Valuation of clearances to inter-connected undertakings must follow the specific rule, and limitation fails absent suppression.

Clearances to an inter-connected undertaking must be valued under the specific valuation rule applicable to inter-connected undertakings, not under the rule reserved for sales to or through related persons where the statutory conditions are not shown. Because the units were treated only as inter-connected and no finding of mutuality of interest or related-person status was recorded, the demand based on the wrong valuation basis was unsustainable. The extended period of limitation also could not be invoked, as the assessee was registered, filed returns, and the record did not establish suppression of facts with intent to evade duty. Consequential relief followed.

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Issues: (i) Whether clearances to inter-connected units could be valued under Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 instead of Rule 10; (ii) Whether the demand was barred by limitation for want of suppression.

Issue (i): Whether clearances to inter-connected units could be valued under Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 instead of Rule 10.

Analysis: Rule 9 applies where sales are to or through a related person falling within sub-clauses (ii), (iii) or (iv) of Section 4(3)(b) of the Central Excise Act, 1944. Rule 10 specifically governs sales to an inter-connected undertaking. The units were treated only as inter-connected undertakings, and no finding of mutuality of interest or treatment as related persons under the relevant sub-clauses was recorded. The demand was also quantified on a Rule 8 basis, which was not the applicable mode for the stated allegation of clearances to inter-connected units.

Conclusion: The demand was not sustainable under Rule 9 and was set aside on merits in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation for want of suppression.

Analysis: The assessee was registered, filed returns, and the Department did not establish suppression of facts with intent to evade duty. The record did not disclose material to justify invocation of the extended period.

Conclusion: The demand was time-barred and was unsustainable in favour of the assessee.

Final Conclusion: The appeal succeeded on both valuation and limitation, and the assessee was entitled to consequential relief according to law.

Ratio Decidendi: Clearances to an inter-connected undertaking must be valued under the specific valuation rule governing inter-connected undertakings, and the extended period cannot be invoked absent able suppression of facts with intent to evade duty.

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