Related-person valuation applies only to full clearances through the related person; mixed direct and related sales defeat the demand.

Related-person valuation under the Central Excise valuation rules was held applicable only where the assessee clears its entire production through the related person. Because the assessee supplied goods both to PALI and to ELMI, the Tribunal found that the case did not involve 100% clearances to the alleged related person. The department's valuation basis for ELMI was therefore unsustainable, and the demand based on that premise was set aside in favour of the assessee.

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Issues: Whether the demand of duty on clearances to ELMI on the basis of related-person valuation was sustainable when the assessee was not clearing 100% of its to the alleged related person.

Analysis: The dispute on the ELMI clearances turned on the applicability of the related-person valuation provisions. The Tribunal held that those provisions are attracted only where the entire production is cleared through the related person. As the assessee was supplying goods both to PALI and ELMI, it was not a case of 100% clearances to a related person. On that footing, the valuation basis adopted by the department could not be sustained for ELMI.

Conclusion: The demand relating to ELMI was set aside and the issue was decided in favour of the assessee.

Final Conclusion: The appeal by the assessee succeeded on the principal valuation dispute, while the departmental appeal failed.

Ratio Decidendi: Related-person valuation provisions under the Central Excise valuation rules apply only where the assessee clears its entire production through the related person; absent such 100% clearances, a demand of undervaluation on that basis is not sustainable.

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