable goods for Central Excise duty - Interconnected undertakings under MRTP Act 1969 - Trade discount offered to related parties - Time-bar for demanding duty.

In this case, the main issue was whether two entities, a Pvt. Ltd. company (respondent) and a partnership firm (buyer), were interconnected undertakings for the purpose of valuing excisable goods cleared by the respondent. The Revenue argued that the buyer should be considered an interconnected undertaking due to the relationship between its partners and the directors of the respondent company. The Revenue contended that the trade discount offered to the buyer was not legally valid. However, the Tribunal found that the Revenue erred in considering the two entities as interconnected undertakings without a legal basis. The Tribunal emphasized that the respondent company and the buyer were separate legal entities, and the relationship between the partners and directors did not make them interconnected undertakings under the MRTP Act 1969.

Regarding the contention about outstanding amounts and shared premises between the entities, the Tribunal ruled that these factors did not justify rejecting the transaction value or the trade discount offered. The Tribunal noted that there was no evidence of any flow back or extra commercial consideration in the transactions between the respondent and the buyer. Additionally, the Tribunal agreed with the Commissioner (A) that there was no deliberate evasion of duty by the respondent prior to a certain date, which was considered time-barred.

Ultimately, the Tribunal upheld the Commissioner (A)'s decision, concluding that there was no legal basis to interfere with the order. The appeals filed by the Revenue were dismissed based on the clear findings in the impugned order, which established that the respondent and the buyer were not interconnected undertakings and that there was no evasion of duty prior to the time-barred date.