2006 (5) TMI 236 - AT - Central Excise

Summary

Issues Involved:
Valuation of intermediary products like Populated Printed Circuit Boards (PPCBs) for clearance to sister units, determination of assessable value for goods captively consumed, imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:

1. Valuation of Intermediary Products:
The appeal was filed against an order regarding the valuation of intermediary products like Populated Printed Circuit Boards (PPCBs) cleared to the sister unit of the appellant. The Revenue contended that the value should be determined as per Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. The appellant argued that the value should be based on the price charged to other buyers. The Tribunal considered the argument and noted that when goods are cleared to a sister unit on payment of duty, the duty paid is taken as Cenvat credit by the other unit. The Tribunal found no justification for penalizing the unit for alleged evasion when there was clear evidence of revenue neutrality. Additionally, it was highlighted that the appellant and the buyer were not related within the meaning of the Central Excise Act, 1944. Consequently, the Tribunal allowed the appeal based on the prices at which the goods were sold to the buyer.

2. Assessable Value for Goods Captively Consumed:
The Commissioner had rejected the argument that the assessable value for goods captively consumed should be based on the price charged to outside buyers. Citing relevant case laws, the appellant contended that the price charged to outside buyers should determine the assessable value for goods captively consumed. However, the Commissioner rejected this argument, stating that the price at which the goods were sold to a specific buyer was not the 'Normal price' due to being based on a contract. The Tribunal, after careful consideration, disagreed with the Revenue's stance, emphasizing that penalizing the unit for alleged duty evasion was unjustified, especially when there was evidence of revenue neutrality. The Tribunal allowed the appeal, emphasizing the importance of considering the actual prices at which the goods were sold.

3. Imposition of Penalty under Section 11AC:
The Commissioner had imposed a demand and an equal penalty under Section 11AC of the Central Excise Act, 1944. However, the Tribunal found that the penalty was not justified in this case, particularly considering the revenue neutrality and the lack of relationship between the appellant and the buyer as per the Act. The Tribunal concluded that there was no valid reason to reject the value of clearances to sister units based on the prices at which the goods were sold. Consequently, the Tribunal allowed the appeal and provided consequential relief, if any, to the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting the importance of considering the actual prices at which goods were sold, the concept of revenue neutrality, and the lack of a relationship between the parties involved. The Tribunal found the imposition of a penalty under Section 11AC unwarranted and allowed the appeal with consequential relief.