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2018 (2) TMI 1231 - AT - Central ExciseValuation - Interpretation of Statute - definition of related person under section 4 of Central Excise Act, 1944, read with definition of "interconnected undertakings" in Section 2(g) of MRTP Act, 1969 - Valuation - related party transaction - Department harboured the view that appellant and the two firms are related to each other and having mutual interest; that appellants adopted lower prices to these two firms compared to that of other independent customers; that appellants were collecting certain amounts as twisting & straitening charges from these two firms by raising debit notes which are not being included in the assessable value. Whether the shareholding of "close relatives" of the partners can be added to the shareholding of the partners themselves for the purposes of adjudging whether the partners of each firm hold directly or indirectly, not less than 50% of the share of another entity which is a body corporate? Held that: - At the time of introduction of new section 4, the CBEC thought it proper to issue a circular No. 354/81/2000-TRU dated 30.06.2000 which sought to explain the changes brought about. In para 5 of the said circular, CBEC clarified that new section 4 essentially seeks to accept different transaction values which may be charged by the assessee to different customers for assessment purposes, so long as these are based upon purely commercial consideration, where buyer and seller have no relationship and price is the sale consideration for same - Para 24 of the circular clarifies that a new provision has been made in the valuation rules and even if the assessee and the buyer are inter-connected undertakings, the transaction value will be registered only when they are related in terms of clause (ii), (iii), or (iv) of sub section 4(3)(b) or the buyer is a holding company or a subsidiary company of the assessee. In para 25, it was further clarified that notwithstanding the change in the definition of related personin the new section 4 for practical applications, its scope has been restricted and but for small variation, it would not be much different than that covered under the old section 4 definition - post 01.07.2000, assessee and the buyer shall be deemed to be relatedas per section 4(3)(b) of the Act. For the purpose of section 4 of the Central Excise Act, persons shall be deemed relatives, if they both in any of the categories listed in sub section 4 (3) (b) thereof. True, one of these categories is when the persons are relatives, where relative shall have the meaning assigned to it under section 2(41) of the Companies Act, 1956. The list of relatives under the provision includes only members of Hindu Undivided Family (HUF), or husband & wife, or, if they fall in the list of 22 categories of relatives given in schedule 1(a) to Section 6 of the Companies Act, 1956. The relationships like brother-in-law, mother-in-law etc. do not find a place in that list. In any case, the department is not seeking to allege that the impugned entities are related on account of their falling within the ambit of 4(3)(b)(ii) namely they are relatives. On the other hand, the department has only sought to charge these entities as being related for the purpose of section 4(3)(b)(i), that they are inter-connected undertakings. Whether the addition of share holding of close relatives by the adjudicating authority is legally correct or not? - Held that: - the answer is resoundingly in the negative. We are unable to find any provision in section 4 of Central Excise Act, 1944 or for that matter, in section 2(g) of MRTP Act, 1969 that allows for such addition of shareholding of close relatives. Secondly the conclusions arrived at by the adjudicating authorities in this regard are against all accepted principles of statutory interpretation. Words in a statute should be interpreted literally and as they stand, and the starting point for interpreting a statue, is the language of the statute itself. When the words of a statute are unambiguous, this first canon is also the last - the attempt of the lower authorities to add the shareholding of the shareholders in Black Gold "related" to the concerned partners is surely a misconceived interpretation of the relevant statutory provision. The combined shareholding of the partners in each firm, who are also shareholders in the body corporate can alone be added up for the purpose of determining whether they cross the 50% shareholding bench mark. As seen above, this is suddenly not the case in respect of the concerned partners of both AS Steel Traders and Sri Vijayalaxmi Steel Traders - M/s Black Gold and the two firms cannot be considered as related persons for the purpose of section 4(3)(b)(i) of Central Excise Act, 1944. Appeal allowed - decided in favor of appellant.
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