1999 (12) TMI 508 - AT - Central Excise

Summary

Issues Involved:
Valuation of goods sold to a related person under Central Excise law; Justifiability of invoking the extended period for demand; Determination of assessable value based on commercial considerations rather than relationship between buyer and seller.

Valuation of Goods Sold to a Related Person:
The appeal concerned the valuation of glass shells sold to a related person, M/s. Samtel (I) Ltd., by M/s. Samcor Glass Ltd. The central issue was whether the lower sale price to M/s. Samtel could constitute assessable value for Central Excise duty due to the relationship between the buyer and seller. The order observed that as per Section 4 of the Central Excise Act, the assessable value should be the normal price at which goods are ordinarily sold when the buyer is not a related person. The appellant contended that the price charged to M/s. Samtel was a commercial price based on the large volume purchased, not due to any special relationship. They argued that the buyer-seller interest should not be considered a "related person" concept in the valuation law. The Tribunal emphasized that a lower price to a related person can only be rejected if it is due to extra-commercial considerations, which was not proven in this case.

Justifiability of Invoking the Extended Period for Demand:
The appellants challenged the justification for invoking the extended period for demand under the Proviso to Section 11A of the Central Excise Act from November 1994 to February 1996. They argued that the sale price to M/s. Samtel was under a specific contract, and full details about sales to other parties at higher prices were known to the authorities. The appellants contended that there was no suppression of facts, making the extended period for issuing a show cause notice unavailable to the department. They also highlighted that the duty paid on the goods was available to M/s. Samtel as Modvat credit, eliminating any advantage in not paying the correct duty.

Determining Assessable Value Based on Commercial Considerations:
The Tribunal emphasized that the existence of a mere relationship between buyer and seller should not determine the acceptability of a sale price as assessable value under Central Excise law. It was noted that a lower price based on commercial considerations, such as a buyer purchasing a significant portion of the seller's production, should be considered the normal price at which goods are sold. The Tribunal rejected the Revenue's argument that the sale price was not acceptable due to the parties' interest in each other's business, as no evidence proved the transaction value was a non-commercially favored low price. Consequently, the duty demand and other claims were deemed to have no legal basis, leading to the setting aside of the impugned order in its entirety.

In conclusion, the Tribunal allowed the appeal, holding that the order was not legally tenable due to the lack of evidence supporting the rejection of the sale price between the related parties as assessable value. The decision emphasized the importance of commercial considerations in determining the normal price of goods sold, rather than merely focusing on the relationship between the buyer and seller.