2016 (10) TMI 271 - AT - Central Excise

Valuation - Clearance to inter-connected undertakings - CTD bars - TMT bars - wire rod - demand of differential duty - rejection of transaction value for excise purposes - Held that - merely because the units are interconnected undertakings the same would not be a ground to reject the transaction value unless the units are related persons. The goods cleared by the appellants to the interconnected undertakings are to be assessed on transaction value under Section 4(1)(a) of the Act treating them as if they are not related person. Also held that if the goods were partly sold to related person and partly to independent buyers transaction value under Section 4(1)(a) are to be applied without application of valuation Rules. The department s attempt for changing the assessment practice to change to costing method to arrive at a value is without any basis - appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of goods for excise duty purposes, transaction value, related undertakings, applicability of valuation rules

In this case, the appellants were manufacturing CTD bars, TMT bars, and wire rods subject to Central Excise duty. The dispute arose regarding the correct valuation of goods sold to interconnected undertakings for the period of November 2006 to June 2007. The Commissioner of Central Excise initiated proceedings against the appellant, alleging incorrect transaction value for excise purposes. The original authority deviated from the consistent stand taken by the Revenue in previous cases and attempted to distinguish the valuation based on sales to related and non-related buyers. The Tribunal noted that similar issues had been decided in favor of the appellant in five different proceedings. The Tribunal referred to the Central Excise Act and relevant case law to emphasize that the mere fact of undertakings being interconnected does not justify rejecting transaction value unless they are related persons as per the Act. The Tribunal also cited a Supreme Court decision highlighting the requirement of mutual interest for related persons and the limited applicability of valuation rules in specific circumstances.

The Tribunal observed that the Revenue had consistently assessed the appellant's goods based on transaction value in previous years but changed this practice in the impugned order without valid reasons. The department's attempt to shift to a costing method for valuation was deemed baseless. Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the importance of adhering to established valuation practices unless there are valid grounds for deviation.