2016 (8) TMI 120 - AT - Central Excise

Levy of interest and penalty on differential duty - revenue neutral exercise - appellant to avoid litigation, paid the differential duty of ₹ 2.18 crores approx. and intimated the Revenue - it was contended that, the entire exercise is revenue neutral inasmuch as whatever duty was required to be paid by the appellant, was available as credit to their other unit located at Jabalpur unit. - Held that - the issue i.e. liability of the present assessee to pay the duty, has not been adjudicated by the lower authorities. The fact that the Jabalpur unit discharged the full duty liability is also required to be kept in mind while adjudging the assessee s duty liability, even though they have paid the same. - However once differential duty is found payable, interest has to be paid - Matter remanded back.

Summary

Issues: Liability of differential duty, interest liability, imposition of penalty

Liability of Differential Duty:
The case involved a dispute regarding the liability of an appellant located at Bhopal to pay duty on the full value of vehicles, including the value of chassis. The appellant argued that the exercise was revenue neutral as the duty paid was available as credit to their Jabalpur unit. The advocate relied on a Supreme Court decision and contended that no penalty should be imposed due to lack of malafide intent. The Tribunal noted that the duty liability of the appellant had not been adjudicated by lower authorities and considered the fact that the Jabalpur unit had already paid the full duty liability. The Tribunal highlighted the benefit of cenvat credit if the appellant was held liable as a manufacturer, potentially reducing their duty liability significantly.

Interest Liability:
Regarding interest liability, the advocate cited a Tribunal decision to support the appellant's position. However, the Revenue referred to a Supreme Court decision upholding interest liability even if the amount was paid before the issuance of a show cause notice. The Tribunal discussed conflicting decisions within the Tribunal on interest liability, ultimately emphasizing a majority decision that interest liability is sustainable. The Tribunal highlighted the need to consider majority decisions as binding on the Tribunal, declaring them as law.

Imposition of Penalty:
The appellant argued against the imposition of a penalty, emphasizing the revenue-neutral nature of the exercise and lack of malafide intent. The Tribunal considered the advocate's arguments but ultimately set aside the impugned order and remanded the matter to the Commissioner for a fresh decision. The Tribunal directed the Commissioner to first decide the appellant's liability for the differential duty and, if applicable, calculate interest liability in accordance with the Tribunal's decision. The issue of limitation was left open for consideration based on relevant legal precedents.

By analyzing the liability of the appellant for the differential duty, interest liability, and the imposition of a penalty, the Tribunal provided a detailed and comprehensive judgment, considering legal precedents and conflicting decisions within the Tribunal to arrive at a reasoned decision.