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2023 (9) TMI 1373 - AT - Central ExciseMethod of Valuation - Related party transaction - Sale to inter-connected undertakings for the period prior to 01.03.2013 - applicability of rule 11 of the Valuation Rules read with rule 4 and rule 2 (b) - case of the Revenue is that the duty should have been paid on the price at which the appellant had sold the goods to independent buyers in the greatest aggregate quantity. HELD THAT - In the impugned order, and the OIO the value was determined as per Rule 11 read with Rule 4. We find that Rule 11 can be applied only when the situation is not covered by any of the previous valuation rules. It is undisputed that the appellant and JSPL and JPL are related persons. Therefore, it must be examined if they can be covered by Rule 10 (a) or Rule 10(b) - If the appellant and JSPL an JPL were related persons only because they were interconnected undertakings and they were not also related in any of the other three ways clauses (i) (ii) or (iv) of clause (b) of sub-section (iii) of Section 4 or the appellant and JSPL or JPL are the holding or subsidiary companies of each other, then valuation should be done as if they are not related persons. In this case, there is no allegation or evidence that JSPL and JPL are connected to the appellant in any of the other three ways. There is no allegation that the appellant is either the holding or the subsidiary company of either JSPL or JPL. The only allegation is that they are associated companies and hence they are interconnected undertakings. It has also been alleged that JPL is the subsidiary of the JSPL, i.e., one of the buyers is the subsidiary of another buyer. Therefore, this case falls squarely under section 10 (a) of the Valuation Rules and duty was required to be paid as if the appellant and JSPL and JPL were not related persons, i.e., on the transaction value. The demand of duty under Rule 11 of Valuation Rules cannot, therefore, be sustained and needs to be set aside - impugned order set aside - appeal allowed.
Issues Involved:
The issues involved in this case are the determination of the value of goods sold by the appellant to inter-connected undertakings, the application of Central Excise Valuation Rules, 2000, and the imposition of excise duty based on the valuation of goods sold. Issue 1: Determination of Value of Goods Sold to Inter-connected Undertakings The appellant, a manufacturer of TMT bars, sold goods to inter-connected undertakings, namely M/s JSPL and M/s JPL. The Department contended that the value of goods sold to inter-connected undertakings should be determined as per Rule 11 of the Valuation Rules for the period prior to 01.03.2013 and as per Rule 9 for the subsequent period from December 2013 onwards. The appellant argued that Rule 10 should apply, specifically Rule 10(a) as the appellant and JSPL and JPL are related persons, and therefore, Rule 11 should not be applied. Issue 2: Application of Central Excise Valuation Rules The Central Excise Valuation Rules, 2000 provide for the determination of the value of goods in specific situations. Rule 11 is the residual rule to be applied when the situation is not covered by any other valuation rule. In this case, it was found that the appellant and JSPL and JPL are related persons as interconnected undertakings. As per Rule 10(a), when the buyer and seller are related persons, the value should be determined as if they are not related persons. Therefore, Rule 11 cannot be applied, and the duty demand under Rule 11 of Valuation Rules was set aside. Issue 3: Imposition of Excise Duty based on Valuation of Goods Sold The Department issued a show cause notice proposing to recover the allegedly short-paid duty and imposing penalties. The appellant contended that duty should be paid based on the transaction value, as they sold goods to inter-connected undertakings. The Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeal. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, finding that the demand of duty under Rule 11 of Valuation Rules could not be sustained. The value of goods sold to inter-connected undertakings should have been determined as if they were not related persons, as per Rule 10(a) of the Valuation Rules. The extended period of limitation was not examined as the Tribunal ruled in favor of the appellant on the merits of the case.
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