ORDER
T.K. Jayaraman, Member (T)
1. This appeal has been filed against the OIO No. 01/2005 dated 27-4-2005 passed by the Commissioner of Central Excise and Customs, Calicut.
2. The issue involved is the valuation of intermediary products like Populated Printed Circuit Boards (PPCBs) which are cleared to the sister unit of the appellant at Bangalore, Mankapur etc. on payment of duty for further use in the manufacture of the final products.
3. Shri B.V. Kumar, the learned Advocate who appeared on behalf of the appellants, pointed out that the appellants have not cleared the goods on the basis of the value of the goods sold to other buyers. It is the contention of the Revenue that the value should have been determined in terms of Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. The following case laws were cited to hold that when the goods are partly sold and also captively consumed, then the price charged to the outside buyer would form the assessable value for goods captively consumed.
(i) ESSEL Packaging Ltd. v. CCE, Mumbai
(ii) Hindustan Spinning and Weaving Mills Ltd. v. CCE, Mumbai
(iii) CCE, Trichy v. SreeAravindh Steel (P) Ltd.
The Commissioner has rejected this argument on the ground that the price at which the goods were sold to BSNL is not the ‘Normal price’ because it has been arrived under a contract. He has confirmed a demand of Rs. 56.89 lakhs and imposed equal penalty under Section 11AC of the Central Excise Act, 1944.
4. On a very careful consideration of the matter, we find that there is not much substance in the contention of the Revenue. When the goods are cleared to the sister unit on payment of duty, whatever duty is paid will be taken as Cenvat credit by the other unit. In such circumstances, to penalise the unit with intend to evade Central Excise Duty does not appear to be correct. Therefore, imposition of equal penalty under Section 11 AC is not at all justified when there is clear evidence of revenue neutrality. Moreover, the appellant and BSNL are not related within the meaning of Section 4 of thg Central Excise Act, 1944. Hence, there is no reason to reject the value of the clearances to sister units when it is based on the prices at which the goods are sold to BSNL. Therefore, we allow the appeal with consequential relief, if any.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)