2018 (2) TMI 633 - AT - Central Excise

Valuation - related party transaction - period 01/07/2002 to April 2003 - Rule 8 and Rule 9 of CENVAT Credit Rules - Held that - The said rules are applicable only in a situation when the appellant is clearing 100% of the production to the person to whom he is related. Admittedly the appellant is not clearing the 100% of the production through related person - Rule 8 and Rule 9 of CENVAT Credit Rules are not applicable to the facts of the case - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dispute over undervaluation of goods supplied to related parties.
2. Applicability of Valuation Rules in the case.
3. Disputed demand for captive consumption.
4. Adjudication of demand from specific periods.

Analysis:
The judgment pertains to two appeals against an order-in-original dated 29/01/2008, involving a dispute over undervaluation of goods supplied to related parties. The Tribunal had previously remanded the matter for fresh decision, leading to the second round of litigation. The appellant, engaged in manufacturing filaments and molybdenum wires, supplied goods to two parties, one being related. The department alleged undervaluation due to the relationship between the parties. However, it was found that the related party status was not established for one of the parties, leading to the cessation of the matter concerning that party. The remaining dispute focused on the demand from a specific period related to the other party.

During the proceedings, the appellant conceded to the demand for captive consumption. However, regarding the demand related to the other party, it was noted that 100% of the goods were not supplied to them. Citing a precedent, the Tribunal concluded that the Valuation Rules were not applicable since the appellant did not clear 100% of production through the related person. Consequently, the charge of undervaluation was deemed unsustainable in the absence of full supply to the related party. As a result, the impugned order was set aside concerning the demand from the specific period related to that party.

In the final decision, the appeal filed by the assessee was allowed, while the appeal filed by the department was dismissed. The judgment emphasized that the Valuation Rules apply only when the appellant clears 100% of production to the related person, which was not the case in this instance. Therefore, the charge of undervaluation was deemed inapplicable due to the incomplete supply to the related party.