2017 (7) TMI 327 - AT - Central Excise

Valuation - related party transaction - Held that - the impugned order did not explain how two Private Limited Companies having separate legal existence, can be considered as relatives . Relationship between natural persons holding position in these companies cannot make these two companies automatically relative within the meaning of Section 4. Also, there is no cost calculation based CAS-4. It is not clear how the value of 110% is arrived at by the lower authorities - matter remanded for fresh consideration - appeal allowed by way of remand.

Summary

Issues: Valuation of excisable goods based on relationship between companies and application of Central Excise Valuation Rules.

In this judgment by the Appellate Tribunal CESTAT NEW DELHI, the main issue revolved around the valuation of excisable goods cleared by the appellants during the period 2006-2010. The dispute arose from the contention of the Revenue that the appellant and another company were related persons, leading to the valuation of goods based on 110% of the cost of production. The lower authorities confirmed the differential duties demanded in various show cause notices, a decision upheld by the Commissioner (Appeals).

The appellant argued that the lower authorities did not properly consider the legal issues in terms of Section 4 read with Valuation Rules. They contended that the transaction between the two companies did not automatically attract the valuation applicable to related persons as the conditions mentioned in Rule 10 were not satisfied. The appellant also highlighted a previous Tribunal order on the same issue for a later period, where the matter was remanded back for a fresh decision.

Upon examination, the Tribunal noted that the Commissioner (Appeals) considered the companies as inter-connected undertakings based on the relationship between their office bearers, deeming them as relatives. However, the Tribunal found that the order did not explain how two separate legal entities could be considered relatives, especially without a clear basis for the 110% valuation. Given the previous remand order for a similar issue, the Tribunal set aside the impugned orders and remanded the matter back for a fresh decision by the Commissioner (Appeals).

The Tribunal emphasized that the mere interconnection between the companies did not automatically make them related persons for valuation purposes. It reiterated the conditions under Rule 10 that needed to be satisfied for rejecting the transaction value based on related person status. Since these conditions were not examined in the impugned order, the Tribunal found it appropriate to remand the matter for a de novo decision by the Commissioner (Appeals). The judgment concluded by setting aside the impugned order and remanding the case back for a fresh decision.