2013 (8) TMI 461 - AT - Central Excise

Transfer of manufactured product to another unit - Captive Consumption Rule 8 of Valuation @ 110%/115% of cost of production - Appellants manufactured wire rods and stock transferred the same to their Borivali unit on payment of duty. - On scrutiny of records by the department, it was observed that the appellants while computing the cost of production of wire rods only took into consideration the cost of production of the billets instead of 115% /110% of the cost of production of the billets, which resulted in short payment of duty There is short payment of duty inasmuch as the assessable value of wire rods should be 115%/110% of the cost of production of billets Held that - As per the case of Nirlon Ltd. vs. CCE 2004 (10) TMI 363 - CESTAT, MUMBAI , the concept of revenue neutrality is not novel to a manufacturer where the goods are modvatable. Thus the Goregaon factory is aware that whatever duty is discharged while clearing the goods to Tarapur unit the latter will be in a position to take such duty as Modvat credit. Despite that if an unit chooses to suppress certain facts and thereby short pays duty, the consequences of such action would befall him. As per the Larger Bench in Jay Yuhshin Ltd. v. CCE, New Delhi 2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI - Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee s manufactured goods In case two assessees albeit belonging to the same group - We are not aware as to what financial considerations the Goregoan unit had in mind when it chose to deliberately understate the value of the goods manufactured and cleared by it to the Tarapur unit nor are we expected to go into such calculations. Revenue neutrality is a concept known to both the units. The allegation of evasion does not get mitigated by the fact that one unit is entitled to take Modvat credit of duty paid by the other Held that - The appellants recognize the cost as 115%/110% of the cost of production which is nothing but a conscious and positive act on the part of the appellant. Similarly, short payment of duty by under valuation of wire rods is equally a conscious and positive act of suppression of facts on the part of the appellant - Raising a hypothetical question and taking shelter of revenue neutrality does not come to the appellant s rescue Decided against the Assessee.

Issues Involved:
1. Computation of assessable value for captive consumption under Rule 8 of the Central Excise Valuation Rules, 2000.
2. Applicability of the extended period of limitation.
3. Concept of revenue neutrality in the context of excise duty.
4. Validity of penalties and fines imposed.

Issue-Wise Detailed Analysis:

1. Computation of Assessable Value for Captive Consumption:
The primary issue was whether the appellants correctly computed the assessable value of wire rods by considering only the cost of production of billets, instead of 115%/110% of the cost of production of billets as mandated by Rule 8 of the Central Excise Valuation Rules, 2000. The appellants argued that the cost of billets should not include the notional profit added by the Jamshedpur unit. However, the Tribunal held that Rule 8 clearly states that the value for captive consumption should be 115%/110% of the cost of production, without any provision for excluding notional profit. The Tribunal emphasized that the cost of billets at the Tarapur unit should include this notional addition as per the rules and relevant CBEC circulars.

2. Applicability of the Extended Period of Limitation:
The appellants contended that the demand beyond the normal period of limitation was not maintainable as the issue was interpretational. The Tribunal, however, found that the appellants were aware of the correct procedure but chose to compute the value incorrectly, thus justifying the invocation of the extended period for recovery of the duty short-paid. The Tribunal noted that the appellants' actions indicated a conscious act of short payment of duty, supporting the department's stance on invoking the extended period.

3. Concept of Revenue Neutrality:
The appellants argued that any differential duty would be available as CENVAT credit to their Borivali unit, making the situation revenue neutral. The Tribunal rejected this argument, citing precedents where revenue neutrality does not absolve the assessee from paying the correct duty. The Tribunal referred to the principle that even in a revenue-neutral situation, suppression of facts and short payment of duty cannot be justified. The Tribunal emphasized that the concept of revenue neutrality does not apply when there is clear evidence of suppression and conscious undervaluation.

4. Validity of Penalties and Fines Imposed:
The Tribunal upheld the penalties and fines imposed by the adjudicating authority. It was found that the appellants' actions constituted a clear case of suppression of facts and deliberate undervaluation, justifying the penalties. The Tribunal referenced various case laws to support the imposition of penalties and fines in situations involving conscious evasion of duty.

Conclusion:
The Tribunal dismissed the appeals, upholding the orders-in-original in toto. The Tribunal concluded that the appellants' method of computing the assessable value was incorrect, the extended period of limitation was rightly invoked, the revenue neutrality argument was not applicable, and the penalties and fines were justified. The judgment reinforced the strict adherence to the provisions of Rule 8 of the Central Excise Valuation Rules, 2000, and the importance of accurate duty payment.

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