2024 (6) TMI 1320 - AT - Central Excise

Valuation of goods - related person - Whether the price at which the finished goods cleared by the appellant to M/s. H.D. Consortium India Ltd. can be considered as the 'Transaction Value' for the purpose of payment of central excise duty? - time limitation. Valuation of goods - HELD THAT - As per the provisions of Section 4(1) of the Central Excise Act, 1944, it is observed that the price determined by the appellant is the sole consideration for sale of the finished goods and it is the Transaction Value for determination of Central Excise Duty by the appellant. Accordingly, it is observed that there is no need to resort to Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 to determine the assessable value in this case. Hence, the demand confirmed by interpreting Rules 8 and 9 of the Central Excise Valuation Rules, 2000, to confirm the demand of central excise duty in this case is not sustainable in law. Accordingly, the demand confirmed in the impugned order by rejecting the 'Transaction Value' declared by the appellant in the invoices raised to M/s. H.D. Consortium India Ltd., is not sustainable. The appellant has been availing the benefit of Notification No. 20/2007-C.E. wherein they are eligible for refund of the whole of the duty of excise paid by them. Thus, there are merit in the contention of the appellant that there is no revenue loss to the exchequer on account of the clearance to M/s. H.D. Consortium India Ltd. at a lower price. The Appellant has adopted a higher value addition and duty was paid at a higher side. Thus, there is no evidence available on record to substantiate the allegation that the appellant has undervalued the finished goods sold to M/s. H.D. Consortium India Ltd. Accordingly, the demand confirmed in the impugned order on the allegation of undervaluation of the final product is without any basis and liable to be set aside. Time Limitation - HELD THAT - The appellant is eligible to claim refund of the duty paid by them in PLA as per Notification No. 20/2007-C.E. dated 25.04.2007. The appellant has been filing returns regularly and disclosing all relevant information before the appropriate authority. The Range Superintendent has verified all the invoices and challans submitted by the appellant while sanctioning the refund claims. Thus, the suppression of fact with intent to evade payment of tax does not exist in this case. Accordingly, the demand raised by invoking the extended period of limitation is not sustainable. The demand of duty confirmed in the impugned order is not sustainable - Since the demand itself is not sustainable, the question of raising any interest on the demands or imposition of penalty does not arise. Appeal allowed.

Issues Involved:

1. Alleged undervaluation of goods and evasion of Central Excise duty.
2. Determination of whether the appellant and M/s. H.D. Consortium India Ltd. are "related persons" under Section 4(3)(b) of the Central Excise Act, 1944.
3. Validity of the transaction value declared by the appellant.
4. Applicability of Notification No. 20/2007-C.E. dated 25.04.2007 and its impact on revenue.
5. Limitation period for raising the demand.

Issue-wise Detailed Analysis:

1. Alleged Undervaluation of Goods and Evasion of Central Excise Duty:
The appellant was accused of evading Central Excise duty amounting to Rs. 1,02,20,679/- by undervaluing their products when sold to their related unit, M/s. H.D. Consortium India Ltd. The Department alleged that the appellant cleared goods at lower prices to the related unit compared to prices charged to unrelated buyers, leading to a demand for differential duty, interest, and penalty.

2. Determination of "Related Persons":
The core issue was whether the appellant and M/s. H.D. Consortium India Ltd. could be considered "related persons" under Section 4(3)(b) of the Central Excise Act, 1944. The appellant argued that both entities were distinct legal entities operating independently, despite common ownership by certain partners. The Tribunal observed that mere shareholding does not establish a mutual interest in each other's business, as required by the definition of "related person." Citing the Supreme Court's decisions in Union of India vs. ATIC Industries Ltd. and Commissioner of Central Excise, Chandigarh vs. Kwality Ice Cream Co., the Tribunal concluded that the appellant and M/s. H.D. Consortium India Ltd. were not "related persons" as per the Act.

3. Validity of the Transaction Value Declared by the Appellant:
The appellant contended that the prices charged to M/s. H.D. Consortium India Ltd. were based on prevailing market conditions and were the sole consideration for the sale, making them the "Transaction Value" under Section 4(1) of the Central Excise Act, 1944. The Tribunal agreed, noting that the price declared by the appellant was the transaction value and there was no need to resort to Rule 9 of the Central Excise Valuation Rules, 2000. Consequently, the demand based on the alleged undervaluation was found unsustainable.

4. Applicability of Notification No. 20/2007-C.E. and Its Impact on Revenue:
The appellant argued that they were eligible for a refund of the duty paid under Notification No. 20/2007-C.E., hence there was no revenue loss to the exchequer. The Tribunal accepted this argument, noting that the appellant was entitled to a refund of the entire duty paid, and thus, the clearance to M/s. H.D. Consortium India Ltd. at a lower price did not result in any revenue loss.

5. Limitation Period for Raising the Demand:
The appellant claimed that the demand was barred by limitation as they had been regularly filing monthly E.R.-1 returns and refund claims, which were verified and sanctioned by the Department without any objections. The Tribunal found merit in this contention, noting that there was no suppression of facts with intent to evade duty. Therefore, the demand raised by invoking the extended period of limitation was deemed unsustainable.

Conclusion:
The Tribunal held that the demand of duty confirmed in the impugned order was not sustainable. Since the demand itself was invalid, the associated interest and penalty were also set aside. The appeal filed by the appellant was allowed with consequential relief as per law.

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