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TMI Blog2025 (3) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance with Central Excise statute, they had obtained Central Excise registration No. AAICS1080XM001. During the course of audit of the records maintained by the appellants, the department had found that for the purpose of income tax, the appellants had shown M/s Shree Vaishnav Ispat Private Limited, as their associated company in terms of Section 40A(2)(b) of the Income Tax Act, 1961 and have shown such details in Form 3CD income tax return for the year 2008-2009. However, they failed to pay central excise involved in clearance of 'Misrolls' to their associated company at the rate of 110% as per Section 4(1)(b) of the Central Excise Act, 1944 read with Rules 8 & 9 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000 during February, 2009 to March, 2011. 2.3 The department had initiated Show Cause proceedings against the appellants by issue of Show Cause Notice (SCN) dated 11.04.2012 demanding central excise duty of Rs.1,84,594/- along with interest under Section 11A(1) ibid and for imposition of penalty on the appellants under Section 11AC ibid. In adjudication of the SCN dated 11.04.2012, learned Deputy Commissioner of Central Excise had conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel Re-rolling Mill - 2014 (312) E.L.T. 686 (Tri. Del.) (ii) Gajra Gears Private Limited Vs. Commissioner of Central Excise & Service Tax, Indore - 2015 (329) E.L.T. 827 (Tri. Del.) 4. Learned Authorized Representative (AR) appearing for Revenue, reiterated the findings made by the Commissioner (Appeals) in upholding the original order and stated that since the appellants had supplied the goods to their related person, the impugned order is sustainable. 5. Heard both sides and perused the records of the case. We have also perused the additional written submissions presented in the form of paper book for this case. 6. The issue involved in this appeal is to determine whether the clearance of excisable goods by the appellants to M/s Shree Vaishnav Ispat Private Limited, which is an 'inter-connected undertaking' of the appellants, is to be done under Rule 8 & 9 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000 or under Rule 10 ibid? 7. In order to address the above issues relating to valuation of excisable goods, we would like to refer the relevant legal provisions contained in Central Excise Act, 1944 and Rules made thereunder for consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons shall be deemed to be "related" if- (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. Explanation.-In this clause- (i) "inter-connected undertakings" means two or more undertakings which are inter-connected with each other in any of the following manners, namely:- (A) if one owns or controls the other; (B) where the undertakings are owned by firms, if such firms have one or more common partners; (C) where the undertakings are owned by bodies corporate,- (I) if one body corporate manages the other body corporate; or (II) if one body corporate is a subsidiary of the other body corporate; or (III) if the bodies corporate are under the same management; or (IV) if one body corporate exercises control over the other body corporate in any other manner;...... ... (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rule has a specific application for the purpose of determination of the value, as explained hereunder. These are: (i) Rules 1 and 2 are the preliminary provisions. (ii) Rule 3 mandates that valuation should be done as per the rules. (iii) Rule 4 deals with situations where goods are sold, but not at the time of removal. (iv) Rule 5 deals with situations where goods are sold, but not at the place of removal. (v) Rule 6 deals with situations where there is an additional consideration for sale. (vi) Rule 7 deals with situations where there is no sale and the goods are transferred to the assessees' own depot not at the premises of the consignment agent. (vii) Rule 8 deals with situations where goods are captively consumed by the assessee-appellants or on its behalf in which case, the valuation has to be done at 110% of the cost of production. (viii) Rule 9 deals with the situations where the assessee and the buyer are related persons as per sub-Clauses (ii) (iii) or (iv) of Clause (b) of sub-Section (iii) of Section 4. (ix) Rule 10 (a) deals with situations where sale is to related persons as per sub-Clause (i) of Clause (b) of sub-Section (3) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the basis of Rule 8 & 9 ibid, as held in the impugned orders. 8.3 Further, we have also examined the relevant legal provisions concerning 'related person' as follows. The essence of the legal provisions contained in Section 4(3)(b) of the Central Excise Act, 1944, state that persons shall be deemed to be "related" if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. In the Explanation clause it is clearly provided that "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956). From the plain reading of the above legal provisions, it appears that interconnected undertakings are also related person. However, as per Rule 9 of Central Excise Valuation Rules, 2000, it is clear that Rule 9 ibid sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as 'related person' for valuation purpose and the transaction value cannot be rejected. The relevant paragraphs of material on record the said order is extracted and given below: "7. 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 buyer also not holding or subsidiary then for assessment purpose they will not be considered related. In view of above clear position as regard transaction between interconnected undertakings, it is crystal clear that in existing status of interconnected undertaking they should fall under the category of sub-clause (ii), (iii) or (iv) of Section 4(3)(b). In the present case Revenue contended that the respondent and buyers company are interconnected undertaking therefore, they are related and consequently proposed Rule 8 of Central Excise Valuation Rules, 2000 and adopted the valuation of cost construction method. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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