2026-VIL-222-CESTAT-HYD-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Valuation of excisable goods cleared to an inter-connected undertaking, Supply of tailor-made goods - Appellant supplied certain material to an inter-connected undertaking. Department contended that the valuation should be done under section 4(1)(b) of the Central Excise Act, 1944 read with Rule 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, as the goods were being cleared to a related party, which in turn were being sold in retail – Appellant case that Rule 9 and 10 cannot be applied as the entire excisable goods are not sold only to or through related person – Demand invoking extended period – HELD - For invoking Rule 9 of the Central Excise Valuation Rules, it is necessary that the inter-connected undertaking is also related in the manner specified in sub-clauses (ii), (iii) or (iv) of section 4(3)(b). In the present case, the Department did not allege or establish that the inter-connected undertakings were related in the said manner. For the related person definition under section 4(3)(b)(iv), there must be a mutual interest between the parties, which was not proved in the present case. Mere inter-connectedness of the undertakings does not lead to the conclusion of mutuality of interest. There being merely an inter-connected undertaking cannot lead to valuation in accordance with Rule 9 or 10(a), both prior to and post amendment to 01.12.2013. Incidentally, only Rule 9 has been invoked in the SCN for valuation. Therefore, the transaction value has to be accepted for the purposes of discharging Central Excise duty – an attempt has been made by the adjudicating authority to hold that even if Rule 9 and 10 of Central Excise Valuation Rules were not applicable, the valuation in the case should be under clause (b) of sub-section (1) of section 4. It is a case where the demand was proposed based on valuation under Rule 9, where the goods were required to be sold only through the related person prior to 01.12.2013, which is not the case in the present appeal and post amendment, while it is covered as part sale is also included under Rule 9, but the same interconnected undertaking is also required to be related in the manner specified in either of sub-clauses (ii), (iii) or (iv) of section 4(3)(b). The department has not been able to establish that they were otherwise also related in terms of said sub-clauses - The transaction value of the goods cleared to the inter-connected undertaking should be accepted for the purpose of discharging the Central Excise duty. The impugned order is set aside and the appeal is allowed
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