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TMI Blog2007 (10) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... leared by the appellant to LSIL is to be done in terms of Sec.4 (1)(b) of the Central Excise Act, 1944 read with Rule 8 and Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The revenue authorities issued a show cause notice dated 5.1.2006 to the appellant demanding differential duty of Rs.3,17,35,405/- for the period from December, 2000 to 5-Aug-2003 on the above allegation, invoking proviso to Section 11A(1) of Central Excise Act, 1944. The appellant contested the show cause notice mainly on the ground that the appellant and LSIL have no mutuality of interest and that the valuation of the goods cleared to LSIL is to be done as per the provisions of Sec. 4(1)(a) and also on the time bar issue. The adjudicating authority did not accept the contentions of the appellants and came to the conclusion that the purchaser of the goods and the appellant was inter connected undertaking and they had mutuality of interest and also came to the conclusion that the valuation has to be done according to the provision of Rule 8 read with Rule 9 of the Central Excise Valuation Rules read with Sec.4(1)(b) of the Central Excise Act and also dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n merits as well as on limitation, he submits that the entire issue is revenue neutral as the excise duty paid by the appellants is availed as cenvat credit by the said LSIL. 4. Ld DR, on the other hand, submits that the appellants and LSIL are interconnected undertaking is borne out from the order of the adjudicating authority. It is his submission that the Chairman of appellant's firms and LSIL are the same and the managing directors of both the companies are inter alia directors in both the companies. It is his submission that there are financial adjustments in both the companies and that the appellant has accorded accommodation to LSIL in respect of payment for the raw material purchased by LSIL and LSIL has made payment of Central Excise duty, MSEB charges of the appellant. He relies upon the various transactions those are appearing on the ledger of LSIL, paid for and on behalf of appellant. He reiterates the findings of the adjudicating authority and says that the demand of the duty is correct and penalty is imposable. It was his submission that having admitted that both are interconnected undertakings the provision of Rule 8 read with Rule 9 of Central Excise Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will make the rule ultra vires the Act. 27. ......... 36. In our opinion, the Gunapradhan Principle is fully applicable to the interpretation of Rule 9(2). Rule 9(2) is subservient to Section 14. We must, therefore, interpret it in such a way as to make it in accordance with the main object that is contained in Section 14 of the Customs Act. It maybe that in isolation Rule 9(2) conveys some other meaning, but when it is read along with Section 14 of the Act, it must be given a meaning which is in accordance with the object of Section 14. The object of Section 14 is 'primary' whereas the conditions in Rule 9(2) are the 'accessories'. The 'accessory' must, therefore, serve the 'primary'. 9. In view of what we have observed above, we answer the reference in the following terms : (a) the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers; (b) the provisions of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the sequential order of the Valuation Rules but also for the reason that in a case where both the rules are ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of each other. It is not enough that the assessee has an interest, direct or indirect, in the business of the person alleged to be a related person nor is it enough that the person alleged to be a related person has an interest, direct or indirect, in the business of the assessee. It is essential to attract the applicability of the first part of the definition that the assessee and the person alleged to be a related person must have interest, direct or indirect, in the business of each other. Each of them must have a direct or indirect interest in the business of the other. The equality and degree of interest which each has in the business of the other may be different; the interest of one in the business of the other may be direct, while the interest of the latter in the business of the former may be indirect. That would not make any difference, so long as each has got some interest, direct or indirect, in the business of the other. Now, in the present case, Atul Products Limited has undoubtedly interest in the business of the assessee, since Atul Products Limited holds 50 per cent of the share capital of the assessee and has interest as share holder in the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment carries the case of the Revenue may further, nor does learned Counsel so suggest. He says that he has referred to it because of this sentence therein: "The principle that a company under the Companies Act, 1956 is a separate entity and, therefore, where the manufacturer and the buyer are two separate companies, they cannot, then (sic) anything more, be 'related persons' within the meaning of clause (c) of sub-section (4) of Section 4 of the Act is not the universal application." We have difficulty, for the reasons already stated, in accepting as correct this sentence. It appears to have been so stated in relation to and in the context of facts of that case. Therefore, the learned Judges, it should be added, remanded the matter for further inquiry into the facts." It can be seen from the above reproduced ratio, that their Lordships have settled the law, that, to fall into the tainted category of related persons the revenue has to show that there is mutuality of interest. In the current case before us, we find that the appellant may have some kind of interest in the functioning of LSIL as their products are sold to LSIL, as it is sales income to appellant. There is noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction value will be 'rejected' only when they are "related in the sense of any of Clause (ii)(iii) or (iv) of Section 4(3)(b) or the buyer is a holding company or subsidiary company of the assessee. It is further clarified in the same circular that if inter-connected undertaking are not related in the manner as described in clause (ii)(iii) or (iv) and the buyer is not be considered related. In such kind of situations "Transaction Value" can form the basis of valuation provided other two conditions, namely priceis for delivery at the time of the above said clauses (I) (ii) the price is the sole consideration for sale. Since none of the above said clauses (ii)(iii) or (iv) are found to be applicable in your case, the valuation in your case is hereby ordered to be done on the basis of 'Transaction Value' as defined in Section 4(1)(a) of Central Excise Act, 1944. You are further directed to please ensure that deduction towards transportation charges from the assessable value is allowable only if the same are collected separately in the invoice on actual basis. If it is not so then appropriate duty is payable on transportation charges also. Yours faithfully, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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