Inter-unit transfer valuation turned on absence of a true sale between distinct legal entities, requiring fresh Rule 6 review.

Technical information transferred between two units of the same assessee could not be treated as a sale because a valid contract of sale requires separate and distinct buyer and seller. The finding that a sale existed was therefore unsustainable in law, and the valuation issue had to be reconsidered with reference to the Valuation Rules, particularly Rule 6. On that basis, the demand and penalties were set aside and the matter was remanded for fresh re-examination under the valuation framework.

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Issues: Whether the value of technical information transferred between units of the same company could be included in the assessable value, and whether the demand and penalties could stand when the transaction was not between distinct legal entities.

Analysis: The transfer was between two units of the same assessee, and the finding that there was a sale was held to be unsustainable in law because a contract of sale requires separate and distinct buyer and seller. The adjudicating authority had overlooked this basic requirement. The matter therefore had to be examined afresh with reference to the valuation provisions, particularly Rule 6.

Conclusion: The demand and penalties were set aside and the matter was remanded for re-examination under Rule 6 of the Valuation Rules.

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