Interconnected undertaking valuation: Rule 9 did not apply; clearances were to be valued under Rule 10(b) on transaction value basis.

Clearances by an assessee qualifying as an interconnected undertaking under Section 4(3)(b)(i) were held not to attract Rule 9 of the Central Excise Valuation Rules. Valuation had instead to proceed under Rule 10(b) read with Section 4(1), applying the normal transaction value method explained in Ujagar Prints. The Tribunal noted that the proviso to Rule 9 could not be invoked separately once Rule 9 itself was inapplicable, and the Revenue could not raise a new valuation theory at the appellate stage. The proposed 115% cost-loading approach was therefore rejected, and consequential relief followed.

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Issues: Whether clearances by an assessee treated as an interconnected undertaking to the principal manufacturer were outside Rule 9 of the Central Excise Valuation Rules and had to be valued under Rule 10(b) read with Section 4 of the Central Excise Act, 1944, and whether the proposed addition of 115% of cost of production was sustainable.

Analysis: The assessee was found to fall within Section 4(3)(b)(i) as an interconnected undertaking. On that footing, Rule 9 did not apply, and therefore the proviso to Rule 9 also could not be invoked independently. The correct route was Rule 10(b), which sends the valuation back to Section 4(1). That meant the normal transaction value method, as explained in Ujagar Prints, governed the valuation. The Tribunal also noted that the Revenue had not effectively disputed the application of that method and could not be permitted to build a new case at the appellate stage.

Conclusion: The valuation was required to be made under Rule 10(b) read with Section 4 on the normal transaction value basis, and the 115% cost-loading approach under Rule 9 was not applicable.

Final Conclusion: The appeal succeeded and the assessee obtained consequential relief.

Ratio Decidendi: Where goods are cleared by an interconnected undertaking covered by Section 4(3)(b)(i), Rule 9 of the Central Excise Valuation Rules does not apply, and valuation must proceed under Rule 10(b) by reference to Section 4(1) on the normal transaction value basis.

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