2008 (8) TMI 37 - SC - Central Excise

Assessee receiving goods from their sister unit in semi-finished condition - allegation that assessee is raising value of semi-finished goods by adding Modvat element and rounding off the value to higher figure so as to pass on the excess Credit held that CER entitled the receipt manufacturer to avail credit of the duty paid by the supplier - so quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be challenged by revenue in charge of recipient unit

Summary

Issues:
1. Interpretation of relevant law in the process followed by Revenue from issuing show cause notice to determining liability.
2. Allegation of inflating the value of intermediate goods by adding Modvat element and rounding off the value.
3. Confirmation of demand, penalty imposition, and recovery of interest by Commissioner of Central Excise & Customs.
4. Tribunal's acceptance of the appeal by the assessee.
5. Lack of loss of revenue and reasoning provided by the Tribunal in accepting the appeal.
6. Lack of challenge by Revenue to the findings recorded by the Tribunal.

Issue 1 - Interpretation of relevant law in Revenue process:
The Supreme Court heard an appeal where the Revenue challenged the Customs, Excise & Gold (Control) Appellate Tribunal's decision to reverse the order-in-original passed by the Commissioner of Central Excise. The Tribunal found the Revenue's process, from issuing the show cause notice to determining liability, not based on relevant law.

Issue 2 - Allegation of inflating the value of intermediate goods:
The case involved two sister concerns engaged in manufacturing circuit-breakers under Central Excise Tariff Act, availing Modvat facility. The Revenue alleged that one concern deliberately inflated the value of semi-finished goods by adding Modvat element and rounding off the value to pass on excess Modvat credit.

Issue 3 - Confirmation of demand, penalty, and interest recovery:
The Commissioner confirmed a demand of Rs. 13,08,701 under Section 11A of the Act, imposed penalties, and ordered recovery of interest. The assessee appealed to the Tribunal, which accepted the appeal, leading the Revenue to file the present appeal before the Supreme Court.

Issue 4 - Tribunal's acceptance of the appeal:
The Tribunal accepted the appeal by the assessee, concluding that there was no loss of revenue. It found the reasons provided by the appellants for inflating the value of intermediate goods logical. The Tribunal highlighted the lack of examination by the Commissioner on the loading of assessable value by Modvat credit and the absence of under-invoicing charges against the concerned unit.

Issue 5 - Lack of loss of revenue and Tribunal's reasoning:
The Tribunal's decision was based on the absence of evidence supporting the Revenue's claim of revenue loss. It emphasized that the valuation approved by the department was duly accepted, and there was no legal basis for converting paid duty into a deposit of duty. The Tribunal found no merit in the Commissioner's attempt to challenge the duty paid by the supplier unit.

Issue 6 - Lack of challenge by Revenue to Tribunal's findings:
During the appeal, the Counsel for Revenue failed to challenge the findings recorded by the Tribunal. Consequently, the Supreme Court agreed with the Tribunal's view and dismissed the appeals, leaving the parties to bear their own costs.

This comprehensive analysis of the Supreme Court judgment highlights the key issues, findings, and legal interpretations involved in the case.