TMI Blog2018 (10) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... s Rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule. In view of the specific decisions of the Hon’ble Supreme Court on the issue, the decision of Commissioner (Appeal) cannot be sustained - appeal allowed - decided in favor of appellant. - APPEAL No. E/1694/2010 - A/87579/2018 - Dated:- 8-10-2018 - Mrs. Archana Wadhwa, Member (Judicial) And Mr. Sanjiv Srivastava, Member (Technical) Shri S.K. Babaladi, Consultant, for appellant Shri M.R. Melvin, Superintendent (AR), for respondent ORDER Per: Sanjiv Srivastava The appeal is directed against the order of Commissioner (Appeals) Central Excise Mumbai Zone-1 dated 30th June 2010. By the said order Commissioner (Appeal) has upheld the order of Deputy Commissioner Central Excise, Malad Divison, Mumbai V Commissionerate holding as follows: 25. I confirm the demand of differential Central Excise duty amounting to ₹ 2,46,296/- (Rs 2,40,390/- (Basic) + ₹ 4,808/- (Education Cess) + ₹ 998/- (Higher Education Cess)) 9rupees Two Lakhs Forty Six Thousand Two Hundred and Ninety S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of 18% of their total clearances, made to their sister concern. Remaining 82% of the sales were made to independent buyers. Since all the sales were not made to or through related person Rule 9 of valuation rules shall not be applicable for determination of the assessable value of the goods cleared to related person. ii. Further none of the authorities have held them and their sister concern to be related person in terms of Section 4(3)(b)(ii), (iii), (iv) or clause 41 of Section 2 of the Companies Act, 1956 (1 of 1956). Thus invoking the provisions of Rule 9, for determining the assessable value may not be justified. iii. Both the authorities have failed to appreciate that Rule 9 of the Valuation Rules 2000, is applicable only when the goods are sold through related person. Rule 10 of the valuation rule specifically cover the situation when sales are to through interconnected undertakings and the sales were also made to independent buyers. iv. Quantity discounts offered by them need to be allowed. It is not the case that quantity discounts on the list price were given only to their sister concern, but were also given to Marico Limited. v. In the case of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for clearance to their interconnected unit was approximately lower by ₹ 1 to ₹ 2.5 per kg from the printed price list. They have offered quantity discounts to other bulk buyers namely M/s Marico Limited. In fact about 82% of the goods were being cleared to independent buyers and only 18% have been cleared to their sister concern (inter-connected unit) 5.1 For proper appreciation of law we reproduce Sub Section (3) of Section 4 of the Central Excise Act,1944 and Rule 8, 9 and 10 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, below: Central Excise Act, 1944 Section 4 (3) For the purpose of this section,- (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 to be related if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the assessee, 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.- I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the purpose determining the value in terms of Rule 9, the persons transacting should be related as per the clause (ii), (iii) or (iv) of sub section 3 to Section 4. 5.3 As per Para 7 of the Show Cause Notice, In view of the above it is amply clear that, in legal terms, M/s Amardeo Plastic Industries and M/s Indian Extrusions are inter-connected undertakings. As such they should have considered the value of their products sold to M/s Indian Extrusions in terms of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, and not the value which was verbally decided among them. 5.4 Para 17 of the order in original states Thus, it is quite clear that the department has strived to prove in the Show Cause Notice itself that since two partners in both the firms are common, both the firms are proved to be inter-connected undertakings and prices charged are favoured prices. The department has mentioned in the show cause notice all the relevant act and rules to prove their contentions. But assessee is not accepting the same simply stating that the same are allegations. Neither the assessee provides any proof nor refer to any law to prove that they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of (ii), (iii) or (iv). Our view is the view as have been held by various authorities listed below:- i. Handy Wires Pvt. Ltd. v. Commissioner of Central Excise, Nagpur [2015 (329) E.L.T. 169 (Tri.-Mumbai)]; ii. South Asia Tyres Pvt. Ltd. v. Commissioner of Central Excise, Aurangabad [2003 (152) E.L.T. 434 (Tri.- Mumbai)]; 5.8 Hon ble Supreme Court has in case Commr. Of C. Ex., Aurangabad Versus Goodyear South Asia Tyres Pvt. Ltd [2015 (322)ELT 389 (SC)] 14. No doubt that the assessee became the fully owned company of Goodyear, the relationship between the two would be that of related persons as they became inter connected undertaking and are covered by the provisions of amended Section 4(4)(3)(b) of the Act which provides that the person would be deemed to be related if : i. they are inter-connected undertakings, ii. they are relatives, iii. Amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor, or iv. they are so associated they have interest, directly or indirectly, in the business of each other. 15. This position was not denied even by the assessee. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f saying that such sale can be effected directly to or indirectly through such related person. It is only when all three considerations are cumulatively met that proviso (iii) can be said to be attracted. 5.9 Further Hon ble Supreme Court has in case of Commissioner Of C. Ex., Pune Versus Mahindra Ugine Steel Co. Ltd [2015 (318) ELT 592 (SC)] held as follows:- 3. The question before us, in the present appeal, is as to whether Rule 8 of the Central Excise (Valuation) Rules, 2000 (hereinafter referred to as the Rules ) or Rule 11 thereof would apply in arriving at the valuation of the goods at the end of the respondent/assessee. As per the appellant/Department Rule 8 is applicable and therefore, the value has to be 115% of the cost of production. Rule 8 reads as under : RULE 8 : .. 4. On the face of it Rule 8 will have no application to the facts of the present case. It is rightly pointed out by the CEGAT that for the applicability of this Rule two requirements are to be fulfilled. The first is that the excisable goods that the assessee manufactures are not sold by him and the second requirement is that these goods must be used for consumption eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as related to Mahindra and Mahindra in terms of Section 4(3)(b)(i) of the Act. The Commissioner in this behalf stated as under in his order: I find that assessee have manufactured goods on job work basis for M/s. Mahindra Mahindra and others. M/s. Mahindra Mahindra are the related persons in terms of Section 4(3)(b)(1) a fact which the assessee has also admitted and others i.e. M/s. Ashok Leyland, M/s. Ameja M/s. PSSL are not related. 11. Such a relationship is excluded from Rule 9 as subclause (i) is conspicuously absent therefrom. On this ground alone proviso to the Rule 9 shall not be attracted at all. Therefore, from whatever angle the matter is looked with, Rule 8 would not apply here. 12. Once we come to the conclusion that Rule 8 is not applicable in the case of the respondent, it is Rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule. 5.10 Thus in view of the specific decisions of the Hon ble Supreme Court on the issue, the decision of Commissioner (Appeal) cannot be sustained. 6.0 The Appeal is allowed with consequential reliefs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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