2013 (8) TMI 344 - AT - Central Excise

Tribunal rules on excise duty valuation, emphasizing transactions with independent buyers

The Tribunal allowed the appeal, setting aside the order demanding differential excise duty. It ruled that Rule 9 of the Central Excise Valuation Rules, ... Valuation (Central Excise) - Sale to related parties - Demand of differential duty - Penalty u/s 11AC - Commissioner upheld penalty - Held that:- the provision in the Valuation Rules, with regard to sale to related persons, is an exception to the general rule. That exception is applicable only when the manufacturer so arranges that goods are not sold except to or through related person. In the present case, goods are being sold to unrelated parties also. To such a case, the exception does not apply. In any case, the price to the related person cannot be called a non-commercial price since the same was higher than the price to unrelated parties - Following decision of ULTRA REFRIGERATORS PVT. LTD. Versus COMMISSIONER OF C. EX., DELHI-IV[2004 (4) TMI 167 - CESTAT, NEW DELHI] and Birdi Steels Vs. CCE[2004 (10) TMI 145 - CESTAT, NEW DELHI] - Decided in favour of assessee. Issues involved:Assessable value determination for excise duty on cotton yarn sold to related party.Detailed Analysis:1. Assessable Value Determination: The main issue in this appeal was the assessable value to be adopted for the payment of excise duty on cotton yarn sold by the appellant to a related party, M/s Jayakumar Fabrics. The Revenue contended that since the buyer and seller were related, the transaction value could not be adopted as the assessable value. The Revenue argued that the value should be determined as 115% of the cost of production as per Central Excise Valuation Rules, 2000.2. Adjudication and Appeal: A show cause notice was issued demanding differential excise duty based on the assessable value arrived at 115% of the cost of production. The adjudicating authority confirmed the demand along with interest and penalties. On appeal, the Commissioner (Appeal) upheld the adjudication order, leading the appellant to file this appeal against the Commissioner's decision.3. Legal Arguments: The Counsel for the appellant argued that the appellant and M/s Jayakumar Fabrics were independent entities with no mutual interest. The appellant sold goods to unrelated buyers at prices lower than those sold to M/s Jayakumar Fabrics. The Counsel contended that Rule 9 of the Central Excise Valuation Rules, 2000, should not apply as the goods were sold to unrelated buyers at lower prices.4. Judicial Precedents: The Counsel for the appellant relied on various judicial decisions, including Ultra Refrigerators Pvt Ltd, Birdi Steels, Aquamall Water Solutions Ltd, and Bharat Petroleum Corporation Ltd. On the other hand, the Revenue relied on decisions such as Calcutta Chromotype Ltd, Poornalaya Electricals, CCE Vs. I. T. E. C. (P) Ltd, and CCE Vs. Fiat India Pvt Ltd to support their argument.5. Decision: The Tribunal considered the arguments from both sides and analyzed the applicability of Rule 9 in the given situation. The Tribunal noted that when prices of goods sold to independent buyers are available, there is no scope for invoking Rule 9 read with Rule 8 of the Central Excise Valuation Rules, 2000. Therefore, the Tribunal set aside the impugned order, allowing the appeal with consequential benefits for the appellant.In conclusion, the Tribunal's decision focused on the interpretation of the Central Excise Valuation Rules, 2000, in the context of the relationship between the appellant and the related party, M/s Jayakumar Fabrics. By considering the arguments, judicial precedents, and the specific circumstances of the case, the Tribunal ruled in favor of the appellant, emphasizing the availability of prices of goods sold to independent buyers as a determining factor in assessing the applicability of Rule 9 for the excise duty valuation.