2017 (3) TMI 124 - AT - Central Excise

Valuation - Iron Castings - related party transaction - appellant sold 80% to 90% of their entire production of Iron Castings to their related manufacturing unit - whether in the facts and circumstances of the case the provisions of Rule 9 read with Rule 8 of Central Excise Valuation Rules, 2000, are applicable to the facts of this case or not? - Held that - Provisions of Rule 10, Rule 9 and Rule 8 are applicable only in a situation where the appellant is clearing 100% of this production through the person who is related. Admittedly, the appellant is not clearing 100% of production through related person - the provisions of Rule 9 read with Rule 8 of Valuation Rules, 2000, are not applicable to the facts of this case - charge of under valuation is not sustainable against the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against impugned order on under valuation charge.

Detailed Analysis:

1. Under Valuation Charge:
The appellant, engaged in manufacturing Iron & Steel Castings and parts of Motor Vehicle, was charged with under valuation for selling 80% to 90% of their production to a related unit. The charge was based on contravention of Section 4(1)(b) of the Central Excise Act, 1944 read with relevant rules. The appellant was required to pay duty on clearances to the related person as per the Valuation Rules. The appellant contested the charge, arguing that as they did not clear 100% of their production to the related person, the Valuation Rules were not applicable, and the demand was based on an unsustainable average price.

2. Legal Submissions:
The appellant's counsel argued that the Valuation Rules did not apply as only 80% to 90% of production was sold to the related person. Conversely, the respondent's counsel supported the findings in the impugned order.

3. Judgment Analysis:
After hearing both parties, the Tribunal focused on whether the Valuation Rules applied to the case. It was noted that the appellant did not clear 100% of production to the related person, rendering Rules 9 and 8 inapplicable. Rule 8 specifies valuation when goods are not sold but used for consumption, while Rule 9 pertains to sales through related persons. As the appellant did not meet the criteria of clearing 100% through related persons, the Tribunal held that the charge of under valuation was unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

4. Conclusion:
The Tribunal's analysis centered on the applicability of the Valuation Rules to the appellant's case, emphasizing the requirement of clearing 100% of production through related persons for the rules to be relevant. As this condition was not met, the charge of under valuation was deemed unsustainable, leading to the setting aside of the impugned order. The judgment provided clarity on the specific circumstances under which the Valuation Rules apply, ensuring a fair and accurate assessment of duty obligations in related party transactions.