2017 (11) TMI 1246 - AT - Central Excise

Valuation - related party transaction - case of the Revenue is that the value shown in the document of clearance by appellants to M/s.IOCL should be considered as transaction value for Central Excise duty - The appellant s claim is that since their clearance is exclusively to a holding company and the transaction is between related party, the value cannot be determined in terms of main section 4(1)(a) - Held that - when the excisable goods are not sold except through an inter-connected undertaking, the value should be determined as per Rule 10(a) read with Rule 9 of Valuation Rules - there is no legal sanction to demand duty from the appellants in case the price charged by them from M/s. IOCL is higher than the price of M/s. IOCL. - appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of excisable goods sold between related parties under Central Excise duty regulations.

In this case, the appellants, engaged in manufacturing petroleum products, were selling goods exclusively to their holding company at a price lower than the market rate. The Revenue contended that the transaction value between the appellants and their holding company should be considered for Central Excise duty assessment. The original authority upheld the Revenue's view, resulting in a substantial duty demand and penalty. The appellants argued that as related parties, the provisions of section 4(1)(a) did not apply, and valuation should be done as per section 4(1)(b) read with Valuation Rules. They cited a previous Tribunal decision in their favor. The Revenue maintained that the transaction value was correctly assessed. The Tribunal observed that in a previous case involving the appellants, it was held that valuation should be done as per Valuation Rules when goods are sold only through inter-connected undertakings. The Tribunal found the impugned order legally unsustainable, setting it aside and allowing the appeal.

The Tribunal emphasized that the case at hand involved goods sold exclusively to the holding company for further sale, unlike the precedent cited by the Revenue. The Tribunal noted the interconnected nature of the appellants and their holding company. Relying on its previous decision in a similar case involving the appellants, the Tribunal concluded that the impugned order was not legally sustainable and allowed the appeal. The Tribunal's decision was based on the application of Valuation Rules when goods are not sold except through interconnected undertakings, as established in previous cases and upheld by higher courts.