2003 (9) TMI 434 - AT - Central Excise

Summary

Issues:
Assessable value for central excise duty on sales to group companies, applicability of negotiated price as normal value, Modvat credit entitlement, price comparison for different buyers.

Assessable Value for Central Excise Duty on Sales to Group Companies:
The appellant, a manufacturer of electron guns, sold a significant portion to its group companies. The Revenue contended that sale price to related parties cannot be accepted for valuation, leading to a duty demand and penalties. The appellant argued that the sale prices were negotiated and commercially justified, citing precedents where the Tribunal and the Apex Court upheld similar transactions. The Tribunal found the Revenue's view unjustified, holding that the duty demand and penalties were unsustainable.

Applicability of Negotiated Price as Normal Value:
The appellants contested the duty demand, asserting that the negotiated sale prices were fully commercial and should be accepted as the normal value for assessment. They highlighted that the price variations were minimal and based on commercial considerations like order quantity. Previous Tribunal decisions and Apex Court rulings supported the acceptance of prices charged from group companies as assessable value, reinforcing the appellants' stance.

Modvat Credit Entitlement:
The appellants argued that as the goods sold were industrial inputs for TV picture tubes, the recipient companies were entitled to claim the entire duty paid on electron guns as Modvat credit. This position indicated that there was no motive to undervalue the goods to reduce central excise duty liability, ensuring a revenue-neutral transaction.

Price Comparison for Different Buyers:
The Revenue pointed out discrepancies in prices charged to various buyers, suggesting that the lower prices to group companies were not solely due to commercial considerations like order quantity. However, the Tribunal found that the sale prices were contractually determined, with slight variations falling within a narrow range and justified by commercial factors. The Tribunal concluded that the penalties imposed on the appellant and its officials were unwarranted, allowing the appeals and setting aside the impugned order.