CE Valuation - Inter connected undertakings - Related Persons?
A Commissioner did not agree for transaction value and demanded duty from an assessee on the goods sold to an inter connected undertaking, terming it as related person. A peep into the Law:
As per Rule 9 of the Valuation Rules, 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-clauses (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 persons 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.
Sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of Section 4sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of Section 4
stipulates that persons shall be deemed to be “related” if -
(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.
Rule 10 stipulates:
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:-
(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 Companies Act, 1956 (1 of 1956).
(b) In any other case, the value shall be determined as if they are not related persons for the purpose of sub-section (1) of Section 4.
The Tribunal set aside the order of the Commissioner in the case of Koya & Company Industries Pvt Ltd -
The Revenue did not keep quiet and took the matter in appeal to the Supreme Court where a battery of senior lawyers fought it out before a Larger Bench headed by the Chief Justice. The Supreme Court observed, "The matters have been decided by the Tribunal on their own facts. No substantial question of law is involved." And so the Civil Appeals were dismissed.
The Tribunal had originally remanded the matter to the Commissioner to determine the assessable value afresh according to his best judgment, after hearing the assessee, in terms of Rule 11 of the Central Excise (Valuation) Rules, 2000.
Another round of litigation?
Please see