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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 ..... fore, 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 job-work should be 115% of the cost of manufactured goods. On this basis differential excise duty demand was raised which was confirmed in the impugned order. Therefore, the appellant is before us. 3. Shri Jayesh P. Doshi, Learned Chartered Accountant appearing on behalf of the appellant, submits that even though the Directors of both the companies are relatives that alone is not sufficient to hold that both the companies are related person. He submits that both the companies are independent limited company and therefore, there is no relationship between both the companies. He submits that the Commissioner held that on the basis of relationship between the Directors, both the companies are interconnected units. Even if it is accepted that both the companies are interconnected units, the interconnected units are not related pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 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." 6. Whether only on the basis of both the companies are related or otherwise, this issue has been considered by this Tribunal in detail in the case of Anil Wir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (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 undertaking that alone is not sufficient for holding as related person. We have gone through the Board Clarification referred by the ld. Counsel in Circular No. MF/DR/F/354/81/2020-TRU, dated 30-6-2000 is reproduced below. F. No. 354/81/2000-TRU Subject : Central Excise - Section 4 - Transaction Value - Regarding. I am directed to say, that as you aware, Section 4 of the Central Excise Act, as substituted by Section 94 of the Finance Act, 2000 (No. 10 of 2000), would come into force from the 1st day of July, 2000. For the sake of ready reference, the new Section 4 is being reproduced below : 4(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall : (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares, whether preference or equity, of the body corporate, or (b) exercise control, directly or indirectly, whether as director or otherwise, over the body corporate. (v) if one is owned by a body corporate and the other is owned by firm having bodies corporate as its partners, if such bodies are under the same management. (vi) If the undertakings are owned or controlled by the same person or (by the same group). (vii)If one is connected with the other either directly or through any number of undertakings within the meaning of one or more foregoing sub-clauses. Explanation I. - For the purpose of this Act, (two bodies corporate), shall be deemed to be under the same management,- From the above clarification it was made clear that the transaction value can be rejected only when the buyers are related in the sense in clause (ii), (iii) or (iv) of Section 4(3)(b) or buyer is holding company or subsidiary company of the assessee. It was made further clear that while dealing with transaction between interconnected undertaking, if the relationship as described in clause (ii), (iii) or (iv) does not exist and buyers also not holding or subsidiary then for assessment pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 have correctly valued their goods sold to their three interconnected undertakings, therefore the impugned order is not sustainable and deserve to be set aside. We therefore set aside the impugned order and allow the appeal with consequential relief, if any, in accordance with law." 7. As per the above decision of the coordinate bench of this Tribunal it was categorically held that the interconnected undertakings are not related person and if this so Rule 8 shall not apply. Rule 8 is reproduced below "Rule 8: Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods." 8. From the above rule it is clear that the valuation of goods manufactured on job-work under Rule 8 can only be done in a case where the goods are used for captive consumption within the factory or if it is used by other company on their behalf. In the present case, the goods manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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