2013 (10) TMI 402 - AT - Central Excise

Valuation - related parties - exclusive sale to units in which assessee holds shares as many as 7.7% and 12.85% Waiver of Pre-deposit Held that - Following Alembic Glass Industries Ltd. 2002 (4) TMI 75 - SUPREME COURT OF INDIA purchaser and the seller having some shares in each other and having common chairman and three directors would not be the reason to hold that buyer company is the related person - Revenue has gone to the costing method and has found that sale price was less than the cost price - there are no details given by the Revenue as to how such costing arrive at by them and for which period - The appellant have categorically denied having provided any costing structure to the Revenue - costing arrived in today s date would not be relevant for the past period starting from 2005 onwards - the appellant has good prima facie case in his favour so as to dispense with the condition of pre-deposit of entire amount of duty and penalty Unconditional stay granted.

Summary

Issues:
- Application to dispense with the condition of pre-deposit of duty and penalty
- Allegation of under-valuation due to relationship with buyer companies
- Interpretation of related person under the law
- Lack of details provided by Revenue on costing method
- Relevance of costing for past periods

Analysis:

The judgment pertains to an application seeking to dispense with the pre-deposit condition of duty and penalty confirmed against the appellant for the period 2004-2009. The appellant, engaged in the manufacture of steel wire, was alleged to have under-valued their products due to relationships with buyer companies, M/s. Hindustan Overseas and M/s. Thapar Finance. The Revenue initiated proceedings based on shareholding connections between the parties. However, the Tribunal referred to a Supreme Court decision stating that mere shareholding and common directors do not establish a related person status. The Revenue's costing method was also questioned as lacking details on how the sale price was determined to be lower than the cost price, with the appellant denying providing any costing structure. The Tribunal emphasized that current costing is irrelevant for past periods, starting from 2005 onwards.

The Tribunal found that the appellant had a good prima facie case in their favor, leading to the decision to dispense with the pre-deposit condition of the entire duty and penalty amount. This decision was made unconditionally, indicating a favorable outcome for the appellant in the stay petition. The judgment highlights the importance of establishing a clear link between parties to determine related person status and the need for detailed and relevant information in assessing allegations of under-valuation. The Tribunal's ruling provides relief to the appellant by allowing the stay petition and addressing the concerns raised regarding the proceedings initiated by the Revenue.