2008 (7) TMI 274 - AT - Central Excise

Differential duty demand on transaction between two units of same person - assessee-unit not earned any profit in material period - profit of 8% with reference to the transactions of all the four units belonging to the assessee-company, is not relevant for determining the assessable value of excisable goods cleared by the assessee to its sister concern - manufacturer unit as well as buyer unit belong to the same company, therefore, a revenue neutral situation exists assessee s appeal allowed

Summary

Issues:
1. Differential duty demand on clearances of excisable goods.
2. Demand of interest and penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:

Issue 1:
The judgment dealt with the affirmation of a demand for a differential duty amounting to Rs. 3,31,115 on clearances of excisable goods made by the appellants during the year 1996-97. The Commissioner (Appeals) upheld the demand along with interest and penalty. The appellant argued that the clearances were made between two units of the same company and that the valuation based on an 8% profit margin was incorrect as the Chennai unit was running at a loss. The Tribunal noted that the profit margin of 8% from all four units was not relevant for determining the assessable value of the goods. Citing a previous decision, the Tribunal emphasized that revenue neutrality applies when the credit is available to the assessee and not the buyer. As both the manufacturer and buyer units belonged to the same company, a revenue-neutral situation existed. Consequently, the appeal was allowed, considering the revenue-neutral position in recovering the amount due.

Issue 2:
The judgment also addressed the demand for interest and penalty under Section 11AC of the Central Excise Act, 1944. The impugned order affirmed the demand for interest on the duty demand and an equal amount of penalty. The appellant's consultant argued against the demand, emphasizing the incorrect valuation based on the profit margin and the revenue-neutral nature of the situation. The Tribunal, after considering the submissions, found that the profit margin was not relevant for determining the assessable value of the goods. It reiterated the principle that revenue neutrality applies when the credit is available to the assessee. Given that both units involved belonged to the same company, a revenue-neutral situation existed. Consequently, the Tribunal allowed the appeal, considering the revenue-neutral position in recovering the amount due.

This judgment from the Appellate Tribunal CESTAT, Chennai, highlighted the importance of correctly valuing excisable goods and applying the principle of revenue neutrality in cases involving transactions between units of the same company. The decision provided clarity on assessing duty demands, interest, and penalties under the Central Excise Act, 1944, emphasizing the need for accurate valuation methods and considering the specific circumstances of the case to ensure fairness and compliance with legal requirements.