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2017 (4) TMI 497 - AT - Central ExciseValuation - The appellant cleared the manufactured goods to the Central Distribution Centre (CDC), which belongs to the appellant company and the goods were sold from the said CDC by adding a value of 40% on the clearance value from the factory - Department s case is that CDC is a related person of the appellant, the prices at which the goods are sold from CDC shall be the assessable value and duty should be chargeable on the said value at the time of clearance of the goods from the factory - Held that - the CDC is like a depot owned by M/s. National Textile Corporation (Maharashtra North) Ltd. and the appellant is a unit of said company. Therefore, all the three i.e., National Textile Corporation (Maharashtra North) Ltd., the appellant and CDC, are under one single entity, i.e. the company, M/s. National Textiles Corporation (Maharashtra North) Ltd. Therefore, among three there are no different persons involved. Accordingly, there is no related person exist in the entire transaction - Since the SCN is based only on the point of related person, even though some other valuation provision may or may not apply, we cannot address to the same. Otherwise, we have to travel beyond the scope of SCN, which is not permissible in the law - appeal allowed - decided in favor of appellant.
Issues:
1. Whether the Central Distribution Centre (CDC) is a related person of the appellant. 2. Whether the prices at which goods are sold from the CDC should be considered as the assessable value for charging excise duty. 3. Whether the demand for differential duty is valid based on the relationship between the appellant and the CDC. Analysis: 1. The appellant, a unit of National Textile Corporation, is engaged in manufacturing dyed/printed cotton fabrics. The appellant cleared goods to the CDC, owned by the same company, and sold them by adding a value of 40%. The department claimed the CDC is a related person, leading to a demand for duty on the CDC selling price. The appellant argued the CDC is not a separate entity but a distribution center of the appellant, hence no related person exists. The appellant's counsel cited relevant circulars and judgments supporting their stance. 2. The Revenue contended that the CDC falls under the definition of related persons as an interconnected undertaking. They argued that the goods' sale price from the CDC should be the assessable value for excise duty. The Revenue supported its position with various judgments emphasizing related party transactions. However, the Tribunal analyzed the relationship between the appellant, CDC, and the parent company, concluding they are part of the same entity, thus no related person exists. 3. The Tribunal found that since the entire basis for disputing valuation was the CDC being a related person, which was incorrect, the foundation of the show-cause notice was flawed. As a result, all proceedings based on this notice were deemed invalid. The Tribunal emphasized that addressing other valuation provisions beyond the related person issue would exceed the notice's scope, which is impermissible. Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant due to the lack of a related person relationship. In conclusion, the Tribunal allowed the appeal, holding that the CDC was not a related person of the appellant, and thus the demand for differential duty based on this relationship was unfounded. The judgment emphasized the importance of the correct foundation for show-cause notices and limited the scope of proceedings to issues raised in such notices.
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