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2016 (12) TMI 908 - CESTAT MUMBAI

2016 (12) TMI 908 - CESTAT MUMBAI - TMI - Valuation - rejection of transaction value - related party transaction - interconnected undertaking - Section 4 of the Central Excise Act - Held that: - From rule 9 it is very clear that only in cases where goods are sold through the person as specified under clause (ii), (iii) or (iv) of clause (b) of Section 4 the transaction value at which the goods are sold by the said person shall apply and not the sale price at which goods are sold to these three c .....

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ed that the buyers company are interconnected undertaking of the appellant company it can not 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 can not be disturbed, therefore value as provided under Rule 8 is not applicable in the present ca .....

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xcise Tariff Act, 1985. The appellant, apart from selling the goods to independent buyers is also clearing a substantial quantity (as per Show Cause Notice approximate 80% of the goods) to one M/s. Rajaram Steel Industries to be referred as "Rajaram" in this order. On scrutiny of the records of appellant the department came to know that Shri. Rajesh Sarda and Shri. Ramswaroop Sarda are the Managing Director and Director respectively of the appellant company. Whereas Shri. Ramswaroop Sa .....

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ed undertakings" though both of them are separate legal entities, being private limited companies. As the definition of related person included "interconnected undertaking" under Section 4 of the Central Excise Act, the department proposed to reject the transaction value between the appellant and Rajaram. 2. On the basis of above observations, show cause notice was issued wherein valuation of the excisable goods supplied by the Respondent to 'Rajaram' was proposed under Ru .....

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s before us. 3. Shri. Ajay Kumar, Ld. Joint Commissioner(A.R.) appearing on behalf of the appellant Revenue submits that there is no doubt that the appellant and the buyer 'Rajaram' are 'interconnected undertaking' on the basis of relationship between directors of both the companies. Once both companies are interconnected undertaking it is related person in terms of Section 4(3) (b) therefore in the transaction between the related person valuation is governed by Rule 8 of Central .....

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submits that firstly on the only basis of relation between the persons who are directors in both independent companies, it cannot become 'interconnected undertaking'. Therefore on this basis itself it cannot be said that both companies are related person. Secondly even if the contention of the Revenue is accepted that both companies are interconnected even then it is not related person in terms of Section 4(3)(b) read with Rule 9 of Central Excise Rules, 2000. As per the provisions only .....

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)] (b) Commissioner of C. Ex. Raipur Vs. Orient Steel Re-rolling 686(Tri. Del)] (c) C.C.E., S.T. & Cus, Visakhapatnam-II Vs. Rak Ceramics India Pvt ELT 599(Tri. Bang.)] (d) Shri. Krishna Alloys Vs-. Commissioner of Central Excise, ELT 329(Tri. Chennai)] 5. We have carefully considered the submissions made by both sides. 6. Section 4(3)(b) in the Central Excise Act, 1944 (b) persons shall be deemed to be "related" if- (i) they are inter-connected undertakings; (ii) they are relative .....

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signed to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); From the plain reading of the above section it appears that interconnected undertaking are also related person. However, as per Rule 9 of Central Excise Valuation Rules, 2000 it is clear that Rule 9 shall apply only when the goods are sold through person as specified under sub clause (ii), (iii) or (iv) of clause (b) of section 4 of the act. The rule 9 is reproduced below:- Rule 9. When the assessee so arranges that .....

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ail : 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. From the above rule 9 it is very clear that only in cases where goods are sold through the person as specified under clause (ii), (iii) or (iv) of clause (b) of Section 4 the transaction value at which the goods are sold by the said person shall apply and not the sale price at .....

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nected undertaking, if the relationship as described in clause (ii), (iii) or (iv) does not exist and buyer also not holding or subsidiary then for assessment purpose they will not be considered related. In view of above clear position as regard transaction between interconnected undertakings, it is crystal clear that in existing status of interconnected undertaking they should fall under the category of sub clause (ii), (iii) or (iv) of Section of 4(3)(b). In the present case Revenue contended .....

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