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2024 (12) TMI 1192 - AT - Central ExciseValuation of Excise duty - two firms are related to one another as per Schedule 1A to the Clause (c) of Section 6 of the Companies Act, 1956 and as provided under Section 4(3)(b) of the Act or not - requirement to value in terms of Section 4(1)3(b)(ii) of Central Excise Act, 1944 read with Rule 9 of Central Excise Valuation Rules or not - HELD THAT - The same issue has come for consideration before this Bench in the appellant s own case for the demand raised for the period 2003- 04 and 2005-06. The Bench in HINDUSTAN PUMPS ELECTRICAL ENGINEERING PVT. LTD., MALKOH MARKETING PVT. LTD. VERSUS C.C.E. S.T. - PANCHKULA, C.C.E. DELHI-III 2018 (10) TMI 532 - CESTAT CHANDIGARH held that 'the appellant are not related persons in terms of section 4(3)(b)(ii) of Central Excise Act, 1944 and provisions of Rule 9 of the Central Excise Valuation Rules, 2000, are not applicable to the facts of this case, therefore, the impugned orders are not sustainable in the eyes of law.' The issue is squarely covered in favour of the appellants and the impugned orders cannot be sustained - Appeal allowed.
Issues:
1. Whether the two appellant companies are related persons under Section 4(1)(3) of the Central Excise Act, 1944? 2. Whether Rule 9 of the Central Excise Valuation Rules was correctly invoked in the case? 3. Whether the show cause notice exceeded its scope by confirming the relationship between the appellants? 4. Whether the impugned orders passed by the Commissioner (Appeals) are sustainable in law? Detailed Analysis: 1. The judgment revolves around the issue of whether the two appellant companies are related persons under Section 4(1)(3) of the Central Excise Act, 1944. The Revenue contended that the firms were related due to common directors and family relationships. However, the appellants argued that corporate entities cannot be considered relatives under the Companies Act, 1956. The Tribunal referred to previous decisions and held that the appellants were not related persons as defined in the Act. Therefore, the demand raised based on this relationship was not sustainable. 2. The next issue pertains to the invocation of Rule 9 of the Central Excise Valuation Rules. The appellants argued that the rule was wrongly invoked as the transaction price and profit margins were not adequately considered. The Tribunal found that since not all goods were sold through the allegedly related party, Rule 9 was inapplicable. Consequently, the charge of undervaluation was deemed unsustainable based on the facts of the case. 3. The appellants raised a procedural issue regarding the show cause notice exceeding its scope by confirming the relationship between the parties. They argued that this contravened established legal principles. The Tribunal cited relevant case law and held that the notice had indeed gone beyond its permissible scope, which was impermissible under law. 4. Lastly, the Tribunal evaluated the sustainability of the impugned orders passed by the Commissioner (Appeals). It noted that in previous instances, the allegations against the appellants had been dropped, indicating inconsistency in the Revenue's position. Considering the precedents and legal arguments presented, the Tribunal concluded that the issue was decisively in favor of the appellants, leading to the allowance of all four appeals and the rejection of the impugned orders. In conclusion, the judgment clarifies the legal interpretation of the relationship between corporate entities, the correct application of valuation rules, procedural requirements for show cause notices, and the sustainability of orders based on consistent legal principles and precedents.
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