Related-person valuation requires proof of control and flowback; shareholding and family ties alone do not suffice.

Valuation under related-person provisions requires the Revenue to prove inter-connection, common management, control, or other legally relevant relationship, together with supporting evidence of flowback or mutual interest. On the facts, shareholding and family relationship alone did not establish that the marketing concern controlled the respondent or that both entities were under the same management. Sales through the marketing concern were only part of total sales, with the balance made to independent buyers and Government bodies, and no documentary evidence showed financial flowback or complete control. The related-person valuation provisions and Rule 10 were therefore not attracted.

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Issues: (i) Whether the respondent and the marketing concern were inter-connected undertakings or related persons for valuation of excisable goods; (ii) whether the Revenue established the factual basis required to invoke the related-person valuation provisions and Rule 10 of the Central Excise Valuation Rules, 2000.

Issue (i): Whether the respondent and the marketing concern were inter-connected undertakings or related persons for valuation of excisable goods.

Analysis: The applicable framework required the Revenue to establish inter-connection through ownership, control, common management, or direct or indirect control by a partner having the requisite shareholding or influence. The shareholding pattern relied upon by the Revenue, by itself, did not establish that the partner concerned controlled the respondent-company or that the entities were under the same management. Mere relationship through family members was insufficient to prove the statutory test of inter-connection or related-person status.

Conclusion: The entities were not shown to be inter-connected undertakings or related persons on the evidence produced.

Issue (ii): Whether the Revenue established the factual basis required to invoke the related-person valuation provisions and Rule 10 of the Central Excise Valuation Rules, 2000.

Analysis: The valuation provisions could be invoked only on proof of the legally relevant relationship and corresponding flowback, mutual interest, or exclusive sales through the related concern. The record showed that sales through the marketing concern formed only a part of the total sales and the balance were made to independent buyers and Government bodies. No documentary evidence was produced to establish financial flowback, control over directors, or the complete shareholding and management pattern necessary to displace the finding of arm's-length dealing.

Conclusion: The Revenue failed to prove the conditions necessary for valuation under the related-person provisions and Rule 10.

Final Conclusion: The order of the adjudicating authority was left undisturbed, and the Revenue challenge failed for want of proof of inter-connection and related-person valuation criteria.

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