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Handy Wires Pvt. Ltd. Versus Commissioner of Central Excise, Nagpur

2015 (11) TMI 1241 - CESTAT MUMBAI

Valuation - sale to interconnected units - Discharge of excise duty under Rule 8 and 9 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 - Penalty u/s 11AC - Held that:- Appellant have admitted that the three buyers companies are their interconnected undertakings. However merely because buyers are interconnected undertakings it is not sufficient to hold that the companies are related persons. - transaction value can be rejected only when the buyers are related i .....

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nected undertaking is correct valuation and the same cannot be disturbed, therefore value as provided under Rule 8 is not applicable in the present case. - When for the same goods transaction value is available i.e. transaction value at which the goods are sold to independent buyers, then there is no scope of any notional value such as valuation in terms of Rule 8 or otherwise. For this reason also valuation of Rule 8 cannot be applied in the present case. - appellant have correctly valued their .....

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/1/2010 passed by the Commissioner of Central Excise, Nagpur, wherein total demand of ₹ 8,03,787/-, interest and penalty of equal amount under Section 11AC and also equal amount of penalty under Rule 25 of Central Excise Rules, 2002 were confirmed. The fact of the case is that the appellant M/s. Handy Wires Pvt. Ltd. are engaged in manufacture of M.S. Wire. On scrutiny of the record by the Revenue officer it was observed that the appellant have cleared excisable goods i.e. M.S. Wire to the .....

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d that these are the related persons. Show cause notice was issued and culminated into adjudication wherein it was held that the appellant is required to discharge excise duty under Rule 8 and 9 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 i.e. 110% of cost of production or manufacture of said goods supplied to all the three related entities and accordingly confirmed demand of duty, interest and penalty. 2. Shri. Vinay Sejpal, Ld. Counsel for the appellant .....

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Section 4 of the Act, transaction value shall be the value at which the goods are sold by such related person at the time of removal to buyer(not being related person) or where such goods not sold to such buyers(being related person) who sold such goods in retail. He also referred Board Circular no. 354/81/2000 TRU dated 30/6/2000 wherein in para 24 it was clarified that the transaction will be rejected in case of interconnected undertaking only when they are related in the sense of any of claus .....

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any are interconnected undertaking of the appellant, these three buyers cannot be treated as related person. Therefore whole foundation of the case gets demolished. He submits that in the impugned order Ld. Commissioner has held that all the three buyers as interconnected undertaking and due to this reason treated as related person and valuation was attracted under rule 8 and 9 of Central Excise Valuation Rules, 2000, which is absolutely incorrect as per the explanation given above. He submits t .....

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sold to independent buyers. He submits that on the issue when goods are sold to related person as well as to the independent buyers the value at which goods to the independent buyers shall apply also to the clearance made to related buyers. In this support he placed reliance on the Larger Bench judgment of this Tribunal in the case of Ispat Industries Ltd. Vs. CCE Raigad [2007 (209) ELT 185(Tri. LB)]. In the said judgment this position has been confirmed that where the goods are sold to related .....

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t consumer. For this reason also at the most price charged to the independent consumer shall be applicable and not price arrived at by adopting cost construction method as provided under Rule 8 of Central Excise Valuation Rules, 2000. He submits that on both the counts as submitted above, in any case valuation adopted by Ld. Adjudicating authority in terms of Rule 8 and 9 of Central Excise Valuation rules is not at all applicable therefore impugned order is suffered by very serious infirmity and .....

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d. Adjudicating authority has correctly applied the valuation of the goods in terms of Rule 8 and 9 of Central Excise Valuation Rules, 2000. He also submits that the directors in all the companies are common therefore appellant and buyer companies are related person. He prays that impugned order be maintained and the appellant's appeal be rejected. 4. I have carefully considered the submissions made by both the sides and perused the record. 5. The appellant have admitted that the three buyer .....

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e, 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. Explanation. In this clause (i) "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 (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 195 .....

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a person who is related in the manner specified in either of sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of the goods shall be the normal transaction value at which these are sold by the related person at the time 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 .....

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ision of rule 9 also shows that merely buyers is interconnected undertaking that alone is not sufficient for holding as related person. We have gone through the Board Clarification referred by the Ld. Counsel in circular No. MF/DR/F/354/81/2020 TRU dated 30/6/2000 is reproduced below. F.No. 354/81/2000-TRU Subject: Central Excise - Section 4- Transaction Value- Regarding. I am directed to say, that as you aware, section 4 of the Central Excise Act, as substituted by section 94 of the Finance Act .....

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is the sold consideration for the sale, be the transaction value; b. in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. 2. The provisions of the section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of Sec.3. a. "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; b. persons shall be deemed .....

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Practices Act, 1969; and ii. "relative" shall have the meaning assigned to it in Clause (41) of Section 2 of the Companies Act, 1956; (c) "place of removal" means. 23. Where goods are sold through related persons, the transaction value is not applicable. However, there is some change in the definition of related personsvis-vis the old definition. It includes "inter-connected undertakings" as defined in the Monopolies and Restrictive Trade Practices Act, 1969. The de .....

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rate is a subsidiary of the other body corporate, or c. if the bodies corporate are under the same management, or d. if one body corporate exercise control over the other body corporate in any other manner; i. where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firms, a. hold, directly or indirectly, not less than fifty per cent of the shares, whether preference or equity, of the body corporate, or b. exercise control, directly or i .....

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of this Act, (two bodies corporate), shall be deemed to be under the same management,- From the above clarification it was made clear that the transaction value can be rejected only when the buyers are related in the sense in clause (ii), (iii) or (iv) of Section of 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 ( .....

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ng therefore they are related and consequently applied rule 8 of Central Excise Valuation Rules, 2000 and adopted the valuation of cost construction method. Ld Commissioner have not brought any material to establish that the relationship between appellant and buyers company are one of the relationship as prescribed under sub clause (ii), (iii) or (iv) of Section 4(3)(b) of Central Excise Act therefore in our considered view even if it is accepted that the buyers company are interconnected undert .....

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