9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (11) TMI 609 - AT - Central ExciseValuation - related person - inter-connected undertakings - seller and alleged buyers of the goods are related persons in terms of Section 4(3)(b) of the Central Excise Act or not - mutuality of interest - HELD THAT - It is clear that only if the parties are related in terms of Clause (ii), (iii), (iv) of Section 4(3)(b) of Central Excise Act, they would be treated as related persons - In the present matter, it is found that show cause notice alleges that the Respondent and buyers are related in terms of sub-clause (i) and (iv) of Section 4(3)(b) of the Central Excise Act, 1944. In the present matter it is not disputed by the respondent that the respondent and other buyers are related in terms of sub-clause (i) of Section 4(3)(b) of the Central Excise Act 1944 as interconnect undertaking and impugned show cause notice only rely the clauses (i) and (iv) of the Section 4(3)(b) of the Central Excise Act, 1944, therefore the Ld. Commissioner in impugned order in-original has correctly examined whether the Respondent and other buyers are related in terms of sub-clause (iv) of Section 4(3)(b). In the present matter it is rightly pointed out by the Ld. counsel that the argument of the revenue that the respondent and other buyers are related in terms of sub-clause (ii) or (iii) of Section 4(3)(b) would be beyond the scope of show cause notice inasmuch as the same is never alleged in the show cause notice. Hence, the same is also not acceptable at this stage - In the facts of the present case, the relationship is based on the fact that when Sub-Clause (ii) and (iii) were not invoked, the facts related thereto were also neither required to be examined nor the Adjudicating Authority has rightly examined. Therefore, by making ground of Sub-Clause (ii) (iii) holding the appellant and their buyer are related person is completely beyond the SCN as well as the impugned order, which is not permissible. The Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS M/S BALLARPUR INDUSTRIES LTD 2007 (8) TMI 10 - SUPREME COURT , has held that the SCN is the foundation in the matter of levy and recovery of duty, penalty and interest. As per Rule 9 and 10 of Central Excise Valuation Rules, 2000 it is clear that Rules shall apply only when the goods are sold through person who are related in terms of sub-clause (ii), (iii) or (iv) of clause (b) of Section 4 (3) of the Act. Further the provisions of Rules also suggest that merely because buyer is interconnected undertaking that alone is not sufficient for holding as related person - the show cause notice and revenue have not brought any material to establish that the relationship between respondent and buyers company are one of the relationship as prescribed under sub-clause (ii), (iii) or (iv) of Section 4(3)(b) of Central Excise Act therefore, even if it is accepted that the buyers company are interconnected undertaking of the respondent company it cannot be treated as related person in terms of Section 4(3)(b) in absence of relationship as specified under sub-clause (ii), (iii) or (iv) of Section 4(3)(b). The respondents and the buyers are also not covered by Sub-Clause (iii) of Section 4 (3)(b) of Central Excise Act 1944. In terms of Sub-Clause (iii) of Section 4(3)(b) a person shall be deemed to be related if amongst them the buyer is a relative and distributor of the assessee or distributor of such distributor - only natural person can be treated as relatives since the first condition itself of Sub Clause (iii) is not satisfied, the 4 buyers and the respondent cannot be considered as related under Sub-Clause (iii) of Section 4 (3)(b). In any case, the respondent and the 4 buyers are not holding or subsidiaries Companies of each other, therefore the second condition of Sub-Clause (iii) is also not fulfilled in the present case. This issue has been considered time and again in various judgments. The Hon ble Supreme Court has considered the issue similar in the present case in UNION OF INDIA OTHERS VERSUS ATIC INDUSTRIES LTD. 1984 (6) TMI 51 - SUPREME COURT . In this case, M/s Atik Industries was manufacturing dyes. The entire production was sold to two companies namely, Atul products Ltd and ICI India Ltd. Atul products was holding 50% of share capital in M/s. Atik Industries Ltd ICI, UK was holding balance 50% share capital of Atik Industries. ICI India ltd was a wholly owned subsidiary of ICI, UK since 1978, shareholding of ICI, UK in ICI India was reduced to 40 % (shareholding of iCi, UK in Atik Industries continued to be 50%). There is no mutuality of interest in the present case between the respondent an the 4 buyers and the relationship is not covered by Sub-Clause (iv) of Section 4(3)(b) of Central Excise Act 1944S but only Sub-Clause (i) of Section 4(3)(b) of Central Excise Act 1944. The transaction value of the goods between respondent and the so-called interconnected undertaking is correct valuation and the same cannot be disturbed, therefore, there are no merits in the appeal of revenue. The impugned order passed by the Adjudicating Authority is correct, legal and the same has no infirmity - appeal of Revenue dismissed.
Issues Involved:
1. Whether the respondent and the buyers are "related persons" under Section 4(3)(b) of the Central Excise Act, 1944. 2. Applicability of Rule 9 and Rule 10 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. 3. The legality of invoking the extended period of limitation. 4. Whether the demand for the period prior to 01.12.2013 is sustainable. 5. Revenue neutrality and the applicability of Customs Act, 1962 for clearances made by an EOU. Summary: 1. Related Persons under Section 4(3)(b): The case revolves around whether the respondent and the buyers are "related persons" as per Section 4(3)(b) of the Central Excise Act, 1944. The Commissioner examined the relationship under sub-clause (iv) of Section 4(3)(b) and found no mutual interest in the business of each other. The Tribunal upheld this finding, stating, "the relationship is not covered by Sub-Clause (iv) of Section 4(3)(b) of Central Excise Act 1944 but only Sub-Clause (i) of Section 4(3)(b) of Central Excise Act 1944." 2. Applicability of Rule 9 and Rule 10: The Tribunal noted that Rule 9 and Rule 10 of the Central Excise Valuation Rules apply only when the goods are sold through persons related under sub-clauses (ii), (iii), or (iv) of Section 4(3)(b). Since the relationship was only under sub-clause (i), these rules were not applicable. The Tribunal stated, "the transaction value of the goods between respondent and the so-called interconnected undertaking is correct valuation and the same cannot be disturbed." 3. Extended Period of Limitation: The Commissioner had dropped the demand for the extended period, citing that the issue was already under audit and inquiry since 2009. The Tribunal agreed, noting that "extended period of limitation is not invokable in view of audit and inquiry conducted against the respondent on the same issue in 2009." 4. Demand Prior to 01.12.2013: The Tribunal found that the demand for the period prior to 01.12.2013 was not sustainable as the provisions of Rule 9 and Rule 10, as they existed then, were not applicable when goods were also sold to independent buyers. The Tribunal stated, "the provisions of Rule 9 and Rule 10 of the valuation rules are applicable only if the entire quantity of goods cleared to related persons." 5. Revenue Neutrality and Applicability of Customs Act: The Commissioner had also set aside the demand on the grounds of revenue neutrality and that clearances made by an EOU should be raised under the Customs Act, 1962, not the Central Excise Act, 1944. The Tribunal upheld these findings, stating, "the Ld. Commissioner has also set aside the demand on grounds - limitation, revenue neutrality, and that clearances made by an EOU is required to be raised in terms of Customs Act, 1962 and not under Central Excise Act, 1944." Conclusion: The Tribunal dismissed the revenue's appeal, upholding the Commissioner's order. It concluded, "the impugned order passed by the Adjudicating Authority is correct, legal and the same has no infirmity." The appeal filed by the revenue was dismissed.
|
