ORDER
C.N.B. Nair, Member (T)
1. The appellant M/s. Samtel Electron Devices Ltd. manufactures electron guns in its factory at Parwanoo. These electron guns are used in the production of T.V. picture tubes. A large portion of the electron guns (65%) is sold by the appellant to its group companies -M/s. Teletube Electronics Ltd. and M/s. Samtel India Ltd. (with cross-holding of shares). The remaining are sold to unrelated picture rubes manufacturers like Rama vision. Sale price to each of the buyers is a contract price. In the proceedings impugned in these appeals, Revenue has taken the view that sale price to the group companies cannot form the assessable value for the purpose of levying central excise duty inasmuch as sale price to related persons cannot be accepted for valuation. Consequently, duty demand of over Rs. 1 crore has been raised in respect of sales to group companies during the period 1994-95 to 1998-99 and an equal amount of penalty has been imposed on the M/s. Samtel Electron Devices Ltd. There are further penalties of Rs. 10 lakhs each on the company’s officials, namely, Shri Satish Kaura, Chairman and Shri Rajiv Jain, Divisional Manager (Finance).
2. The appellants contest the duty demand mainly on the ground that each of the sale prices is a negotiated price and is a fully commercial price meriting acceptance as normal value for the purpose of assessment on the goods covered by the sale. It is pointed out that the variation in price is in narrow range (2% to 8%) which is fully justified by commercial considerations like quantity of sale, long term continued orders etc. During the hearing of the case, learned Counsel for the appellants has submitted that the issue is no more res integra inasmuch as in earlier appeals on identical issue for a different period, this Tribunal had held that prices charged from appellant’s group companies were acceptable as assessable value. Final Order Nos. 253-255/2000-A, dated 28-4-2000 in Appeal Nos. E/111-113/99-A reported in 2000 (118) E.L.T. 262 (Tri. – LB). The Counsel also pointed out that the same issue had come up in respect of another group company namely, Samcor Glass Ltd. v. C.C.E., Jaipur – 2001 (130) E.L.T. 783 (T) and in that case also the Tribunal had allowed the appeal filed by the group company. The Counsel also pointed out that this order of the Tribunal has been upheld by the Apex Court as reported in 2002 (146) E.L.T. A 220. The Counsel further pointed out that the same view had been taken by the Apex Court in the case of Alembic Glass Industries Ltd. v. C.C.E. & Cus. reported in 2002 (143) E.L.T. 244 (S.C.).
3. Another point raised in the appeal is that since these goods were industrial inputs used in the manufacture of TV picture tubes, the recipient companies were entitled to the entire amount of duty paid on the electron guns as Modvat credit. Thus, the appellants had no reason to undervalue the goods sold to group companies for the purpose of reducing the central excise duty liability, the whole transaction being revenue neutral.
4. As against the above submissions, learned DR has pointed out that a comparison of price to various buyers shows that, in some cases, even in respect of comparable quantities, sale price to group company is lower which would show that the price variation is not on account of commercial consideration like quantity difference.
5. Each sale price is a contract price. The variation itself is in a narrow range (2% to 8%). The group companies lift in bulk on a steady basis. A small reduction in price to such buyers cannot be held to be for non-commercial considerations or the result of the transaction being between group companies. This is the view that this Tribunal took in the decisions relied upon by the appellant’s Counsel. One of those orders has also been affirmed by the Apex Court. In these circumstances, we find no merit in the view taken by the Revenue. The duty demand and penalty imposed on the appellant M/s. Samtel Electron Devices Ltd. are not sustainable. When penalty on the manufacturing company is not justified, there is no room for penalty on the company’s official.
6. In view of what has been stated above, all the appeals are allowed after setting aside the impugned order.