2018 (4) TMI 952 - AT - Central Excise

Valuation - related party transaction - mild steel ingots - alloy steel ingots - rule 8 of Central Excise (Determination of Price of Excisable Goods) Rules, 2000 - mutuality of interest - share capital investment in each other - Held that - this narrow view of insistence on share capital investment in each other being the sole criteria for determination of mutuality of interest has been contested by reiterating the evidences highlighted in the show cause notice and the common ownership - reliance is placed in the decision of the Hon ble Supreme Court in Calcutta Chromotype Ltd v. Collector of Central Excise, Calcutta 1998 (3) TMI 138 - SUPREME COURT OF INDIA as precedent. In Commissioner of Central Excise, Delhi-I v. Ever shine Engineering Works 2000 (4) TMI 366 - CEGAT, NEW DELHI the necessity of applying ratio of precedent decision in analogous circumstances has been highlighted. For such an exercise to be completed, it is necessary that the impugned order be set aside and the matter remanded back to the first appellate authority for reconsideration of the facts of mutuality of interest and, thereafter, decide on the application of the relevant valuation provision. Appeal allowed by way of remand.

Summary

Issues:
Appeal against order-in-appeal setting aside demand under Central Excise Act, 1944 for short-payment related to steel ingots clearance without compliance of pricing rules. Interpretation of rule 9 of Central Excise (Determination of Price of Excisable Goods) Rules, 2000 for related entities. Application of precedents like Calcutta Chromotype Ltd case. Definition of 'interconnected undertaking' and lifting the corporate veil. Reconsideration of facts for mutuality of interest and valuation provision application.

Analysis:
The appeal pertains to a demand set aside by the first appellate authority under the Central Excise Act, 1944, regarding short-payment on clearance of steel ingots without following pricing rules. The entities involved were found related due to common director, shareholding, and market share. The first appellate authority considered them interconnected undertakings but highlighted the necessity of being related as per specific criteria under rule 4(3) of the pricing rules, not alleged in the show cause notice. The impugned order emphasized the need for mutual investment in shares for establishing mutuality of interest, contrary to the appellant's argument based on evidences and common ownership.

The appellant contested the narrow view on mutuality of interest, citing evidences and reliance on the Calcutta Chromotype Ltd case. The absence of the respondent during the proceedings led to a discussion on the definition of 'interconnected undertaking' and the application of precedents like Calcutta Chromotype Ltd and Ever shine Engineering Works case. The Tribunal referred to the Supreme Court's decision in Calcutta Chromotype Ltd, emphasizing the authorities' right to lift the corporate veil for related persons and the significance of interest in each other's business.

The Supreme Court's ruling in Calcutta Chromotype Ltd highlighted the importance of factual data in determining mutuality of interest between related entities. The Tribunal found the need to ascertain the shareholding and control of management in both companies to establish mutual interest. Consequently, the matter was remanded back to the first appellate authority for a reassessment of facts related to mutuality of interest and subsequent application of relevant valuation provisions, with a directive to allow the assessee an opportunity to present their case.

In conclusion, the appeal was disposed of with the decision to set aside the impugned order and remand the matter for further consideration, emphasizing the importance of factual data in determining mutuality of interest and compliance with valuation provisions.