2018 (1) TMI 702 - AT - Central Excise

Valuation - related party transaction - Held that - When the goods were cleared to non-related parties and the value is available then the same can be adopted for transactions which are purportedly tainted by relationship - it is not necessary to invoke cost construction method to arrive at the transaction value. When the goods were cleared to non-related parties and the value is available then the same can be adopted for transactions which are purportedly tainted by relationship - matter requires de novo consideration by the original authority - appeal allowed by way of remand.

Summary

Issues involved: Correct valuation for clearances made to related companies, application of cost construction method, determination of relationship between parties.

Analysis:

The appeal was filed against the Order-in-Original passed by the Commissioner of Central Excise, Ujjain, concerning the correct valuation of goods cleared to related companies. The Revenue contended that the assessee was not discharging Central Excise duty on the correct value of goods cleared to certain companies, alleging a relationship between them. The Revenue insisted on applying Rule 9 of the Central Excise Valuation Rules, 2004, to determine the Central Excise duty. The assessee, represented by counsel, argued that the companies were independent entities and not related parties. They also presented evidence of independent sales to support their claim that the value adopted was similar to independent sales. The counsel highlighted that the amended provisions of the Valuation Rules clarified that cost basis valuation was applicable only when all clearances were made through related persons.

Upon hearing both parties and examining the evidence, the Tribunal noted that the key issue revolved around the correct valuation for clearances made to the related companies. The Tribunal found merit in the assessee's argument that they had independent sales to non-related parties, indicating that the transaction value for those sales could be adopted for related transactions. The Tribunal emphasized that the question of relationship itself was contested by the assessee and required further consideration by the original authority in line with the amended Valuation Rules. Consequently, the impugned order was set aside, and the original authority was directed to reconsider both issues, providing the assessee with a reasonable opportunity to present additional evidence, particularly regarding independent sales.

In conclusion, the appeal filed by the assessee was allowed by remand, emphasizing the need for a fresh examination of the valuation issues and the purported relationship between the parties in accordance with the amended Valuation Rules.