2005 (9) TMI 14 - AT - Central Excise

Central Excise Assessable value Related persons treated as unrelated persons as both the companies have common share holdings - Sale price to unrelated persons

Summary

Issues:
1. Appeal against the order of the Commissioner (Appeals) by the revenue.
2. Allegation of "Related Person" not mentioned in the show cause notice.
3. Valuation under Rule 6C(ii) of the Valuation Rules, 1975 for transactions between related parties.
4. Dispute over whether the parties involved are related entities.
5. Determination of value for assessment purposes.

Analysis:
1. The revenue filed an appeal against the order of the Commissioner (Appeals) citing various infirmities in the lower authorities' order. The Commissioner found that the Assistant Commissioner had exceeded his authority by alleging a "Related Person" connection without proper substantiation in the show cause notice. Additionally, valuation was done under Rule 6C(ii) of the Valuation Rules, 1975, applicable to transactions between related parties.

2. The revenue contended that the Commissioner erred in stating that the related party transaction concept was not mentioned in the original order. They argued that the Assistant Commissioner confirmed the demand based on the parties' relationship, which the Commissioner overlooked. The revenue also disputed the Commissioner's dismissal of the relevance of Rule 6C(ii) in the valuation process.

3. Upon review, the Tribunal found that the Commissioner's assertion that the related party transaction concept was absent in the show cause notice was inaccurate. The demand primarily focused on the differential duty calculated from sales by a related party to unrelated buyers. The Tribunal clarified that being Limited Companies does not automatically establish a related party relationship, especially when shareholders are common. It was established during the hearing that not all goods were sold to related parties, leading to a conclusion that related party sales to unrelated buyers cannot dictate the assessment value.

4. The Tribunal upheld the Commissioner's finding that the two entities in question, Bhor Industries Ltd., Mumbai, and Bhor Industries Ltd., Satara, were not related parties. Consequently, the revenue's appeal was dismissed, affirming that the sales between the entities did not constitute related party transactions for assessment purposes.