Comparable independent buyer sales can determine assessable value for subsidiary clearances, sustaining duty demand and penalty.

Where contemporaneous sales to independent buyers are available, those transactions may be used as the comparable market price for valuing goods cleared to subsidiary units, rather than a lower internal weighted average price. The later payment of duty on cost of production plus 15% did not alter the valuation for the disputed period because the relevant comparison was already available from independent sales. On that basis, the duty demand was confirmed and the penalty under Section 11AC of the Central Excise Act, 1944 was upheld.

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Issues: Whether the assessable value of goods cleared to subsidiary units was to be determined on the basis of the price charged to independent buyers, and whether the demand of duty and penalty were sustainable.

Analysis: The goods were cleared to independent buyers at a higher price than to the subsidiary units during the relevant period. The price charged to independent buyers furnished a comparable market price, and the assessee's use of a lower weighted average price for clearances to subsidiary units could not be treated as an arms length valuation. The fact that duty was later paid on cost of production plus 15% did not affect the valuation for the period in dispute, since comparable prices were available.

Conclusion: The demand of duty was correctly confirmed on the basis of the comparable price of goods cleared to independent buyers, and the penalty under Section 11AC of the Central Excise Act, 1944 was upheld.

Ratio Decidendi: Where comparable contemporaneous sales to independent buyers are available, the assessable value for clearances to subsidiary units may be determined on that basis rather than on a lower internal weighted average price.

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