2024-VIL-1023-CESTAT-ALH-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Related Parties, Valuation Rules, Interconnected Undertakings - appellant is engaged in the manufacture of motor vehicle parts and supplied a major portion of its products to Maruti Udyog Ltd – Dept alleged that the appellant and Maruti Udyog Ltd. were related parties, as defined under Section 4(3)(b) of the Central Excise Act, 1944 – Demand of differential duty by applying Rule 9 read with Rule 8 of the Central Excise Valuation Rules, 2000, for the period from 2008 to 2013 - Whether the appellant and Maruti Udyog Ltd. are "related parties" under Section 4(3)(b) of the Central Excise Act, 1944, justifying the application of Rule 9 read with Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - HELD - although the appellant and M/s Maruti Udyog Ltd. had common interests, the appellant sold goods to both related and unrelated buyers. Hence, the strict application of Rule 9 was inappropriate because it applies when goods are exclusively sold to a related person - the valuation must be based on actual transaction values when goods are sold to independent parties. The demand for additional duty based on notional profit was incorrect. Furthermore, the imposition of penalties is set aside as the acts did not reflect willful suppression of facts but rather involved legal interpretation - The demand based on Rule 9 read with Rule 8 of Valuation Rules is set aside and the appeal is allowed - Whether the department was justified in invoking the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944, on the grounds of suppression of facts with the intent to evade duty – HELD - the extended period of limitation could not be invoked since there was no evidence of deliberate suppression of facts or intent to evade duty. The appellant had disclosed all relevant information regarding the transactions with Maruti Udyog Ltd., and the demand was based on a difference in interpretation of the applicable valuation rules - The invocation of the extended period of limitation and the corresponding demand for duty are set aside - Whether the imposition of penalties under Section 11AC of the Central Excise Act, 1944, read with Rule 25 of the Central Excise Rules, 2002, was justified in the absence of willful misstatement or suppression of facts – HELD - penalties under Section 11AC could not be imposed as the appellant had acted under a bona fide belief regarding the correct valuation method. The issue at hand was related to the interpretation of law, and there was no deliberate attempt to evade duty - The penalties imposed under Section 11AC of the Central Excise Act, 1944, are set aside.
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