2011 (6) TMI 86 - AT - Central Excise

Demand - Time limitation - Revenue neutrality - Captive consumption and cleared to sister concern - The appellants admitted their duty liability and also deposited an amount of Rs. 11,54,700 - On investigation it was found that duty liability should be to the tune of Rs. 13,17,720 - Revenue neutral situation was considered in respect of the sister concern only - since the goods were cleared to sister concern, whatever duty was payable by the assessee was available as credit to their own sister concern, the entire exercise was Revenue neutral - Decided in the favour of assessee Regarding limitation - it is the appellants themselves who brought the fact of clearance of the goods to their sister unit, to the notice of the Revenue - it can be safely concluded that there was no positive mis-declaration or suppression on the part of the assessee with an intent to evade payment of duty, thus justifying the invocation of longer period - Decided in the favour of assessee

Summary

Issues:
1. Revenue neutrality on clearance of goods to sister unit.
2. Limitation period for issuance of show cause notice.

Analysis:

Issue 1: Revenue Neutrality
The case involves the appellant, a glass manufacturer, clearing casting moulds to their sister unit without payment of duty. The central issue is whether such clearances constitute a revenue-neutral situation. The appellant argues that since the sister unit could avail modvat credit, the transactions were revenue neutral. The Commissioner, however, contends that the sister concerns are separate entities and the clearances should have been made under Central Excise invoices. The Tribunal finds that the law on revenue neutrality is well-established, citing precedents like Indian Oil Corporation Limited vs. CCE Mumbai and CCE Vadodara vs. Indeos ABS Limited. These cases establish that clearances to sister units without duty payment can be revenue neutral. The Tribunal ultimately rules in favor of the appellant on the grounds of revenue neutrality.

Issue 2: Limitation Period
Regarding the limitation period for the show cause notice, the appellant's advocate highlights a letter dated 16.03.2000, where the appellant voluntarily disclosed the clearance of goods to the Revenue. The Tribunal notes that this proactive disclosure by the appellant demonstrates no intent to evade duty payment. The Tribunal also references previous judgments emphasizing that in cases of revenue neutrality, no malafide intent can be attributed to the assessee. Consequently, the Tribunal rules that the show cause notice issued beyond the normal limitation period is time-barred. As a result, the impugned order is set aside, and the appeal is allowed in favor of the appellant.

In conclusion, the Tribunal's decision rests on the established principles of revenue neutrality and the appellant's proactive disclosure to the Revenue, leading to the dismissal of the demand and penalties against the appellant.