2017 (9) TMI 212 - AT - Central Excise

Valuation - related party transaction - part of production was cleared to the independent wholesale parties and only a part was being sold to the alleged related person - applicability of Rule 9 of the Valuation Rules - Held that - The Larger Bench of the Tribunal in the case of Ispat Industries Ltd. 2007 (2) TMI 5 - CESTAT, MUMBAI has held that Rule 9 of the Valuation Rules would require an assessee to adopt assessable value equivalent to 115% only where the entire production i.e. 100% is being sold to the related parties - In the present case, there is neither any allegation nor any finding in the impugned order by the authorities below that the appellant was clearing their entire 100% production to the said alleged related persons. Extended period of limitation - demand for the period 2001-02 was being raised in 2005 - penalties - Held that - The impugned order has nowhere alleged or given a finding that the appellant was not filing the statutory returns or was not disclosing the said fact to the Revenue or were not maintaining the statutory records. In such a scenario, no malafide can be attributed to the appellant so as to justify invokation of longer period of limitation and penalties. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Assessment of assessable value of clearances to related parties.
2. Application of Rule 9 of the Valuation Rules.
3. Justification for invoking a longer period of limitation.

Analysis:
1. The appellant, engaged in the manufacture of CR strips, was alleged to have sold goods to related parties at prices equivalent to those charged to independent buyers, leading to a demand of duty. The appellant contended that the parties were not related and that the prices were similar to independent sales. The Tribunal noted that the appellant's plea was not addressed by the lower authorities, and the sales to alleged related parties were only a part of the total production, indicating compliance with valuation rules.

2. Referring to the decision in Ispat Industries Ltd., the Tribunal highlighted that Rule 9 of the Valuation Rules applies only when 100% of production is sold to related parties. Since there was no evidence that the entire production was sold to the alleged related parties, the Tribunal concluded that the valuation rules did not apply in this case, thereby setting aside the demand based on Rule 9.

3. The Tribunal also considered the delay in raising the demand for the period 2001-02 in 2005. Not finding any evidence of non-compliance or malafide intent on the part of the appellant regarding statutory returns or record-keeping, the Tribunal held that there was no justification for invoking a longer period of limitation. Consequently, the impugned order confirming the demand and penalties was overturned, and the appeal was allowed with consequential relief.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHANDIGARH addresses the issues of assessable value determination for related party sales, the application of Rule 9 of the Valuation Rules, and the justification for the timeline of the demand, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Tribunal.