2018 (7) TMI 159 - AT - Central Excise

Valuation of goods cleared by the appellant to its subsidiary - related party transaction or not - The view of the department is that central excise duty is required to be paid, in terms of Rule 10 of the Valuation Rules, 2000 at the price at which the subsidiary sells the goods to independent buyers - Held that - The applicability of Rule 10 of the Central Excise Valuation Rules, 2000 and the circumstances in which it can be applied have been clarified by the CBEC vide their Circular dated 01.07.2012, where it was held that when goods are partly sold to related persons and partly to independent buyers, there will be no applicability of Rule 10. The Rule 10 will be applicable only in those cases where 100% of the goods are sold through related persons - There is no justification for insistance on payment of duty at the price at which the goods are sold by the related persons It is the submission of the appellant that the mutually agreed price at which goods are sold to the related persons is at par with the price of such goods sold to independent buyers. We also note that related details also have been submitted before the Adjudicating Authority. But we find from the impugned order that this aspect has not been discussed by him - the Adjudicating Authority is directed to consider this submission made by the appellant and accept the mutually agreed price if it is on par with the selling price to independent buyers. Appeal allowed by way of remand.

Summary

Issues: Valuation of goods sold to related persons, Applicability of Rule 10 of Central Excise Valuation Rules, 2000

Valuation of goods sold to related persons:
The case involved a dispute regarding the valuation of goods cleared by the appellant to its subsidiary unit. The department contended that since the subsidiary sold the batteries at a higher price, excise duty should be paid based on the price at which the subsidiary sold the goods to independent buyers. The appellant argued that the duty was paid at a mutually agreed price, which was determined based on the price at which goods were sold to independent buyers. The appellant cited various case laws to support their contention that no differential duty was payable in such circumstances. The Tribunal noted that the goods were sold through the subsidiary, but the duty was paid at the mutually agreed price. The Tribunal referred to a CBEC Circular clarifying the application of Rule 10 of the Valuation Rules in cases where goods are sold partly to related persons and partly to independent buyers.

Applicability of Rule 10 of Central Excise Valuation Rules, 2000:
The Tribunal highlighted that Rule 10 would not be applicable when goods are partly sold to related persons and partly to independent buyers. It was clarified that Rule 10 is applicable only when 100% of the goods are sold through related persons. The Tribunal cited a previous judgment where it was held that Rule 9 read with Rule 8 of the Valuation Rules was not applicable when the appellant did not clear 100% of production through related persons. The Tribunal found no justification for insisting on payment of duty at the price at which goods were sold by related persons, especially when the mutually agreed price was comparable to the selling price to independent buyers. The Tribunal directed the Adjudicating Authority to consider the submission made by the appellant regarding the mutually agreed price and to accept it if it was on par with the selling price to independent buyers.

In conclusion, the Tribunal set aside the impugned order and disposed of the appeal with directions to consider the mutually agreed price for valuation of goods sold to related persons.