TaxTMI 
TaxTMI 
2024 (8) TMI 1526
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....f the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules 2002. All the dues so adjudged to be paid forthwith" 2.1 Appellant having Central Excise Registration No.AABCC1435FXM001 is engaged in the manufacture of Alternator Assembly, Starter Assembly, Wiper Assembly, Magneto/CDI/FLY WH, Fan/Vent/Blower, and Spares of Motor Vehicles falling under sub heading No 85115000, 85114000, 85124000, 85112090, 87089900 and 8708.00 respectively of the First Schedule to the Central Excise Tariff Act, 1985. They are also availing the facility of Cenvat Credit in respect of Capital Goods, Inputs and Input Services. 2.2 During course of audit it was observed that Maruti Udyog Ltd. and appellant are related person/ parties, as per the Excise Act, for the following reasons : ⮚ M/s Maruti Udyog Ltd. is an Indian promoter of the appellant; ⮚ one Director of M/s Maruti Udyog Ltd. is on the Board of Directors of the appellant; and ⮚ appellant is selling maximum of their product to Ms Maruti Udyog Ltd. The Auditors therefore, were of the view that appellant should have paid duty as per Valuation Rules (Cost + 10% as notio....
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..... Cess ) should not be demanded and recovered from them under Section 11A(4) of the Central Excise Act, 1944. (B) Interest on the above amount of uty in terms of Section 11AA of the Central Excise Act, 1944 may not be recovered from them; (C) Penalty may not be imposed upon them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 2.4 Show cause notice has been adjudicated as per the impugned order. Aggrieved appellant have filed this appeal. 3.1 We have heard Shri Atul Gupta Advocate for the appellant and Shri A K Choudhury, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned counsel submits that : ⮚ The goods were not sold exclusively to the alleged related person, the provisiosn of Rule 9 and accordingly proviso to Rule 9 is not applicable. ⮚ Cost of goods sold has not been computed but arbitrarily the actual clearance value loaded with notional profit attempted to be assessed under Rule 9 read with Rule 8. ⮚ Rule 8 is applicable only when the goods are exclusively sold to the related person. ⮚....
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....ng mutual business interests and accordingly, the party and M/s Maruti Udyog Ltd. fall under the purview of related person' in terms of Section 4(3)(b) of the Central Excise Act, 1944 and (B) clearances made by the party to M/s Maruti Udyog Ltd. have to be treated as clearances made to related person for its captive use and accordingly, excise duty on such clearances is payable on 110% of the cost of production during the impugned period in terms of Rules 8 & 9 of the Central Excise Valuation (Determination of Excisable Goods) Rules, 2000. According to the department/ show cause notice, the party is related in terms of clause (i)& (iv) of Section 4(3)(b) of the said Act and both the units (party & buyer) are inter-connected undertakings' within the meaning of this provision/Section. The relevant portion of Section 4 of the Central Excise Act, 1944, which deals with the valuation of excisable goods for the purpose of charging of duty of excise, reads as under: "Section 4: Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, ....
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....shall be the normal transaction value at which these are sold by the related person at the time of removal, to buyers (not being related person), who sells such goods in retail Provided that in a case, where the related person does not sell the goods, but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in Rule 8." On the issue of common Director in both the units (units of seller & buyer) and valuation of goods under Rules 8 & 9 of the Central Excise Valuation (Determination of Excisable Goods) Rules, 2000 on that count, I place reliance on the judgement of the Hon'ble CESTAT, New Delhi in the case of Sudarshan Castings Vs. CCE, 2007 (217) ELT 428 (Tri.- Delhi). In this case, the Hon'ble CESTAT upheld the adjudicating authority's stand of resorting valuation of goods under Rules 8 & 9 of the said rules (valuation taking value @ one hundred and ten per cent of total cost of production) and held the units as 'inter-connected undertakings' under the above provisions of Section 4 of the Central Excise Act, 1944 In the present case, apart from common Director in....
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....ale of the appellant's product - Relationship between the appellant and PBL, though indirect, they have mutuality of interest in the business of each other - Appellant and PBL to be treated as related person within the meaning of erstwhile Section 4(4)(c) of Central Excise Act, 1944 - Tribunal's order upheld [paras 7, 8]." Thus, in the case of Flash Laboratories Ltd. Vs. CCE, supra, the Hon'ble Supreme Court observed/held that a major sale of goods by the appellant assessee is to company namely Ms PPL (buyer) and although the relationship between the appellant assessee and M/s PPL is indirect, they have mutuality of interest in the business of each other and accordingly, both the companies have to be treated as 'related person' within the meaning of erstwhile Section 4(4)(c) of Central Excise Act, 1944 [pari materi to the present Section 4(3)(b) of Central Excise Act, 1944]. I also find that the Hon'ble High Court of Gujrat at Ahmedabad in the case of Alambic Glass Industries Vs. UOI, 1992 (59) E.L.T. 207 (Gujrat), took a similar view and held that "Valuation - Related person - Assessee company and buyer company having reciprocal interest in the business of ....
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....on the subject. It has been held time and again that the payment of interest becomes due immediately, if the due payment of the duty is not made by the specified date. Reliance is placed here on the cases of CEAT Ltd Vs CCE Mumbai-III-2012(275) ELT 433 (Tri-Mumbai), CCE Bangalore-II Vs. Presscom Products, 2011 (268) ELT 344 (Kar,) and Neptune Spin Fab Pvt. Ltd, Vs, CCE Ahemedabad, 2009 (241) ELT 467 (Tri.-Ahmd.). Once the issue about the correctness of the demand notice is concluded as above, the payment of interest thereon in terms of Section 11AA of the Central Excise Act, 1944 becomes inevitable. The provisions contained in the Section 11AA of the Central Excise Act, 1944 are very clear and applicable to the facts of the present case, In view of the above facts and the statutory provisions, the case laws/ judgements as cited by the party in this regard are not applicable to the present case. I therefore, hold that the interest at appropriate rate is recoverable from the party. On the issue of the extended period of limitation in raising the impugned demand of duty, I also find that the fact of erroneous/non-payment of excise duty in respect of the clearance of goods mad....
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....ct amounts to suppression of facts with intent to evade payment of duty. It implies that the matter involved is merely not in the nature of interpretation of law as contended by the party. The above facts indicate that they have contravened the provisions of Rule 4, 6 & 8 of the Central Excise Rules, 2002 and have rendered themselves liable for imposition of penalty under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944. In view of the above facts and rulings/ judgements, the case laws as cited by the party in the subject matter are not applicable to the present case. Accordingly, I hold that penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules 2002 is imposable upon the party." 4.3 From the findings as recorded in the impugned order it is evident that the entire issue has been decided by the adjudicating authority by holding that the appellant and M/s Maruti Udyog Limited are interconnected undertakings and hence related parties. Therefore the value of the goods cleared by them need to be determined by application of Rule 9 read with Rule 8 of the Central Excise Valuation (Determi....
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.... process at which goods are sold to M/s. Jayakumar Fabrics. 7. Revenue's argument is that the two firms are clearly related persons. Once the buyer and seller are related, the Central Excise Valuation Rules, 2000 do not envisage valuation based on assessable value of comparable goods and value has to be necessarily 115% of the cost of production as provided under Rules 9 and 8 of the said Rules. 8. The Counsel for appellant relies on the following decisions :- (i) Ultra Refrigerators Pvt. Ltd. v. CCE - 2004 (170) E.L.T. 341 (Tri.-Del.), (ii) Birdi Steels v.. CCE - 2005 (179) E.L.T. 82 (Tri.-Del.), (iii) Aquamall Water Solutions Ltd. v. CCE - 2005 (182) E.L.T. 196 (Tri.-Bang.); as affirmed by the Hon'ble Apex Court as reported at 2006 (193) E.L.T. A197 (S.C.); (iv) Bharat Petroleum Corporation Ltd. v. CCE - 2010 (261) E.L.T. 695 (Tri.-Chennai); 9. On the other hand, ld. AR for Revenue relies on the following decisions :- (i) Calcutta Chromotype Ltd. v. CCE - 1998 (99) E.L.T. 202 (S.C.). (ii) Poornalaya Electricals v. CCE - 1999 (107) E.L.T. 660 (Tribunal); (iii) CCE v. I. T. E. C. (P) Ltd. - 20....
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.... Pvt. Ltd. v. CCE - 2004 (170) E.L.T. 341 (ii) Pepsico India Holdings Pvt. Ltd. v. CCE - 2004 (163) E.L.T. 478 (iii) South Asia Tyres Pvt. Ltd. v. CCE - 2003 (152) E.L.T. 434 (iv) Birdi Steels v. CCE - 2005 (179) E.L.T. 82" Civil Appeal filed by the revenue against this decision has been dismissed by Hon'ble Supreme Court as reported at [2016 (342) E.L.T. A32 (S.C.)] 4.9 Thus in our view even if the appellant and M/s Maruti Udyog Ltd. are held to be interconnected undertaking and hence related in terms of Section 4 (3) (b) of the Central Excise Act, 1944 then also Rule 9 cannot be invoked for determination of the value in the present case. 4.10 In case of Ispat Industries Ltd. [2007 (209) E.L.T. 185 (Tri. - LB)] following has been held: "5. We have considered the rival submissions and are of the view that the assessee is correct in contending that provisions of Rule 8 would apply only in a case where its entire production of a particular commodity is captively consumed. This is evident on a plain reading of Rule 8 of the valuation rules, which reads as under "Where the excisable goods are not sold by the assessee but are used fo....
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....le 8, in our view, are not applicable to the present case and therefore the value determined by the assessee under Rule 4 deserves acceptance. 7. We also agree with the submission of the assessee that even if both the rules, i.e. Rule 4 and Rule 8, were applicable, it would only be logical to read and apply the various rules in the Central Excise Valuation Rules in a sequential manner. Though the Central Excise Valuation Rules, 2000 do not specifically prescribe such sequential application of various rules, the same, in our view, is the only reasonable way to read these rules. Any other interpretation would only lead to confusion and chaos. Since the applicability of Rule 4 is not really in dispute, there was no need to look further and regardless of the applicability or otherwise of Rule 8, the assessable value should have been determined in terms of Rule 4 of the Valuation Rules. 8. The conclusion that we are drawing in the present case would lead to determination of a value which, in our view, will not only be reasonable but also consistent with the provisions of Section 4 of the Central Excise Act. We would, at this stage, draw support from the judgme....
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....ther Unit-3. According to the Revenue, Unit-1 and Unit-2 cleared the goods to Unit-3 is a related person and therefore, as per proviso to Rule 9 of the Valuation Rules, 2000, the appellant is liable to pay duty on one hundred and ten per cent, as per Rule 8 of the Valuation Rules. The period of dispute is December, 2008 to June, 2013. 3. After hearing both the sides and on perusal of the records, we find that the issue is no more res integra, in view of the decision of the Larger Bench of the Tribunal in the case of Ispat Industries Ltd. v. Commissioner of Central Excise, Raigad - 2007 (209) E.L.T. 185 (Tri.-LB), which was followed by this Bench in the case of Jai Corporation v. Commissioner of Central Excise & Service Tax, Daman - 2015 (317) E.L.T. 353 (Tri.-Ahmd.). In the case of Jai Corporation (supra), the Tribunal, allowed the appeal of the assessee, observed as under :- "6. At the outset, we would like to recall that there is no dispute as to the fact that as the appellant had valued the products cleared by them to their sister concern on the value which is charged by them to independent buyers. 7. Admittedly, the clearance made to their sister conc....
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....elated buyers. The law of the land takes precedence over the circulars issued by the C.B.E. & C. and also any letters issued by the Revenue by way of audit or by show cause notice." 4.13 In case of Merino Panel Product Ltd [2022-TIOL-103-SC- CX] Hon'ble Supreme Court has held as follows: "28. Rule 9 addresses the valuation of excisable goods when sales are to related parties. Thus, we will focus on Section 4(1)(b) of the CEA, and Rules 9 & 11 of the CEVR. This final limb of our examination will be to determine the method adopted for valuation in cases of partial sales to both independent and related purchasers. Since Rule 11 merely refers back to the principles under the CEVR as a whole read with Section 4(1) of the CEA, it is arguable that there is still a gap in terms of how to proceed with the assessment. In normal circumstances, we may have left this responsibility to the Department but given the history of the case, we find it appropriate to fill in the blanks ourselves. 32. This Court, thus, ruled that the amount charged from independent buyers can form the benchmark to calculate the appropriate assessable value of the goods sold to the related parties. T....
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.... is utilized as a benchmark for sales to related parties. The general principles of Section 4(1) of the CEA, read with Rule 11 of the CEVR, are meant to provide a pathway for determination of the "normal price" and "value" of goods in cases where no alternative methodology is applicable. This fulfils the dual objectives of being in consonance with the Circular dated 01.07.2002 and harmonizing different provisions of the CEA and CEVR. 36. The sum and substance of our analysis is that the assessable value for the related party sales can be established by referring to the normal price under Section 4(1)(a) of the CEA, which is readily available in the present case. This is, in our opinion, the true meaning and intention underlying the Circular of 01.07.2002. The reference to Rule 11 in Point No. 12 of the Circular simply mandates the usage of "reasonable means" keeping in mind Section 4(1)(a) of the CEA and Rule 9 of the CEVR. This is merely a method by which the Revenue is required to apply its mind to a case of partial sales to both independent and related parties. The conclusion reached through this process may very well be in consonance with our analysis. 37. Reg....