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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether CEAT Ltd. was a related person of the appellant for purposes of valuation under section 4 of the Central Excises and Salt Act, 1944, and whether the price at which CEAT sold the goods to its dealers could be adopted as the assessable value of the appellant's goods.
Analysis: The definition of related person under section 4(4)(c) requires mutuality of interest, namely that the assessee and the alleged related person must have direct or indirect interest in the business of each other. Mere shareholding by the buyer in the assessee, without corresponding interest of the assessee in the buyer, is not sufficient. The record showed that CEAT held only 20% of the equity and there was no material to show that the appellant held any equity in CEAT. There was also no proof of extra commercial consideration beyond the agreed sale price. A mere commercial relationship or high volume of sales does not by itself establish that the parties were not dealing on principal to principal basis.
Conclusion: CEAT Ltd. was not a related person of the appellant, and its resale price could not be adopted for determining the appellant's assessable value. The demand and penalties based on that premise were unsustainable.
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