2014 (8) TMI 749 - AT - Central Excise

Waiver of pre deposit - Valuation of goods - related person - mutuality of interest - determination of assessable value of the goods cleared to other units - Held that - Applicant during the relevant period, manufactured and cleared sponge iron to independent buyers as well as to other two units, namely, M/s Jai Balaji Sponge Ltd., Ranigunj and Sri Ramrupai Balaji Steel Ltd., Durgapur. Basis of allegation of mutuality of interest rests on the facts that the Applicant and the other two Units have common Directors and common Head Office and the other two Units were shown as related person in the Balance Sheet of the Applicant. At this stage, it is difficult to accept that merely on these facts, it could be said that there have been mutuality of interests so as to bring them within the fold of Clause (iv) of Sub-section (3)(b) of Section 4, occurring in the definition of related persons . Prima-facie, we are of the view that once the ingredients viz. Clause (ii) (ii) & (iv) of Sub-section (3) of Section 4, are not satisfied, the assessment of goods sold to these Units, would be in accordance with Rule 10 (b)(ii) of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. In other words, the transaction value at which, the Applicants sold/cleared the goods to these Units, namely, M/s Jai Balaji Sponge Ltd., Ranigunj and Sri Ramrupai Balaji Steel Ltd., Durgapur at the relevant time, be the assessable value for payment of duty. In the result, we find that the Applicants are able to make out a prima-facie case for total waiver of predeposit of dues adjudged. - Stay granted.

Summary

Issues:
Waiver of predeposit of duty and penalty under Central Excise Act, 1944.

Analysis:
The judgment revolves around two applications for waiver of predeposit of duty amounting to Rs. 2.17 Crores and an equal penalty imposed on a company under Section 11AC of the Central Excise Act, 1944, along with a personal penalty of Rs. 25,000 imposed on the General Manager of the company under Rule 26 of the Central Excise Rules, 2002. The dispute arises from the determination of the assessable value of goods cleared to two other units of the company, M/s Jai Balaji Sponge Ltd., Ranigunj, and Sri Ramrupai Balaji Steel Ltd., Durgapur. The Department argues that these units are related persons with mutuality of interest, thus Rule 11 read with Rule 4 should apply for valuation. The Applicant contends that these units do not have mutuality of interest and should be assessed under Rule 10 (b)(ii) of Central Excise Valuation Rules, 2000.

The Applicant's advocate cites judgments of the Hon'ble Supreme Court to support the argument that the units lack mutuality of interest. The financial hardship faced by the company is highlighted as one unit is closed, and the group is running at a loss. On the other hand, the Department argues that the relations between the Applicant and the two units satisfy the definition of "related persons" and have mutual interests, as per the findings of the Commissioner. The Tribunal examines the facts and submissions from both sides to determine the assessable value of goods cleared to the related units.

After hearing both parties and reviewing the records, the Tribunal finds that the Applicant manufactured and cleared goods to independent buyers as well as to the related units. The Department proposed to determine the value based on comparable selling prices to the related units during the relevant period. The Tribunal analyzes the definition of "related persons" and the presence of mutuality of interest between the entities. It is observed that common directors and a shared head office are not sufficient to establish mutuality of interest as required by the law. Consequently, the assessable value is determined under Rule 10 (b)(ii) of Central Excise Valuation Rules, 2000, based on the transaction value at which the goods were sold to the related units.

In conclusion, the Tribunal finds that the Applicant has made a prima facie case for a total waiver of predeposit of dues adjudged. Therefore, the predeposit of dues against both the Applicants is waived, and the recovery is stayed during the pendency of the appeal. The stay petitions are allowed, and the decision is dictated and pronounced in open court.