TMI Blog2017 (12) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 4 of the Act. As per section 4 (1(a) of the Act which is applicable for the goods sold to independent buyers. Therefore, section 4(1) (a) is not applicable to the facts of the case and correct provision of section 4(1) (b) is applicable which states that in other cases i.e. which include sale made to independent buyers as well as to related person. In that circumstance, the value is to be determined as per Rule 11 of the Valuation Rules. CBEC vide Circular No.643/34/2002-CX. Dated 01.07.2002 has clarified that Rule 9 would apply only if the entire production is sold to related person. However, part of production is sold to related person and part of production is sold to non-related person, Rule 9 as such may not apply for valuing goods sold to related person. Still the value cannot be determined under Section 4(1)(a), as that section does not apply to sales to related person. Therefore, circular provides that such sales to related person would be assessed under Rule 11 read with Rule 9. The correct valuation is required to be arrived under Rule 11 read with Rule 9 of the Valuation Rules which has not been alleged in the show cause notice. Contrary to that in the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted persons an partly to independent buyers, no specific Rule in this regard is available in the statute book and the valuation in such cases had to be resorted through Rule 11 of the Central Excise Valuation Rules, 2000 and Section 4(30 and Section 4 (1) (a) of the Central Excise Act, 1944 i.e. the transaction value charged from an independent buyer at the time of (or the nearest time as per Rule 4 of the Central Excise Valuation Rules, 2000] and the place of removal shall also be the transaction value for the goods sold to related persons as defined under clause (b) of Section 4(3) of the Act. The said method of valuation has been approved by the Hon ble Tribunal in the case of Aquamall Water Solutions Ltd. Vs. CCE, Bangalore, 2003 (153) ELT 428. The said decision has been upheld by the Hon ble Supreme Court. 3. The appellant contested the show cause notice and submitted that wrong provision has been invoked to substantiate the charge of undervaluation. Therefore, the show cause notice is not sustainable legally but the adjudicating authority relying on the decision of in the case of Aquamall Water Solutions Ltd. (supra) has confirmed the demand. Aggrieved from the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is admitted fact that Rule 11 of the Valuation Rules is applicable to the facts of the case as the appellant is selling the goods to independent buyers as well as related person and there is no such Rule to provide valuation of clearance to related person in the valuation Rules. Therefore, Rule 11 is applicable to the facts of the case. He further submits that as per section 4 (1), the valuation is to be done. The adjudicating authority has correctly valued the goods by applying the Rule 4 of the Valuation Rules. He has relied on the decision of this Tribunal in the case of Aquamall Water Solutions Ltd. (supra). 7. Heard the parties and considered the submissions. 8. The issue before us in the matter is in case where the goods are sold to independent buyers as well as to related person, in that case, how the assessable value of the goods cleared to related buyers is to be arrived. To determine the correct value, which Rule is applicable is required to be seen. 9. Therefore, all the relevant provisions of the Valuation Rules are to be incorporated hereunder: 10. Section 4 of the Central Excise Act, 1944 is the charging section which determines the value of the excisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other place or premises wherein the excisable goods have been permitted to be deposited without [payment of duty;] (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed; (cc) time of removal , in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory; (d) transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : - (i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods; (iii) value of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods. Explanation 2. - Where an assessee receives any advance payment from the buyer against delivery of any excisable goods, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (3) of section 4 of the Act, the value of such 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 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. [Where whole or part of the excisable goods are sold by the assessee to or through an inter-connected 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above provisions, there is no dispute that there is no specific provisions for valuation of the goods cleared to independent buyers as well as to related person to arrive at the assessable value for the goods cleared to the related person. Therefore, Rule 11 is applicable to the facts of the case which has not been disputed by both sides. 13. As per Rule 11, valuation of excisable goods, is to be using reasonable means consistent with the principles of and general provisions of these rules and sub-section (1) of Section 4 of the Act. As per section 4 (1(a) of the Act which is applicable for the goods sold to independent buyers. Therefore, section 4(1) (a) is not applicable to the facts of the case and correct provision of section 4(1) (b) is applicable which states that in other cases i.e. which include sale made to independent buyers as well as to related person. In that circumstance, the value is to be determined as per Rule 11 of the Valuation Rules. We find that the Rule 9 is not applicable to the facts of the case as the said rule deals with a situation when the goods are sold exclusively to related person. 14. The CBEC vide Circular No.643/34/2002-CX. Dated 01.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not correct view. 18. Further, the adjudicating authority has relied on the decision of this Tribunal in the case of Aquamall Water Solutions Ltd. (supra), the facts of the case are not similar to the facts o the case in hand, as facts in the said case are as under: The appellant admittedly is a subsidiary company of M/s. Eureka Forbes Ltd. (hereinafter referred to as EFL) are inter alia engaged in the manufacture of water filter-cum-purifier with accessories of various models as also water cooler-cum-purifier. They entirely stock transfer the goods manufactured to their own depots situated in various States. From the depots the goods are sold to EFL and also to independent buyers. 2. Prior to 1-7-2000 since the department considered the appellant by virtue of it being a subsidiary company of EFL and to be a related person of the appellant, the appellants were clearing the goods on an assessable value that was determined based on the retail price of EFL and after deducting the retailer's margin and other admissible deductions. 3. After the amendment to Section 4 of the Central Excise Act, 1944 w.e.f. 1-7-2000, the appellants started clearing the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis the assessable value would work out to be the one on which duty was paid by the appellants. 19. In the case of Aquamall Water Solutions Ltd. (supra) there was no sale at factory gate and all the brands stock transferred to depots and from depots the goods were transferred to the related persons as well as independent buyers and thereafter sold to independent buyers. All goods were sold to related person in that case who directly sold the goods to independent customers. Therefore, in that case, the appellant was not clearing the goods to independent as well as to related person. Therefore, the decision of this Tribunal in the case of Aquamall Water Solutions Ltd. (supra) has no relevance to the facts of the present case. It is admitted fact that the appellant is selling the goods to independent buyers as well as to related person. 20. In view of above analysis, the correct valuation is required to be arrived under Rule 11 read with Rule 9 of the Valuation Rules which has not been alleged in the show cause notice. Contrary to that in the show cause notice, the valuation is sought to be arrived under Rule 11 read with Section 4(1) (a) of the Act and Rule 4 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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