2015 (11) TMI 1692 - AT - Central Excise

CENVAT credit - inter-unit transfer of goods - transfer of final product to sister unit and credit availed by sister unit - interest - Held that - the decision in the case of Gujarat Narmada Fertilizers CO. Ltd. 2012 (4) TMI 309 - GUJARAT HIGH COURT is applicable to the present case where it was held that interest liability did not arise in view of no dispute regarding availment of cenvat credit by the sister unit and payment of differential duty by the assessee before issuance of the SCN - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Assessment of duty under Rule 8 and Rule 9 of the Valuation Rules, 2002
- Demand of interest and imposition of penalty
- Interpretation of inter-unit transfer of goods
- Applicability of previous judicial decisions on interest liability

Analysis:
The case involved the appellants, engaged in the manufacture of Bulk Drugs, who transferred their final product to a sister unit on payment of duty under Rule 8 and Rule 9 of the Valuation Rules, 2002. Subsequently, a lower assessable value was noticed, leading to the voluntary payment of differential duty by the appellant. A show cause notice (SCN) was issued proposing a demand of interest and penalty. The adjudicating authority confirmed the demand of interest and imposed a penalty. However, the Commissioner (Appeals) directed the original authority to re-quantify the interest demand and set aside the penalty in the impugned order.

Regarding the interpretation of inter-unit transfer of goods, the Ld. AR relied on the decision of the Hon'ble Supreme Court in the case of CCE, Pune vs. SKF India Ltd. The Tribunal considered previous judgments and held that interest liability did not arise in this case due to the absence of a dispute regarding cenvat credit by the sister unit and the payment of differential duty by the assessee before the issuance of the SCN. It was noted that there was no malafide intention attached to the under-valuation. The Tribunal found the decisions of the Hon'ble Supreme Court and the Hon'ble Gujarat High Court applicable to the present case.

Consequently, the Tribunal set aside the impugned order, allowing the appeal filed by the appellant. The operative part of the decision was pronounced in open court, bringing an end to the dispute over the demand of interest and penalty in the case.