2020 (1) TMI 893 - AT - Central Excise

Valuation - clearance of pipes - inter-connected undertakings - arms length price - applicability of Section 4 (1) (b) of the Central Excise Act, 1944 - HELD THAT - From a conjoint reading of Section 4 (3) (b) of the Central Excise Act and Section 2 (g) of the MRTP Act, the Revenue is expected to clearly establish the relation as to inter-connection first, for which a little extra enquiry/investigation would be necessary. To establish the above, they have to place on record the complete shareholding pattern, the management pattern, the exercise of control by one over the other, etc., which are not there either in the Show Cause Notice or even in the grounds of the Revenue s appeal. So also, Rule 10 (a) would apply only if such clause is specified in the Show Cause Notice under which the alleged relationship fitted. This is also for the reason that if the alleged relationship does not fit in under Clauses (ii), (iii) or (iv), then Section 4 (1) has to be adopted. There are no reason to interfere with the reasoned findings given by the Adjudicating Authority in the impugned order and the same is therefore upheld - appeal dismissed- decided against Revenue.

Summary

Issues:
1. Remand of the case by the High Court for passing a speaking order.
2. Valuation of goods and applicability of Section 4 (1) (b) of the Central Excise Act, 1944.
3. Determination of inter-connected undertakings under Section 2 (g) of the MRTP Act.
4. Compliance with Rule 10 of the Central Excise Valuation Rules, 2000.

Analysis:
1. The case was remanded by the Hon'ble High Court for a speaking order. The matter involved Show Cause Notices issued on various grounds, which were adjudicated in earlier orders. The Tribunal disposed of appeals related to the case, leading to a remand by the High Court for a detailed order.

2. The dispute revolved around the valuation of goods and the application of Section 4 (1) (b) of the Central Excise Act, 1944. The Revenue contended that the value of pipes cleared was undervalued due to related units and alleged undervaluation. The Tribunal examined the arguments regarding the assessable value and the interconnection between the units.

3. The Tribunal analyzed the definition of 'inter-connected undertakings' under Section 2 (g) of the MRTP Act. The Revenue argued that the two units were closely managed and not at arm's length, affecting the valuation of goods. However, the respondent countered, stating that the shareholding structure did not meet the criteria for inter-connected undertakings, and the Revenue lacked supporting documents to establish control or shareholding.

4. Rule 10 of the Central Excise Valuation Rules, 2000 required sales through related persons, which the Revenue failed to prove. The Adjudicating Authority's findings indicated only a portion of sales through the related entity, which was not challenged by the Revenue. The Tribunal upheld the Authority's reasoned findings, emphasizing the necessity for the Revenue to establish inter-connection and shareholding patterns for proper valuation.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Adjudicating Authority's findings regarding valuation, inter-connected undertakings, and compliance with Rule 10. The decision highlighted the importance of thorough investigation and evidence to establish inter-connection for accurate valuation of goods under the Central Excise Act.