2013 (9) TMI 695 - AT - Central Excise

Revenue neutral exercise - Assessable Value of Goods - manufacture of dispensing pump sets for petroleum products - clearance of goods from one unit to another unit of the assessee - availability of Modvat / Cenvat Credit - Third member decision - Whether the demand for the normal period of limitation without invoking extended period has to be upheld as observed by Member (Technical) or whether the demand for the entire period has to be set aside as held by learned Member (Judicial). Held that - the issue in an identical case in the case of IMP Power Ltd. 2011 (9) TMI 391 - CESTAT, AHMEDABAD , wherein also, the difference of opinion on the same issue, arose. - the demand of duty liability within the limitation period as provided under Section 11A (1) will be applicable, as has been held by Hon ble Member (Technical). In view of the majority order demand of duty within the period of limitation is upheld, which is required to be quantified by the Original Adjudicating Authority. The interest liability would be examined by the Original Adjudicating Authority in accordance with law . However, the demand beyond the period of limitation is set aside along with setting aside of penalties imposed upon all the appellants.

Summary

Issues Involved:
1. Assessable value of metering units and suction units cleared to the appellant's Bombay unit.
2. Revenue-neutral situation and its impact on the demand for differential duty.
3. Applicability of the extended period under Section 11A of the Central Excise Act.
4. Imposition of penalties under Section 11AC of the Central Excise Act.
5. Judicial precedents and their relevance to the case.

Detailed Analysis:

1. Assessable Value of Metering Units and Suction Units:
The appellant, engaged in manufacturing dispensing pump sets, cleared metering units and suction units to their Bombay unit, which used these as inputs for the final product. The dispute revolves around the assessable value of these units and a consequent demand of Rs. 85,83,356/-.

2. Revenue-Neutral Situation:
The goods were sent to the appellant's own unit in Bombay, where the duty paid was availed as Modvat credit. It was argued that since the Bombay unit paid higher duty on the final product, the situation was revenue-neutral. The Tribunal noted that the issue was no more res-integra and had been decided in several judgments, such as Tenneco RC India Pvt. Ltd. Vs. CCE Chennai and Mafatlal Industries Ltd. Vs. CCE Daman, which held that in a revenue-neutral situation, confirmation of demand is not justified.

3. Applicability of Extended Period Under Section 11A:
The Tribunal had differing views on whether the extended period could be invoked. One member opined that the extended period could not be invoked without evidence of suppression, misdeclaration, or intent to evade duty. The normal assumption is that there was no intention to evade duty when the goods were cleared to the appellant's own unit. Therefore, the demand should be limited to the normal limitation period.

4. Imposition of Penalties Under Section 11AC:
Penalties under Section 11AC cannot be justified if the extended period is not applicable. The member who disagreed with the revenue-neutral argument also held that penalties could not be imposed without proving suppression or intent to evade duty.

5. Judicial Precedents:
The Tribunal referred to several cases to support its decision. In particular, the Supreme Court's judgment in the case of CCE Vs. Coca-Cola India Pvt. Ltd. was cited, which held that in a revenue-neutral situation, the confirmation of demand is not justified. However, another member argued that the Tribunal, being a creation of statute, cannot take equity as a consideration and must follow the law regarding valuation and duty payment.

Final Order:
The difference of opinion between the members was resolved by a third member, who concurred with the view that the demand within the normal period of limitation should be upheld. The Original Adjudicating Authority was directed to recalculate the demand within the normal period of limitation. The penalties were set aside, and the sister unit was allowed to avail credit for the duty paid. Interest liability would be examined by the Original Adjudicating Authority in accordance with the law. The demand beyond the period of limitation was set aside.