Revenue neutrality and unrelated-party valuation support outside sale price and defeat equal penalty in sister-unit clearances.

Assessable value for intermediary goods cleared to sister units may be based on the price charged to an outside buyer where the goods are duty-paid, the recipient can avail Cenvat credit, and the parties are not shown to be related. On those facts, the Revenue's objection to adoption of the outside sale price was rejected. Equal penalty was also held unsustainable because the availability of credit to the recipient unit made the situation revenue neutral, so penal action premised on intent to evade duty was not justified. The demand and penalty therefore did not survive on the Tribunal's findings.

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Issues: (i) whether the assessable value of intermediary goods cleared to sister units could be determined on the basis of the price at which similar goods were sold to an outside buyer; (ii) whether equal penalty was sustainable in the presence of revenue neutrality.

Issue (i): whether the assessable value of intermediary goods cleared to sister units could be determined on the basis of the price at which similar goods were sold to an outside buyer.

Analysis: The goods were cleared to sister units on payment of duty, and the duty paid by the receiving unit would be available as Cenvat credit. The outside sale price was relied upon as the basis for valuation, and the record did not support rejection of that price merely because the goods were sold under a contract. The parties were also not shown to be related within the meaning of the valuation provision.

Conclusion: The valuation based on the price charged to the outside buyer was upheld, and the Revenue's objection was rejected.

Issue (ii): whether equal penalty was sustainable in the presence of revenue neutrality.

Analysis: Since duty paid on clearances to sister units would be available as credit to the recipient unit, the situation was revenue neutral. In such circumstances, penal action premised on intent to evade duty was not justified.

Conclusion: Equal penalty was not sustainable and was set aside.

Final Conclusion: The appeal succeeded, with the demand and penalty not surviving on the facts found by the Tribunal.

Ratio Decidendi: Where clearances to a sister unit are duty-paid and the recipient can avail credit, revenue neutrality negates the basis for penalty, and the outside sale price may be accepted for valuation when the parties are not related.

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