TMI Blog2020 (2) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... le 9, it can be seen that though in Section 4 (3) (b) (i) interconnected undertaking are deemed to be related, however, in Rule 9 only the relationship mentioned under sub-clauses (ii), (iii) or (iv) of clause (b) of sub-Section (3) of Section 4 are considered for the purpose of related person, therefore, even though the seller and buyer are interconnected undertaking, if not related person in terms of sub-clauses (ii), (iii) or (iv) of clause (b) sub-Section (3) of Section 4, the same cannot be qualify as related person. Therefore, merely for the reasons that the partners of the buyer partnership firm are Director or relative of Director, the partnership firm and the appellant which is a private limited company cannot become related person for the purpose of Section 4 (3) (b). In an identical facts where the supplier is a private limited company and buyer is a partnership firm in the case of M/s Surabh Tubes Pvt. Ltd. versus Commissioner of Central Excise, Indore [ 1770009 ], a coordinate bench of this Tribunal having identical facts of the present case the supplies made by a private limited company to a partnership firm it was held that both are not related. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 4 (3) (b) of Central Excise Act, 1944. Reliance was also placed on Section 6 (b) of the Companies Act, 1956 under which 28 relations are listed in Schedule I (a) which shall be construed as relative like husband and wife etc. Accordingly, the Revenue has invoked Section 4 (3) (b) and Rule 8/9 of Central Excise Valuation Rules, 2000 according to which the supplies made by the appellant to their alleged related partnership firm M/s SSI should be valued @ 110% of cost of production and demand of differential duty have been proposed. Both the show cause notices were adjudicated whereby the demand of differential duty alongwith interest and penalty was confirmed, therefore, the present appeals filed by the appellant. 2. Shri O.P. Agarwal, learned Chartered Accountant appearing on behalf of the appellant submits that the appellant is a private limited company and the buyer is a partnership firm. The transaction value was disputed and deemed transaction was applied invoking Rule 8/9 of Central Excise Valuation Rules, 2000 on the ground that the appellant and the buyer M/s Sunshine Steel Industries are interconnected undertaking, therefore, they are related in terms of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Authorized Representative appearing on behalf of the Revenue reiterates the finding of the impugned order. 4. We have carefully considered the submissions made by both the sides and perused the appeal record. We find that the issue before us to be decided is whether the appellant s transaction value is acceptable in a case when goods were sold to partnership firm wherein one of the partner is Director in the appellant s company or whether the valuation should be done in terms of Rule 8/9 of Central Excise Valuation Rules, 2000 i.e. 110% of cost of manufacture of final product. In the impugned order, we find that the entire case was made out only on the limited facts that in the buyer partnership firm one of the partner is Director in the appellant s company, therefore, both the concern are interconnected undertaking. We find that except this so called relationship there is no other allegation of mutual interest between both the concern, therefore, we examine the matter in terms of the statutory provision as provided under Section 4 (3) (b) and Rule 8/9 of Central Excise Valuation Rules, 2000. The Section 4 which defines the related person is reproduced below :- S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : When the assessee so arranges that the excisable goods are not sold by him except to or through an inter-connected undertaking, the value of goods shall be determined in the following manner, namely :- If the undertakings are so connected that (a) 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 buyers is a holding company or subsidiary company of the assessee, then the value shall be determined in the manner prescribed in Rule 9 . 6. From the above Rule 9, it can be seen that though in Section 4 (3) (b) (i) interconnected undertaking are deemed to be related, however, in Rule 9 only the relationship mentioned under sub-clauses (ii), (iii) or (iv) of clause (b) of sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause Inter-connected undertakings shall have (i) the meaning assigned to it in clause (g) of Section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); Rule 9 Rule 10 of Valuation Rules, 2000 Rule 9 : When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in either of sub-clause (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 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 : When the assessee so arranges that the excisable goods are not sold by him except to or through an inter-connected undertaking, the value of goods shall be determined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2 (41) of the Companies Act, 1956. We note that a juristic person, like a private limited company, cannot be called as a relative of a partnership firm. The scope of term relative will apparently apply to only natural persons. Reference can be made to the decision of Tribunal in CCE, Raipur versus Akash Ispat Ltd. reported in 2016 (337) E.L.T. 295 (Tri. Del.). On this ground alone, the proceedings against the appellant are unsustainable. Even if some of the Directors of the appellant are partners of the buying firm, this by itself do not make them related persons. It is a well settled legal position that the relationship between two legal entities are to be established by the facts applicable to each case. We note that the lower Authorities have misdirected themselves in examining the legal provision of Section 4 (3) (b) (ii), and without examining the facts of the present case applied a completely inapplicable provisions of law to decide the valuation issue. We note that the impugned order suffers from serious legal infirmity, as discussed above and accordingly the same is set aside. The appeal is allowed . 8. From the above decision having identical facts of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration, we find that the parties involved are a partnership firm and a public limited company. Merely because some of the partners in the partnership firm and some of the Directors of the public limited company are relatives, it cannot be alleged that the partnership firm and the public limited company are related, because relationship as defined in the Companies Act read with Central Excise Act applies to natural persons and not to impersonal bodies like corporations. Therefore, the proposition in the show-cause notice and the findings of the impugned order that merely because some of the partners of the partnership firm and some of the Directors of the public limited company are relatives the firm and the company are related, has no legal basis whatsoever, especially in the light of the judgment of the Hon ble Apex Court in the case of Hind Lamps Ltd. The said legal position was affirmed by the Hon ble Apex Court in the case of Jay Engineering Works Ltd., referred to supra wherein it was held that concept of relative has no application to impersonal bodies . 10. From the above judgments, which are on the identical facts of the present case also, the appellant and the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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