TaxTMI 
TaxTMI 
2026 (1) TMI 1513
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....both are 100% subsidiary companies of M/s Alghanim Industries (Mauritius) Ltd and therefore, would be treated as inter-connected undertaking in terms of definition of related person under sub-clause (i) of section 4(3)(b)(i) of the CEA. The department felt that the valuation has to be done in terms of section 4(1)(b) of the Excise Act read with Rule 9 of Central Excise Valuation Rules as the goods were being cleared to a related party, which in turn are being sold in retail. On adjudication, the order was confirmed holding, inter alia, that they are related parties and since the goods are tailor-made goods and there is no possibility to compare the goods vide different orders and hence, each lot of goods manufactured and cleared should be treated as a whole and individual group as a whole. Hence, Rule 9 was applicable. Moreover, valuation has to be under section 4(1)(b) as it was mere stock transfer and since they are inter-connected undertakings, there is no need to prove the existence of mutuality of interest between the parties. Further, in the facts of the case, extended period cannot be invoked. 3. Learned Advocate for the appellant has mainly contested that the transaction....
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....me of removal, to buyers (not being related person); or where such goods are not sold to such buyers, to buyers (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. RULE 10. When the assessee arranges that the excisable goods are not sold by him except to or through an interconnected undertaking, the value of such goods shall be determined in the following manner, namely:- (a) If the undertakings are so connected that they are also related in terms of sub-clause (ii) or (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act or the buyer is a holding company or subsidiary company of the assessee, then the value shall be determined in the manner prescribed in rule 9. Explanation. - In this clause "holding company" and "subsidiary company" shall have the same meanings as in the Companies Act, 1956 (1 of 1956). (b) in any other case, the value shall be determined as if they are not related persons for the purpo....
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....ction 4(3)(b). In the present factual matrix, they are not related in the aforesaid manner and no such allegation has been made in the SCN. Further, in terms of Rule 10, post 01.12.2013, where whole or part of excisable goods are sold to or through an interconnected undertaking, then again also, the said undertakings are also required to be connected in a manner that they are also related in terms of sub-clauses (ii), (iii) or (iv) of section 4(3)(b) or the buyer is a holding company or subsidiary company of the appellant and if that being so, the value has to be determined in the manner prescribed in Rule 9. In the facts of the case, this provision would not be invokable and therefore, per force, recourse has to be taken to Rule 10(b), which requires that the value shall be determined as if they are not related persons for the purpose of sub-section (1) to section 4. In other words, transaction value itself has to be adopted. 9. Therefore, essentially, the changes in Rule 9 and 10, which has been resorted to arrive at the valuation in the present appeal, prior to and post 01.12.2013, amendment was applicable only where the entire goods were sold to a related person, whereas, po....
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...., as it was during the period 01.12.2010 "when the assessee so arranges that the excisable goods are not sold by him except to or through an interconnected undertaking, the value of the good shall be determined in accordance with the manner indicated at Rule 10(a) & 10(b)". We find that there are instances, when goods have been sold by the appellant to some other independent buyers also. Further, we note that apart from this, these interconnected undertakings are also required, interalia, to be related in terms of said Clause (ii) or (iii) or (iv) of clause (b) of sub-section (3) of Section 4. As per sub clause (iv) clause b of subsection (3)3 of Section 4, apart from their being interconnected undertaking they are required to be associated in a manner that they have interest directly or indirectly in the business of each other. Department is relying on the fact that any increased realisation of price shall result in increased dividend to the appellant to prove that they have interest in the business of each other. We find that the issue that there is no mutuality of interest between the appellant and the joint venture company ECRL is already a settled matter in terms of the agreem....
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....es a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor. Explanation. - In this clause "holding company", "subsidiary company" and "relative" have the same meanings as in the Companies Act, 1956 (1 of 1956)." 8. The expression 'in the business of each other' clearly denotes that interest of the two persons have to be mutual, i.e., in each other, in order to treat them as related persons. We find from the order of the Member Judicial that only on the ground that the two companies had given a loan of Rs. 85.66 crores to the assessee company, was treated as sufficient to establish the relationship between the assessee and the buyers. That only shows one way traffic whereas requirement is that of two way traffic. The other Member, in our opinion, aptly held that this cannot be the factor which would show the mutuality of interest. For this purpose, he referred to the judgment of this Court in 'Union of India v. Atic Industries Ltd. [1984 (17) E.L.T. 323]. The third Member has, therefore, rightly, concurred with the aforesaid view of Member (Technical)." 11. Moreover, mutuality of interest....
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....Ltd ICI, UK was holding balance 50% share capital of Atik Industries. ICI India ltd was a wholly owned subsidiary of ICI, UK since 1978, shareholding of ICI, UK in ICI India was reduced to 40 % (shareholding of iCi, UK in Atik Industries continued to be 50%) 4.10. The revenue took a view that Atik Industries and two buyers are related persons rejecting the contention of the department, the Hon'ble Supreme Court has held as under: ".....Now in the present case, Atul Products Limited has undoubtedly interest in the business of the assessee, since Atul Products Ltd. holds 50 per cent of the share capital of the assessee and has interest as shareholder in the business carried on by the assessee. But it is not possible to say that the assessee has any interest in the business of Atul Products Limited. There are two points of view from which the relationship between the assessee and Atul Products Limited may be considered. First, it may be noted that Atul Products Limited is a shareholder of the assessee to the extent of 50 per cent of the share capital. But we fail to see how it can be said that a limited company has any interest, direct or indirect, in the business ca....
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....companies. The revenue contended that hind lamps and its 5 buyers are related persons. Rejecting the above contention of the revenue, the Division Bench of the Allahabad High court in 1997 (1) ELT J1 Allahabad held as under: "16. We shall first examine whether the five customer companies come within the first part of the definition of 'related person'. As rightly contended by Shri S. N. Kacker, learned counsel for the petitioner company, in order to come within the first part of this definition, the petitioner company and the customer companies must have interest directly or indirectly in the business of each other. Such of the customer companies, which hold shares in the Petitioner Company, can be said to have interest in the business of the Petitioner Company. But only one of the customer companies, namely, Bajaj Electricals Ltd., Bombay. holds shares in the Petitioner Company. The remaining four customer companies do not hold any shares in the Petitioner Company. 19. Even assuming that all these four customer companies have interest in the business of the Petitioner Company, it is not shown that the Petitioner Company has any interest directly or indire....
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....n 44 does not stand satisfied. In order to be covered Sub-Clause 4 of Section 4(4)(c) there should be two-way business interest. We find that in the present case it was not established that there is even one way interest in the business of each other therefore this case is on much better footing. 4.15 In view of above, we find that there is no mutuality of interest in the present case between the respondent an the 4 buyers and the relationship is not covered by Sub-Clause (iv) of Section 4(3)(b) of Central Excise Act 1944S but only Sub-Clause (i) of Section 4(3)(b) of Central Excise Act 1944. 4.16 We find that the judgments relied upon by the revenue are completely on different facts in the present case. Therefore, the same are not applicable. 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, we do not find any merits in the appeal of revenue." 12. We also note that in the case of Ispat Industries Ltd Vs CCE, Raigad [2007 (2) TMI 5 - CESTAT Mumbai LB], it was held that Rule 9 and 10 cannot be invoked where the goods are sold to bo....