Custom, Excise & Service Tax Tribunal
Cce, Raipur vs M/S M. K. Re-Rolling Mills Pvt. Ltd on 18 October, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi. Date of hearing: 07.10.2016 Pronouncement on: 18.10.016 Excise Appeal No. 1274 of 2012 (Arising out of order-in-original No. 11 & 12/RPR-II/2012 dated 15.03.2012 passed by the Commissioner (Appeals-II), Customs and Central Excise, Raipur). CCE, Raipur Appellant Vs. M/s M. K. Re-rolling Mills Pvt. Ltd., Respondent
Appearance:
Sh. R. K. Manjhi, AR for the Revenue Sh. Manish Saharan, AR for the Respondent - Assessee Coram:
Honble Justice (Dr.) Satish Chandra, President Honble Shri B. Ravichandran, Member (Technical) Final Order No. 54117/2016 Per: B. Ravichandran:
The Revenue is in appeal against the order dated 15.03.2012 of Commissioner (Appeals), Raipur. The issue involved in the present appeal is valuation of goods cleared by the respondent-assessee to M/s M.K. Tubes India Pvt. Limited. The case of the Revenue is that the respondent and M/s M.K. Tubes India Pvt. Limited are related as both the units are having two common Directors. Accordingly, the transaction value has to be arrived at based on cost of production (110% of cost of production), in terms of Rule 8 of Central Excise Valuation Rules, 2000. Accordingly, proceedings were initiated against the respondent to demand differential duty. The case was adjudicated and the original authority confirmed the demand of Rs.38,32,643/- against the respondent and imposed equal amount of penalty on them. On appeal, vide the impugned order the Commissioner (Appeals) set-aside the original order. Aggrieved, the Revenue is in appeal.
2. We have heard both the sides and perused the appeal records.
3. In the appeal, it is contended that the respondent and the buyer are related persons. The value of goods cleared to such related person will be governed by the provision of Rule 11, read with Rule 8 or 10 of Valuation Rules, 2000. It is the Revenues case that Rule 11 has been correctly invoked in the present case for determining a transaction value on cost construction method (110% of cost of production). Revenue also contested the reliance placed by the Commissioner (Appeals) on the decision of Honble Supreme Court in CCE, Ahmedabad vs. Xerographic Ltd., - 2010 (257) ELT 11 (SC).
4. We find the only ground on which the transaction value of the respondent was sought to be rejected in the present case is that the two Directors were common for respondent-assessee as well as buyer. We note that the impugned order examined the status of both the parties. Both are private limited company though having common Directors. Admittedly, in terms of Section 2(g) of MRTP Act both are interconnected undertakings. The impugned order noted that merely because these are two interconnected undertakings, the transaction value under Section 4(1)(a) cannot be rejected. Reliance was placed on Board Circular dated 30.06.2006. The impugned order further examined the scope of Section 4 (3)(b) and (ii) with reference to terms relatives. It was recorded that both were entities with separate share holding patterns. These two companies cannot be termed as relatives in terms of clause (41) of Section 2 of Companies Act, 1956. The impugned order concluded that the respondent and the buyer are related persons only by way of Section 4(3)(b)(i) of the Act being interconnected undertakings and by no other accounts, namely (ii), (iii) and (iv) of sub-section 4(3)(b) of the Act. It was also noticed that the respondent and M/s M. K. Tubes are not holding/ subsidiary companies. The impugned order further examined and that there is nothing on record to indicated common/ mutuality of business interest in these transactions. Finally, the impugned order held that based on the factual position and applying the provisions of Valuation Rules the transaction value adopted by the respondent cannot be rejected. It was recorded that no extra commercial consideration has been demonstrated. We also find that the reliance placed on the decision of Honble Supreme Court in Xerographic Ltd. (supra) cannot be faulted only on the ground the concept of related person discussed therein was with reference to earlier Valuation Rules. There is no material difference in the basic principle with reference to valuation of goods when the transaction is between related person. Mutuality of interest and lower price due to extra commercial consideration are relevant factor for consideration.
5. Considering the above legal position and facts of the present case, we find no reason to interfere with the findings of the lower authority. Accordingly, the appeal filed by the Revenue is dismissed.
(Pronounced on 18.10.2016).
(Justice (Dr.) Satish Chandra)
President
(B. Ravichandran)
Member (Technical)
Pant