Revenue-neutral stock transfers to a sister unit defeat valuation-based duty demands where additional duty is creditable to the recipient.

Valuation-based duty demand was held unsustainable where job-worked components were transferred on stock transfer to the assessee's own sister unit, because any additional duty paid would have been available as credit to the recipient unit. The transaction was therefore revenue neutral, leaving no net gain to the Revenue or corresponding loss to the assessee. On that basis, the higher assessable value adopted for the clearances could not support the demand, and the impugned order was set aside with consequential relief.

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Issues: Whether duty demand was sustainable when job-worked components were transferred to the assessee's own sister unit on stock transfer basis and the dispute concerned valuation of the clearances.

Analysis: The clearances were not to an independent buyer but to the assessee's own sister unit, where any additional duty paid would have been available as credit. In such a situation, the exercise was revenue neutral, because payment of duty at a higher assessable value would not have resulted in any net gain to the Revenue or loss to the assessee. On that basis, the demand founded on adoption of a higher valuation was found unwarranted.

Conclusion: The demand was unsustainable and the valuation-based duty demand could not be maintained.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where the duty paid on stock-transferred goods would be available as credit to the recipient unit, the dispute is revenue neutral and a valuation-based duty demand is unsustainable.

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