2023 (8) TMI 181 - AT - Central Excise

Method of valuation - Rule 9 read with Rule 11 of the Central Excise (Determination of Value) Rules 2000 or Section 4 of the Central Excise Act, 1944 - related party transaction - same goods are sold to TWL and independent buyers at the same rate - demand of differential value arrived at by 110% of cost of production - HELD THAT - The impugned order has cited Board Circular No. 643/34/2002-CX., dated 1-7.2002 and concluded that When the goods are sold partly to related person and partly to independent buyers, there is no specific rule covering such a contingency. The adjudicating authority observed that in such cases, transaction value in respect of sales to unrelated buyers cannot be adopted for sales to related buyers since as per Section 4(1) transaction value is to be determined for each removal. It is observed that the adjudicating authority has wrongly interpreted the Board Circular. As per the Circular, when there is independent sale along with sale to related persons , Rule 9 is not applicable and recourse will have to be taken to the residuary Rule 11. As per the best judgment method under Rule 11, the value of the goods sold to the independent buyer should be the value for the sale to related persons also - This view has been taken by the Hon ble Apex Court in the case of Commissioner of Central Excise Service Tax, Rohtak Vs. Merino Panel Products Ltd. 2022 (12) TMI 453 - SUPREME COURT . The demands confirmed in the impugned order are not sustainable and are set aside - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are related to the valuation of goods sold to a supposedly "related person" and the applicability of Central Excise rules in determining the differential duty.

Valuation of goods sold to "related person":
The Appellant and M/s Titagarh Wagon Ltd. were alleged to be "related persons" for the purpose of Central Excise duty valuation. The Show Cause Notices demanded differential duty based on this relationship. The Appellant contended that TWL is not a related party as per a Board Circular, and thus the differential duty calculated by 110% of cost of production cannot be sustained.

Adjudication and Appeal:
The Notices were adjudicated confirming the demands along with interest and penalty under Section 11AC of the CEA, 1944. The Appellant appealed before CESTAT, which remanded the matter for de novo adjudication. The Ld. Commissioner confirmed the demands again, relying on a CBEC Circular and stating its binding nature on the Revenue.

Interpretation of Valuation Rules:
The Appellant argued that Rule 9 of the Valuation rules is not applicable when goods are sold to both related and independent buyers. They cited Tribunal decisions supporting the view that in such cases, the value of goods sold to independent buyers should be considered for related buyers as well.

Judicial Analysis and Decision:
The Tribunal observed that the differential duty calculated by adopting 110% of cost of production is not sustainable when the same goods are sold to both related and independent buyers at the same rate. They referred to Tribunal decisions and a Supreme Court case to support their view that Rule 9 is not applicable in such scenarios. The Tribunal held that the demands confirmed in the impugned order were not sustainable and allowed the appeal filed by the Appellant.

This summary provides a detailed overview of the legal judgment, focusing on the issues involved, the arguments presented by the parties, the adjudication process, and the final decision rendered by the Tribunal.