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TMI Blog2025 (3) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... omatically treated as 'related person' under the Central Excise law. In the absence of specific determination of the relationship between the appellant and the inter-connected undertaking, being related to each other in terms of Section 4(3) of the Central Excise Act, 1944, there are no merits in the impugned order insofar as it has treated the transaction between these two, as related party transaction without following the due process of law laid down under Central Excise statute. Therefore, there do not exist sufficient grounds to claim that the valuation of impugned goods shall be done on the basis of Rule 8 & 9 ibid, as held in the impugned orders. The interconnected undertakings are also related person. However, as per Rule 9 of Central Excise Valuation Rules, 2000, it is clear that Rule 9 ibid shall apply only when the goods are sold through person as specified under sub-clause (ii), (iii) or (iv) of clause (b) of Section 4 of the Act. Further, proviso of Rule 9 also suggests that merely because buyer is interconnected undertaking that alone is not sufficient for holding as related person. It is nowhere discussed in the impugned order or any evidence produced by the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return. However, they failed to pay central excise involved in clearance of excisable goods 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 the period of financial years 2006-2007 to 2009-2010 and from April, 2010 to October, 2010. 2.3 The department had initiated Show Cause proceedings against the appellant by issue of Show Cause Notice (SCN) dated 23.05.2011 demanding central excise duty of Rs.71, 93, 417/- along with interest under Sections 11A, 11AB ibid and for imposition of penalty on the appellant under Section 11AC ibid. In adjudication of the SCN dated 23.05.2011, learned Commissioner of Central Excise had confirmed the demands and imposed equal amount of penalty on the appellant vide Order-in-Original dated 31.08.2012. Feeling aggrieved with the said original order, the appellant preferred this appeal before the Tribunal. 3.1 Learned Advocate for the appellant submitted that the appellant company and M/s Ujjawal Ispat Private Limited, an 'associate company' of themselves, are two independent private l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an 'inter-connected undertaking' of the appellant, 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 considering whether the valuation proposed in the SCN and confirmed in the Order-in-Original is correct or not, and for determination of proper Central Excise duty payable on the subject goods under dispute. The disputed period covered in this case is from March, 2006 to October, 2010. Central Excise Act, 1944 Valuation of excisable goods for purposes of charging of duty of excise. "Section 3. Duties specified in First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied. - (1) There shall be levied and collected in such manner as may be prescribed a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. "4. The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of the removal of goods unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 4 also known as inter-connected undertaking, where the assessee and the buyer are, in addition, also related persons as per sub-clause (ii) or (iii) or (iv) or the buyer is the holding company or a subsidiary company of the assessee. (x) Rule 10 (b) deals with situations where the assessee and the buyer are interconnected undertakings as per sub-Clause (i), but they are not also related persons in terms of sub-Clauses (ii) (iii) or (iv) nor is the buyer a holding company or a subsidiary company of the assessee. (xi) Rule 11 deals with situations which are not covered by any of the above rules. 8.2 In the impugned order, at paragraph 14.2, learned Commissioner has made a finding that the appellant had mentioned the name of the interconnected undertaking M/s Ujjawal Ispat Private Limited, in the Form 3C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 shall apply only when the goods are sold through person as specified under sub-clause (ii), (iii) or (iv) of clause (b) of Section 4 of the Act. Further, proviso of Rule 9 also suggests that merely because buyer is interconnected undertaking that alone is not sufficient for holding as related person. It is nowhere discussed in the impugned order or any eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 show cause notice or original order have not brought any material to establish that the relationship between respondent and buyers company are one of the relationship as prescribed under sub-clause (ii), (iii) or (iv) of Section 4(3)(b) of Central Excise Act therefore, in our considered view even if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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