Domestic Sale to Associated Unit

[RAM SHARMA]

Dear Expert,We are selling our goods to Our Associated Unit like other domestic customer on same price. Our associated unit selling the same goods as trading goods without availing cenvat credit and rebate claim of duty to add own profit margin. Whether any excise duty liability may be raise on difference of our price and our associated unit. Relation between both unit is as sister concern neither inter unit. Pl. advice.Thanks

[Rajesh Nathoo]

Dear Mr. Ram Sharma ,

At first instance Rule 9 of Central Excise Valuation as applicable in this case is enforceable only when sale is exclusively to the related party ( associated concern in your case ) . In your case sale is both to related and unrelated buyers and transaction value may be accepted in your case . However it depends on quantum of sale to your related buyers . If your substantial sale is through related buyers , you will have to pay the excise duty on the price at which your related buyer is selling it in market .

AI Summary

Central Excise valuation: related-party pricing can trigger duty if majority sales are to associated buyers.
Rule 9 of Central Excise Valuation applies where sales are exclusively to a related party; if sales are both to related and unrelated buyers, the transaction value may be accepted, but if a substantial portion of sales is to related buyers, valuation may be based on the price at which the associated unit sells in the market, giving rise to duty on the difference.