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2019 (2) TMI 745 - AT - Central ExciseValuation - related party transaction - goods sold by the appellant to their related entity Exide Products Limited (EPL) for further sale - case of the department is that the price at which EPL has sold the goods to their customers should be adopted for discharging duty in terms of 3rd proviso to Section 4(1)(a) of the Central Excise Act - Held that - In the present case, admittedly the appellant has sold goods to independent customers in addition to sale to EPL. The price at which the goods were sold to independent buyers was adopted as the basis for the valuation of goods sold to EPL - Proviso (iii) to Section 4(1)(a) of the Central Excise Act, 1944 however, specifically excludes from its operation cases where the goods are partly sold to un-related wholesale dealer and partly to related person. It is clear from the wording of the said proviso itself. The Commissioner in the impugned order has admitted the fact that the appellant in addition to sale of the goods to EPL has also sold the goods to unrelated buyers. There is also no dispute on the fact that the comparable price to independent customer has been adopted as the basis for discharging duty on sale to EPL - further, in the present case there is no evidence led in by the department to show that the relationship has influenced the price for the same to be rejected. Similar issue has been decided by the Tribunal in the Appellant s own case EXIDE INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., CALCUTTA-III 2002 (2) TMI 817 - CEGAT, KOLKATA wherein it was held that sale of goods to others buyers alongwith related party sale would not attract third proviso to Section 4(1)(a) of the Act. Appeal allowed - decided in favor of appellant.
Issues:
Valuation of goods sold to a related entity for further sale under Section 4(1)(a)(iii) of the Central Excise Act, 1944. Analysis: The appeal was filed against an Order-in-Original passed by the Commissioner of Central Excise, Kolkata-III, regarding the valuation of electrical accumulators sold to a related party, Exide Products Limited (EPL). The Commissioner confirmed a demand for differential duty based on the price at which EPL sold the goods to independent customers. The appellant argued that since comparable prices to unrelated buyers were available, the rejection of assessable value based on EPL's sale price was incorrect. The appellant also highlighted a previous Tribunal decision in their favor on a similar issue. The key contention revolved around the applicability of proviso (iii) to Section 4(1)(a) of the Central Excise Act, 1944, which states that if goods are generally not sold except to or through a related person, the price at which the related person sells the goods should be adopted for duty calculation. The appellant maintained that since they also sold goods to independent buyers, the proviso did not apply. The Tribunal agreed, noting that the proviso excludes cases where goods are partly sold to unrelated dealers. The Tribunal referenced a previous decision in the appellant's favor, emphasizing that the sale to unrelated buyers influenced the valuation methodology. The Tribunal found that the department failed to provide evidence that the relationship influenced pricing or that the 3rd proviso to Section 4(1)(a) was applicable. It criticized the department for quantifying the demand on a notional basis without legal support. The Tribunal distinguished a Supreme Court judgment cited by the department, highlighting the specific requirements for the proviso to apply, none of which were met in the present case. Given the lack of arrangement between the appellant and EPL to sell goods below normal price, the Tribunal concluded that the impugned order was unsustainable and ruled in favor of the appellant, setting aside the demand and penalty imposed. In conclusion, the Tribunal held that the impugned order was not sustainable and allowed the appeal, providing consequential relief to the appellant. The judgment emphasized the need for a clear arrangement to apply proviso (iii) to Section 4(1)(a) and highlighted the significance of sales to unrelated buyers in determining assessable value for goods sold to related entities.
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