TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 568
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the appellant as well as M/s Bony Polymers and controlled both the units; the appellant and M/s Bony Polymers are related in terms of Section 4 (3) (b) (1) of the Central Excise Act; therefore, the appellants were required to discharge central excise duty on 110% of the cost of production in terms of Section 4 (1) (b) of the Central Excise Act, 1944 read with Rules 8 & 9 of Valuation Rules; three show cause notices dated 12.12.2014, 28.05.2015 & 28.12.2015, covering the periods February 2010 to September 2014, October 2014 to March 2015 and April 2015 to November 2015, seeking to recover central excise duty of Rs.94,84,776/- along with interest and penalty on the appellant and penalty on Shri Raj Kumar Bhatia, Managing Director and Shri Saket Bhatia, Director, (E/60181/2016) were issued. Learned Commissioner vide impugned order dated 28.01.2016 dropped the demand under extended period and the penalty under Section 11AC on the grounds that there was no suppression on the part of the appellants and that the issue was revenue neutral; however, he imposed penalties of Rs.10 Lakhs and Rs.5 Lakhs on the Managing Director and the Director. Hence, these appeals. Revenue is also in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red related' ; impugned Order has recorded no finding as to how the Appellant and BPPL are related in terms of clause (ii),(iii) or (iv) of Section 4(3)(b) or that BPPL is a holding company or subsidiary company of the Appellant; Ld. Commissioner himself held that key managerial persons cannot be held to be relatives; therefore, in such a case, valuation of goods is to be done under Rule 10(b) read with Section 4(1)(a) of the Excise Act. She relies on. * DSRM Steel Pvt Ltd & another 2025 (2) TMI 209- CESTAT Chennai * Shree Vaishnav Industries Pvt Limited 2025 (3) TMI 568- CESTAT Mumbai * Shiva Steel Industries (Nagpur) Limited 2025 (3) TMI 955- CESTAT Mumbai * Khyati Ispat Private Limited (Rolling Mill Division) 2022 (3) TMI 399- CESTAT New Delhi * Mahendra Sponge & Power Ltd 2022 (8) TMI 1250- CESTAT New Delhi * Kwality Foundry Industries 2019 (4) TMI 1642- CESTAT New Delhi * Ramsons Casting Pvt Ltd 2017 (357) ELT 431 (Tri. - Mumbai) * Apsara Metallica Industries 2019 (369) ELT 1619 (Tri. - Mumbai) 4. Learned Counsel submits also, without prejudice to the submissions above, that the Appellant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isfied cumulatively; in the present case, there is no evidence on record to show that the Appellant and their Managing Director and Director had any knowledge or reason to believe that the goods were liable for confiscation; in the absence of such evidence, the penalty imposed is liable to set aside; there is no evidence in the SCN or the Impugned Order that the Appellant and their Managing Director and Director physically dealt with such goods; hence, imposition of penalty under Rule 26(1) is not sustainable. She submits that in order to impose penalty under Rule 26(1), it is necessary that certain goods are confiscated; hence, penalty under Rule 26(1) can only be imposed wherein goods are confiscated. She relies on the following. * Shri Piyush Agarwal Director Basai Steels Power Pvt Ltd 2024 (6) TMI 754- CESTAT Bangalore * Apple Sponge and Power Ltd 2018 (5) TMI 772- CESTAT Mumbai The Impugned Order has not even confiscated any goods. * Gouri Shankar Poddar 2024 (9) TMI 615- CESTAT Ahmedabad * Zapak Digital Entertainment Limited 2023 (2) TMI 40- CESTAT Mumbai * Goodyear India Ltd and Shri R.K. Gupta, Manager Excise 2024 (10) TMI 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e related in terms of Section 4(3)(b)(i) of Central Excise Act, 1944; consequently, whether the appellants are required to assess the value of goods cleared to them at 110% of the cost of production; whether penalties are imposable on the appellants and their Managing Director and Director. The case of the Department is that the appellant and M/s BPPL are related as the management of the companies is in the same hands and therefore, valuation of the goods cleared by the appellants to M/s BPPL should be done under Rule 8 & 9 of Central Excise Valuation Rules. The appellants, on the other hand, claimed that the appellants and M/s BPPL can at best be termed as inter-connected undertakings and thus, valuation requires to be done under Section 4(1)(a) of the Central Excise Act, 1944 in view of Rule 10 of Central Excise Valuation Rules. We find that it will be useful to have a look at the provisions of the Statute before we proceed further. 11. Section 4(1) stipulates that: [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, then, on each re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irectly, not less than fifty per cent of the shares, whether preference or equity, of the body corporate; or (II) exercise control, directly or indirectly, whether as director or otherwise, over the body corporate; (E) if one is owned by a body corporate and the other is owned by a firm having bodies corporate as its partners, if such bodies corporate are under the same management; (F) if the undertakings are owned or controlled by the same person or by the same group; (G) if one is connected with the other either directly or through any number of undertakings which are inter-connected undertakings within the meaning of one or more of the foregoing sub-clauses. Explanation I.- For the purposes of this clause, two bodies corporate shall be deemed to be under the same management- (i) if one such body corporate exercises control over the other or both are under the control of the same group or any of the constituents of the same group; or (ii) if the Managing Director or manager of one such body corporate is the Managing Director or manager of the other; or (iii) if one such body corporate holds not less than one-fourth of the equity....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the same management. Explanation III.- If two or more bodies corporate under the same management hold, in the aggregate, not less than one-fourth equity share capital in any other body corporate, such other body corporate shall be deemed to be under the same management as the first mentioned bodies corporate. Explanation IV.- In determining whether or not two or more bodies corporate are under the same management, the shares held by financial institutions in such bodies corporate shall not be taken into account. Illustration Undertaking B is inter-connected with undertaking A and undertaking C is interconnected with undertaking B. Undertaking C is inter-connected with undertaking A; if undertaking D is inter-connected with undertaking C, undertaking D will be interconnected with undertaking B and consequently with undertaking A; and so on. Explanation V.- For the purposes of this clause, "group" means a group of- (i) two or more individuals, associations of individuals, firms, trusts, trustees or bodies corporate (excluding financial institutions), or any combination thereof, which exercises, or is established to be in a position to exercise, cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....action 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, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.] 11.2. Rule 8, 9 & 10 of Central Excise Valuation Rules, 2000 provides that: RULE 8.[Where whole or part of the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value of such goods that are consumed shall be one hundred and ten per cent of the cost of production or manufacture of such goods.] RULE 9.[Where whole or part of the excisable goods are sold by the assessee to or through a person ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aring 97% of their production to M/s BPPL. We find that the period involved is after the said Rule 9 was amended. We find that whereas the show cause notice alleges that the appellant and M/s BPPL are related under clauses (ii), (iii) & (iv) of sub-section 3 of Section 4, it is not explained as to how they are related. Learned Commissioner finds that the key managerial person being the same cannot be said to be relatives; learned Commissioner relying on the Explanation to Section 2(g) of Monopolies and Restrictive Trade Practices Act, 1969, they being interconnected, are deemed to be related for the purposes of Section 4(3)(b)(i). The appellants submit that as it has not been explained as to why the appellants are related in terms of Clauses (ii), (iii) & (iv) of Section 4(3)(b). We find that the appellants and M/s BPPL are inter-connected undertakings. In order to be treated as related persons, they should also satisfy the Clauses (ii), (iii) & (iv) of Section 4(3)(b); M/s BPPL is neither a holding company or a subsidiary of the appellant. Learned Commissioner held that they are not relatives; so, they are not related in terms of Clause (ii) of Section 4(3)(b); M/s BPPL are not a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the impugned order or any evidence produced by the authorities below to state that the appellants and their interconnected undertaking are related in terms of the above provisions of the Central Excise statute. Therefore, we are of the opinion that on this ground alone the impugned order is liable to be set aside and it does not stand the scrutiny of law. 9.1 We find that in the case of Gajra Gears Private Limited (supra), the Co-ordinate Bench of the Tribunal has held that valuation of goods between inter-connected undertaking shall be determined as prescribed under Rule 10. The relevant paragraph of the said order is extracted and given below: "5. Merely because the assessee and his buyers are interconnected undertakings in terms of Section 2(g) of Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of valuation, the two cannot be treated as 'related person' and the transaction value cannot be rejected merely on this basis, as for rejecting the transaction value in such cases the conditions prescribed in Rule 10 of the Central Excise Valuation Rules have to be satisfied which are that - (a) all the sales of the excisable goods are to or through th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the buyers company are interconnected undertaking of the appellant company it cannot be treated as related person in terms of Section 4(3)(b). In absence of relationship as specified under sub-clause (ii), (iii) or (iv) of Section 4(3)(b). In this position, the transaction value of the goods between respondent and the so-called interconnected undertaking is correct valuation and the same cannot be disturbed, therefore, value as provided under Rule 8 is not applicable in the present case. We have gone through judgments relied upon by the rivals. We find that the judgment relied upon by the ld. Counsel are directly applicable in the facts of the present case. As regard the judgment in case of Avon Scales Co. (supra) relied upon by the ld. AR the same is not applicable for the reason that relationship is related to the partners and partnership firm, whereas in the present case respondent and the buyer are two independent private limited companies. In view of our above discussion we are of the considered view that the respondent have correctly valued their goods sold to their group company..." 15. Intriguingly, though the Revenue alleges that the valuation of the goods supplied b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the assessee had suppressed any information. 20. The Department cannot be permitted to invoke the period of limitation by merely stating that it is a case of self-assessment as even in a case of self-assessment, the Department can always call upon an assessee and seek information. It is under sub-rule (1) of rule 6 of the Central Excise Rules, 2002 (the Rules) that the assessee is expected to self-assess the duty and subrule (3) of rule 12 of the Rules provides that the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authori....