2025-VIL-1048-CESTAT-HYD-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Valuation, Related Persons, Interconnected Undertakings, Mutuality of Interest – Appellant entered into a joint venture agreement with Opto-Sensors Inc. (OSI) forming ECIL-Electronics Corporation Rapiscan Ltd. (ECRL). The Department issued show cause notices for the period 01.07.2000 to 30.06.2012 alleging that ECIL and ECRL were related persons as interconnected undertakings, and therefore valuation under Section 4(1)(a) of Central Excise Act, 1944 could not be applied, requiring recourse to Rule 10(a) read with Rule 9 of Central Excise Valuation Rules, 2000 - Whether the valuation adopted by the Department for demanding duty under Section 4 of Central Excise Act and Central Excise Valuation Rules is correct on the ground that ECIL and ECRL constituted related persons warranting application of Rule 10(a) for valuation purposes – HELD - While ECIL and ECRL were admittedly interconnected undertakings post 01.07.2000, for invoking Rule 10(a) read with Rule 9, the parties must also be related in terms of having interest directly or indirectly in each other's business as per Section 4(3)(B)(iv) of CEA, 1944 - The issue of mutuality of interest between ECIL and the joint venture had been conclusively determined in earlier litigation through orders of the Adjudicating Authority, Tribunal, and Supreme Court, which held that there was no mutuality of interest between the parties. The factual matrix regarding absence of mutuality of interest remained unchanged for the post-2000 period - Additionally, evidence showed that ECIL had sold goods to independent unrelated customers, negating the Department's contention that sales were exclusively to the joint venture. The Board Circular dated 30.06.2000 clarified that the scope of "related person" definition post-amendment was not materially different from the pre-amendment definition - the Rule 10(a) could not be invoked due to existence of sales to unrelated parties, and absence of mutuality of interest between the parties. Therefore, recourse had to be taken to Rule 10(b) which provides for determination of value as if the parties were not related persons, meaning transaction value under Section 4(1)(a) would be the basis for valuation - The impugned order is set aside and the appeal is allowed
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