TaxTMI 
TaxTMI 
2025 (3) TMI 955
X X X X Extracts X X X X
X X X X Extracts X X X X
....the records maintained by the appellant, the department had found that for the purpose of income tax, the appellant had shown M/s Ujjawal Ispat Private Limited, as their associated company in terms of Section 40A(2)(b) of the Income Tax Act, 1961 and have shown such details including the name of Directors in Form 3CD of income tax return. However, they failed to pay central excise involved in clearance of excisable goods to their associated company at the rate of 110% as per Section 4(1)(b) of the Central Excise Act, 1944 read with Rules 8 & 9 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000 during the period of financial years 2006-2007 to 2009-2010 and from April, 2010 to October, 2010. 2.3 The department had initiated Show Cause proceedings against the appellant by issue of Show Cause Notice (SCN) dated 23.05.2011 demanding central excise duty of Rs.71, 93, 417/- along with interest under Sections 11A, 11AB ibid and for imposition of penalty on the appellant under Section 11AC ibid. In adjudication of the SCN dated 23.05.2011, learned Commissioner of Central Excise had confirmed the demands and imposed equal amount of penalty on the appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e impugned order is sustainable. 5. Heard both sides and perused the records of the case. We have also perused the additional written submissions presented in the form of paper book for this case. 6. The issue involved in this appeal is to determine whether the clearance of excisable goods by the appellant to M/s Ujjawal Ispat Private Limited,, which is an 'inter-connected undertaking' of the appellant, is to be done under Rule 8 & 9 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000 or under Rule 10 ibid? 7. In order to address the above issues relating to valuation of excisable goods, we would like to refer the relevant legal provisions contained in Central Excise Act, 1944 and Rules made thereunder for considering whether the valuation proposed in the SCN and confirmed in the Order-in-Original is correct or not, and for determination of proper Central Excise duty payable on the subject goods under dispute. The disputed period covered in this case is from March, 2006 to October, 2010. Central Excise Act, 1944 Valuation of excisable goods for purposes of charging of duty of excise. "Section 3. Duties specified in F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-In this clause- (i) "inter-connected undertakings" means two or more undertakings which are inter-connected with each other in any of the following manners, namely:- (A) if one owns or controls the other; (B) where the undertakings are owned by firms, if such firms have one or more common partners; (C) where the undertakings are owned by bodies corporate, - (I) if one body corporate manages the other body corporate; or (II) if one body corporate is a subsidiary of the other body corporate; or (III) if the bodies corporate are under the same management; or (IV) if one body corporate exercises control over the other body corporate in any other manner;...... ... (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the rules. (iii) Rule 4 deals with situations where goods are sold, but not at the time of removal. (iv) Rule 5 deals with situations where goods are sold, but not at the place of removal. (v) Rule 6 deals with situations where there is an additional consideration for sale. (vi) Rule 7 deals with situations where there is no sale and the goods are transferred to the assessees' own depot not at the premises of the consignment agent. (vii) Rule 8 deals with situations where goods are captively consumed by the assessee-appellant or on its behalf in which case, the valuation has to be done at 110% of the cost of production. (viii) Rule 9 deals with the situations where the assessee and the buyer are related persons as per sub-Clauses (ii) (iii) or (iv) of Clause (b) of sub-Section (iii) of Section 4. (ix) Rule 10 (a) deals with situations where sale is to related persons as per sub-Clause (i) of Clause (b) of sub-Section (3) of Section 4 also known as inter-connected undertaking, where the assessee and the buyer are, in addition, also related persons as per sub-clause (ii) or (iii) or (iv) or the buyer is the holding comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sofar as it has treated the transaction between these two, as related party transaction without following the due process of law laid down under Central Excise statute. Therefore, we do not find that there exist sufficient grounds to claim that the valuation of impugned goods shall be done on the basis of Rule 8 & 9 ibid, as held in the impugned orders. 8.3 Further, we have also examined the relevant legal provisions concerning 'related person' as follows. The essence of the legal provisions contained in Section 4(3)(b) of the Central Excise Act, 1944, state that persons shall be deemed to be "related" if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. In the Explanation clause it is clearly provided that "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and "relative" shall h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the matter is remanded to the Commissioner (Appeals) for de novo decision." 9.2 We further find that in the case of Commissioner of Central Excise, Nagpur Vs. Ramsons Casting Private Limited (supra) 2017 (357) E.L.T. 431 (Tri. - Mumbai), the Co-ordinate Bench of the Tribunal has held that in the absence of evidence, even if two companies are operated as 'interconnected undertakings', they cannot be treated as 'related person' for valuation purpose and the transaction value cannot be rejected. The relevant paragraph of the said order is extracted and given below: "7. The transaction value can be rejected only when the buyers are related in the sense in clause (ii), (iii) or (iv) of Section 4(3)(b) or buyer is holding company or subsidiary company of the assessee. It was made further clear that while dealing with transaction between interconnected undertaking, if the relationship as described in clause (ii), (iii) or (iv) does not exist and buyer also not holding or subsidiary then for assessment purpose they will not be considered related. In view of above clear position as regard transaction between interconnected undertakings, it is crystal clear that in existing st....