Related-person valuation fails without proof of mutuality of interest affecting price in sister concern transfers.

Differential duty demand on clearance of capital goods to a sister concern was not sustainable where the show cause notice failed to clearly plead the basis of related-person valuation and no evidence showed mutuality of interest, control, or other influence on price. Mere familial or direct relationship between directors and the buyer's proprietor was held insufficient without factual material proving that the relationship affected the transaction value. Revenue's cited authorities were distinguished because they involved concrete evidence of interconnection, common management, or control affecting valuation.

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Issues: Whether the demand of differential duty on clearance of capital goods to a sister concern on the basis of related-person valuation was sustainable in the absence of pleadings and proof of mutuality of interest affecting the transaction value.

Analysis: The show cause notice proceeded only on the premise that the buyer was a sister concern or related person and that the goods should be valued on depreciated value. The basis of the alleged relationship was not clearly set out in the notice. The adjudication order introduced additional facts to support related-person status, but there was no evidence showing mutuality of interest, control, or any influence on value. Mere familial or direct relationship between directors and the proprietor of the buyer concern was held insufficient without factual material demonstrating that the relationship affected the price. The authorities relied upon by the Revenue were distinguished because those cases contained concrete evidence of interconnection, common management, or control affecting valuation.

Conclusion: The demand based on related-person valuation was not sustainable and the issue was decided in favour of the appellant.

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