By TIOL News Service

MUMBAI, DEC 04, 2014 : THE appellants are manufacturers of parts of pistons and sold the same to their group Co. on transaction value.

After introduction of Valuation Rules, 2000 the Revenue was of the opinion that since the goods were being sold to "related persons" the appellant is required to pay duty under Rule 8 of the same during the 01.07.2000 to 30.06.2002.

Demands were confirmed by the lower authorities and, therefore, the appellant is before the CESTAT.

The appellant submitted that they are a Private Ltd. Company and the buyer of the goods is a Public Ltd. Co. therefore, they cannot be termed as related persons as per the definition provided in Section 2(41) of the Companies Act, 1956. At the most, the allegation of the Revenue could have been that both the units are interconnected undertakings and for that purpose Rule 10(a) of Central Excise Valuation Rules, 2000 will be applicable. However, since that has not been proposed, valuation adopted by the lower authorities under Rule 8 of the Central Excise Valuation Rules is not sustainable. Reliance is placed on the Board Circular F.No. 354/81/2000/TRU dated 30.06.2000.

The AR submitted that the Commissioner (Appeals) has given a finding that the appellants are relatives as defined in Section 2(41) of the Companies Act, 1956 and this finding has not been controverted by the appellants and, therefore, the order needs to be upheld.

The Bench extracted the definition of 'relative' as mentioned in s.2(41) of the Companies Act, 1956 and the list of relatives as defined in section 6 of the Companies Act and observed that the appellant (a Private Ltd. Co.) and the buyer (a Public Ltd. Co.) cannot be termed as relatives.

After reproducing the contents of rules 8, 9 & 10 of the Valuation Rules, 2000, the Bench observed that since the appellant & the buyer are not related persons the appropriate Rule for valuation is Rule 10 of the Central Excise Valuation Rules.

The Bench further observed that as per the said Rule and in view of the CBEC Circular dated 30.06.2000 it should be established that both the parties are having mutual interest in business and inter-connected with each other.

Portions from the Board Circular dated 30.06.2000 pertaining to the definition of Inter-connected undertakings as appearing in the Monopolies and Restrictive Trade Practices Act, 1969 were extracted and, thereafter, the Bench concluded -

"7.3 On perusal of the definition of the "inter-connected undertakings", we observe that the appellants are not covered under the definition. We further find that the issue of mutual interest has also not been alleged against the appellants. In these circumstances, we hold that Rule 8 of the Valuation Rules is not applicable in the facts of this case. Accordingly, we set aside the impugned order and allow the appeals with consequential relief, if any."

(See 2014-TIOL-2441-CESTAT-MUM)