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2017 (10) TMI 276 - AT - Central ExciseValuation - related party transaction or not? - whether the transaction between the respondents and two companies, M/s.Aquagel Chemicals Pvt. Ltd. Gujarat and M/s.Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh are sale transactions or not? - Held that - From the invoice of M/s.Aquagel Chemicals Pvt. Ltd. Gujarat, issued to respondent, M/s.Hindustan Lever Ltd., it is observed that it is a sale invoice wherein Central Sales Tax @ 4% was charged. From the aforesaid transaction, it is clear that in respect of noodles there is a transaction of sale from the respondent to M/s.Aquagel Chemicals Pvt. Ltd. Gujarat and M/s.Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh and similarly in respect of soap, there is a sales transaction from M/s.Aquagel Chemicals Pvt. Ltd. Gujarat and M/s.Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh to the respondents. Accordingly, it cannot be said that these transactions are not a sale transaction in the ordinary course of trade. This be so, the transaction value has to be taken for charging of Central Excise duty in terms of Section 4 (1) (a) of CEA, 1944. Rule 8 can be resorted to for valuation only when the transaction is not of sale. In the facts of the present case, the possession of the goods and ownership stands transferred from the respondents to M/s.Aquagel Chemicals Pvt. Ltd. Gujarat and M/s.Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh, in respect of sale of soap noodles. The SCN only made a charge that transaction is not of a sale, which is absolutely incorrect on the face of the evidences. Appeal dismissed - decided against Revenue.
Issues:
Valuation under Rule 8 of Central Excise Valuation Rules, 2000 for the transaction of soap noodles, determination of sale transaction between the appellant and manufacturers, applicability of Central Excise duty, interpretation of possession and transfer of goods for sale, reliance on past judgments for defining sale. Analysis: The case involved the valuation of soap noodles under Rule 8 of Central Excise Valuation Rules, 2000. The appellant, a soap manufacturer, cleared soap noodles to two other companies for manufacturing branded soap. The dispute arose when the Revenue contended that the transaction was not a sale, thus applying Rule 8 for valuation. The Commissioner (Appeals) held that the transaction was indeed a sale, allowing the appeal. The Revenue challenged this decision. The Revenue argued that the possession of goods should be transferred for a transaction to be considered a sale, as per Section 2(h) of the Central Excise Act, 1944. They claimed that the transaction was influenced by future obligations and not a standard sale. They relied on various judgments to support their stance. On the other hand, the respondent maintained that the transaction was a sale, evidenced by invoices and sales tax charges. They highlighted that two separate transactions occurred: the sale of noodles to the manufacturers and the sale of branded soap back to the appellant. They emphasized that the sourcing agreement did not affect the sale transaction. Several judgments were cited in support of this argument. Upon review, the Tribunal analyzed the invoices and concluded that the transactions were indeed sales. They noted the transfer of ownership and physical possession of goods, satisfying the elements of sale and purchase. Citing past judgments, the Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal. The judgment emphasized the importance of considering the transfer of goods and ownership in determining a sale transaction. In conclusion, the Tribunal affirmed that the transactions between the appellant and manufacturers constituted sales, warranting the application of Section 4(1)(a) of the Central Excise Act, 1944 for valuation. The judgment highlighted the significance of physical transfer and ownership transfer in defining a sale, ultimately upholding the Commissioner's decision and dismissing the Revenue's appeal.
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