2016 (3) TMI 476 - AT - Central Excise

Differential duty paid on account of revision of cost in respect of captively consumed goods and transferred to their sister unit - whether subject to interest or not and penalty should be imposed or not? - Held that - We find that the demand of interest under Section 11AB is correctly confirmed by the adjudicating authority and upheld by the first appellate authority as interest liability arises on the differential Central Excise duty paid due to revision of the cost of the goods. This law is settled and does not require any revisit. Penalty is imposed under Rule 25 of the Central Excise Rules, 2002. In our considered view this provision cannot be brought into play as in the case in hand the appellant had been filing the price list with the authorities for the clearance of the intermediate product to their own sister concern and discharging Central Excise duty on the cost of production as per the provisions during the material period. The differential duty has arisen due to revision in the cost not done at the time of clearance of the goods to their sister concern. We find strong force in the contentions raised by the learned Counsel that the issue is of revenue neutrality as duty paid on clearance of the goods to their sister concern is cenvatable. We find strong force in the contentions raised by the learned Counsel that the issue is revenue neutral as any amount paid as central excise on parts and components, cleared to their sister concern, the recipient unit would take the CENVAT credit of the Central Excise duty paid as final products manufactured are dutiable. The provisions of Rule 25 of the Central Excise Rules does not get attracted as the said Rule provide for imposition of penalty only if there is a violation of the provisions of Rules. In the case in hand, we have already recorded that as the appellant was clearing the goods on payment of duty and subsequently on their own revised the price and discharged the differential duty there seems to be no violation of any provisions. Penalty imposed on the appellant is unwarranted. - Decided in favour of assessee in part

Summary

Issues Involved: Whether differential duty paid by the appellant on account of revision of cost for captively consumed goods and transferred to their sister unit should be subjected to interest and penalty.

Analysis:
1. Interest Liability: The appellant acknowledged their liability to pay the differential duty resulting from the revision of cost for the goods. The issue revolved around the imposition of interest on this differential duty. The adjudicating authority and the first appellate authority confirmed the demand of interest under Section 11AB, citing that interest liability arises due to the revision of the cost of goods. The Tribunal upheld this decision, stating that the demand of interest was correctly confirmed as per established law without the need for further review.

2. Penalty Imposition: The penalty was imposed under Rule 25 of the Central Excise Rules, 2002. However, the Tribunal determined that this provision was not applicable in this case. The appellant had consistently filed the price list with the authorities for goods clearance to their sister unit and paid Central Excise duty based on the cost of production as per regulations during the relevant period. The differential duty arose due to a subsequent revision in cost, not at the time of initial clearance. The Tribunal agreed with the appellant's argument of revenue neutrality, emphasizing that any duty paid on parts and components cleared to the sister unit could be availed as CENVAT credit. Rule 25 pertains to penalties for violations, and since there was no violation in this scenario where the appellant rectified the duty payment upon cost revision, the penalty was deemed unwarranted.

3. Conclusion: The Tribunal upheld the interest liability on the appellant due to the revision of cost for captively consumed goods but set aside the penalty imposed. The judgment emphasized the adherence to established legal principles and the specific circumstances of the case to reach a fair and just decision.