Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Central Excise Central Excise + SC Central Excise - 2015 (8) TMI SC This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2015 (8) TMI 586 - SC - Central Excise


Issues:
1. Interpretation of related person under customs law.
2. Application of cost plus principle for excise duty assessment.
3. Arm's length sales and pricing discrepancies.

Interpretation of Related Person:
The case involved the interpretation of the term "related person" under customs law. The appellant, a company manufacturing Epichlorohydrin (ECH), entered into a joint venture for manufacturing Epoxy Resins. The courts analyzed detailed findings by the Deputy Commissioner and the Commissioner, concluding that although there was no direct interconnection, there was a mutuality of interest between the appellant and the joint venture company. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld these findings, except for a discordant note by the Commissioner (Appeals), which was overruled. Ultimately, the Supreme Court agreed with CESTAT's decision, affirming the indirect interest between the parties.

Application of Cost Plus Principle:
Regarding the application of the cost plus principle for excise duty assessment, the appellant argued that arm's length sales were made at prices significantly below the cost of production due to low international prices. The court examined a chart showing the price differentials and noted that even sales to arm's length purchasers were below the cost of production. The court emphasized that a best judgment assessment must be reasonable, not arbitrary. As arm's length sales were below cost, the cost plus principle was deemed inappropriate. The court directed authorities to re-calculate the duty based on the price differentials between arm's length purchasers and the joint venture company.

Arm's Length Sales and Pricing Discrepancies:
The appellant demonstrated through a chart that arm's length sales were conducted at prices below the cost of production due to low international prices. Even sales to unrelated parties were significantly lower than the production cost. The court acknowledged these pricing discrepancies and emphasized the need for a reasonable assessment method. By setting aside the application of the cost plus principle, the court instructed authorities to re-evaluate the duty based on the price differentials between arm's length sales and sales to the joint venture company. The appeals were disposed of with these observations.

 

 

 

 

Quick Updates:Latest Updates