JAGAJOTHI SPINNING MILLS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant is a firm of four partners one of whom was the Managing Partner. During the period July 2000 to September 2001, the appellant manufactured cotton yarn and sold about 93% of such yarn manufactured to M/s. Jayakumar Fabrics which was a proprietorship concern of Shri. S. Jayakumar who was one of the partners of the appellant firm. Further Shri. S. Jayakumar is the son of the Managing Partner of the appellant firm. The issue involved in this appeal is the assessable value to be adopted for payment of excise duty on cotton yean sold by the appellant to M/s. Jayakumar Fabrics. Revenue was of the view that the buyer and seller were related and therefore the transaction value could not be adopted as the assessable value. Further, since the yarn sold to M/s. Jayakumar Fabrics was consumed by that firm in further manufacture of fabrics, Revenue was of the view that the value should be arrived at as 115% of the cost of production as per Rule 9 and 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

(2.) A show cause notice issued demanding differential excise duty based on assessable value arrived at 115% of cost of production was confirmed by the adjudicating authority along with interest and penalty equal to the differential duty imposed under section 11AC of the Act. There was a penalty of Rs. 10,000/ - imposed under Rule 173Q of Central Excise Rules, 1944, Rule 25 of Central Excise (No. 2) Rules, 2001 for the periods for which these rules were applicable.

(3.) THE Counsel for appellant submits that appellant and M/s. Jayakumar fabrics were independent entities and there was no mutuality of interest. Further, the appellants were selling such goods to independent buyers at prices lower than the price at which goods were sold to M/s. Jayakumar Fabrics.