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TMI Blog2016 (12) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... i Jayesh P Doshi, Chartered Accountant for the appellant Shri Ashuthosh Nath, Asstt. Commissioner (AR) for the respondent Per: Ramesh Nair The fact of the case is that the appellant is carrying out job-work on the material supplied by their group company M/s Unique Sugar Limited, Dondaicha. They are paying excise duty on the goods manufactured on job-work by following the principle laid down in the Hon ble Supreme Court judgment in the case of Ujagar Prints vs. Union of India 1989 (39) ELT 493 (SC), according to which valuation was done on the basis of cost of raw material plus job-work charges including profit of the job-worker. 2. The department issued the show cause notice contending that the Directors of both the companies are related persons, they have mutual business interest in each other and therefore, both the companies i.e., appellant M/s Universal Starch Chem Allied Ltd and the raw material supplier M/s Unique Sugar Mills Ltd are interconnected units. They are related in terms of Section 4(3)(b) of the Central Excise Act, 1944. Therefore, valuation should be done under Rule 8 of Central Excise Valuation Rules 2000, according to which valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to under Rule 8 of Valuation Rules and placed reliance on the judgment of the Tribunal in the case of Commissioner of Central Excise, Pondicherry v. Ravishankar Industries Pvt. Ltd. 2014 (299) ELT 249 (Tri.-Chennai). 5. We have carefully considered the submissions made by both the sides. We find that the Commissioner, on the basis of relationship between the Directors of both the company i.e., the appellant M/s. Universal Starch Chem Allied Ltd and the raw material supplier M/s. Unique Sugar Mills Ltd., held them interconnected undertakings. Accordingly, it was decided that both the companies are related persons. Hence, the valuation should be done under Rule 8 of the Valuation Rules 2001. Without going into the aspect of whether the basis of holding both the companies as interconnected undertakings is correct or not, even if it is accepted that the appellant who is a job-worker and the raw material supplier are interconnected undertakings that do not fall under the related person as per the provisions of Section 4(3)(b) of Central Excise Act, 1944 and Rule 9 of Central Excise (Valuation Rules) 2000 which are reproduced below: 9. When the assessee so arranges that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow :- RULE 9. When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in either of sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of Section 4 of the Act, the value of the goods shall be the normal transaction value at which these are sold by the related person at the time of removal, to buyers (not being related person); or where such goods are not sold to such buyers, to buyers (being related person), who sells such goods in retail : Provided that in a case where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in Rule 8. From the above Rule 9 it is very clear that only in cases where goods are sold through the person as specified under clause (ii), (iii) or (iv) of clause (b) of Section 4 the transaction value at which the goods are sold by the said person shall apply and not the sale price at which goods are sold to these three categories of person are made. Provision of Rule 9 also shows that merely buyers is interconnected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nected undertakings as defined in the Monopolies and Restrictive Trade Practices Act, 1969. The definition of interconnected undertaking in the said Act reads as follow: Inter-connected undertakings means two or more undertaking which are inter-connected with each other in any of the following manner, namely :- (i) if one owns or controls the other, (ii) where the undertakings are owned by firm, if such firms have one or more common partners. (iii) Where the undertakings are owned by bodies corporate, (a) if one body corporate manages the other body corporate, or (b) if one body corporate is a subsidiary of the other body corporate, or (c) if the bodies corporate are under the same management, or (d) if one body corporate exercise control over the other body corporate in any other manner; (iv) where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firms, (a) hold, directly or indirectly, not less than fifty per cent of the shares, whether preference or equity, of the body corporate, or (b) exercise control, directly or indirectly, whether as director or otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable in the present case. Moreover we are convinced with the argument of the ld. Counsel that sale price of goods sold to interconnected undertaking are in majority of the case higher than the price charged to the independent buyer for the same goods. Now it is settled law by the Larger Bench of this Tribunal in the case of Ispat Industries (supra) that if goods partly sold to the independent buyer and partly to the related person, valuation under Rule 8 shall not apply in the case of goods sold to related person but transaction value at which the goods are sold to independent buyers shall apply. For this proposition the Larger Bench has contended that first principle of valuation is the transaction value and only in the absence of transaction value, valuation rules should be made applicable. When for the same goods transaction value is available i.e. transaction value at which the goods are sold to independent buyers, then there is no scope of any notional value such as valuation in terms of Rule 8 or otherwise. For this reason also valuation of Rule 8 cannot be applied in the present case. In view of our above discussion we are of the considered view that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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