2004 (12) TMI 166 - AT - Central Excise

Valuation (Central Excise) - Determination of transaction value for related persons - Applicability of Rules 9 and 10 of the Central Excise Valuation Rules, 2000 - HELD THAT - We notice that in the Show Cause Notice, the Revenue has invoked Rules 9 and 10 of the Central Excise Valuation Rules. Rule 9 would apply in circumstances where the sale is explicitly made to the related person. Admittedly in the present case, the appellants are not exclusively selling the goods to the EFL but some percentage of the goods are also being sold to the dealers independently of the sales made to the related person. Thus, invocation of Rules 9 and 10 in the matter is not justifiable and any order beyond the scope of Show Cause Notice would not be sustainable in terms of the judgment cited by the learned Counsel. We have considered the judgment of the Tribunal in the assessees' own case 2003 (1) TMI 400 - CEGAT, BANGALORE and find from the facts that they are acceptable and the issue pertaining to the sale of Aqua Guard etc. to the EFL is covered by the judgment. In so far as the spares are concerned, we find from the submissions of the appellant that large quantity of spares are consumed by the EFL and partly it is sold. Therefore, the department has to re-work the duty particulars with regard to the spares in terms of the Valuation Rules. The matter pertaining to quantification of duty on spares and penalty thereon is remanded to the original authority for de novo consideration. Both these appeals are disposed of partly by allowing the claim of the appellants with regard to the Water Filter-cum-Purifier and by remanding the issue pertaining to the spares. Ordered accordingly.

Summary

Issues Involved:
1. Applicability of Rules 9 and 10 of the Central Excise Valuation Rules, 2000.
2. Determination of transaction value for related persons.
3. Penalty and interest imposition.

Summary:

1. Applicability of Rules 9 and 10 of the Central Excise Valuation Rules, 2000:
The appellants, a subsidiary of M/s. Eureka Forbes Ltd. (EFL), were issued Show Cause Notices by the department demanding duty on the grounds that the appellants and EFL are related persons. The department invoked Rules 9 and 10 of the Valuation Rules, 2000. The appellants contended that these rules would not apply as they sold more than 20% of their goods to independent dealers, and thus, Rule 4 should be applied. The Tribunal found that since the appellants were not exclusively selling to EFL, the invocation of Rules 9 and 10 was unjustifiable. The Tribunal's previous judgment in the appellants' own case, which was upheld by the Apex Court, supported this view.

2. Determination of transaction value for related persons:
The Tribunal examined the sale pattern and found that the appellants transferred all goods to their depots, from where sales were made to both EFL and independent distributors. The Tribunal concluded that the valuation should be determined using Rule 11, read with the principles of Rules 4 and 7, as Rule 9 was not applicable. The Commissioner had correctly applied these principles, and the Tribunal found no grounds to contest the valuation determined.

3. Penalty and interest imposition:
The Tribunal noted that the Commissioner had not imposed mandatory interest u/s 11AB, as there was no fraud, collusion, or wilful misstatement. The Tribunal found a conflict in the Commissioner's findings regarding the imposition of a penalty of Rs. 10 lakhs and concluded that the penalty could not be upheld.

Conclusion:
The Tribunal set aside the demands related to the clearances of Water Filter-cum-Purifier to EFL, following the ratio of the previous judgment. The issue of duty quantification on spares was remanded to the original authority for de novo consideration. The appeals were partly allowed concerning the Water Filter-cum-Purifier and remanded for the spares issue.