2016 (12) TMI 1453 - AT - Central Excise

Valuation - Ethion Technical - clearance of goods to sister concern - captive consumption - duty to be paid in value by considering the cost of production and profit margin as held by Revenue is correct or the duty paid by appellant on transaction value is justified? - whether the assessable value which has been considered by the appellants for the clearances made to their sister concern is correct or otherwise and whether the demand is untenable due to the revenue neutrality of the issue involved or otherwise? - extended period of limitation. Held that - It is undisputed that the product in question is cleared to their own sister concern and the sister concern is eligible to avail the cenvat credit of the duty paid by the appellant. If that be so, there cannot be any mens-rea attached to the clearances made by the appellants to the sister concern and discharge of duty by adopting a particular assessable value. The law is fairly settled on this issue inasmuch that if the clearances are made to their own sister concern and if other unit is eligible to avail cenvat credit, there cannot be any intent to evade central excise duty - In view of the revenue neutral situation, in the facts and circumstances of this case, it is held that the demand and the interest liability is unsustainable in respect of the product in question Ethion Technical. As regards the penalty imposed by the adjudicating authority, we are of the view that appellant could have entertained a bone fide belief that they have to discharge the duty liability of the goods cleared to their sister concern, on the value of the clearances made to independent buyers - Since the issue is of interpretation, we find that there is no necessity to visit the appellant s with penalty for the duty liability discharged by them as recorded hereinabove - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over valuation of goods cleared to sister concern for captive consumption
- Application of Central Excise Act, 1944 provisions pre-and post 1.7.2000
- Undervaluation of goods cleared to sister concern leading to demand of differential duty, interest, and penalties
- Challenge to imposition of penalties on certain products
- Dispute regarding the demand on product Ethion Technical for the period from April 1999 to March 2003
- Consideration of revenue neutrality for clearances to sister concern
- Assessment of penalty based on the bona fide belief of the appellant

Analysis:
1. The appeal concerned the valuation of goods cleared to a sister concern for captive consumption, with the Revenue claiming undervaluation and demanding differential duty, interest, and penalties. The appellant argued that they discharged duty based on the value for independent buyers, contesting penalties on certain products and the time-barred demand for product Ethion Technical.

2. The Tribunal considered the period from April 1999 to March 2003 and the Revenue's claim of undervaluation for goods cleared to the sister concern. It was noted that the sister concern could avail cenvat credit, indicating revenue neutrality and no intent to evade duty, aligning with the Special Steel Ltd case. The demand and interest liability for Ethion Technical were deemed unsustainable and set aside.

3. Regarding penalties, the Tribunal acknowledged the appellant's bona fide belief in discharging duty based on the value for independent buyers, citing the Ispat Industries Ltd case. As the issue was one of interpretation, no penalties were warranted for the duty discharged by the appellant.

4. The Tribunal disposed of the appeal based on the above findings, emphasizing the revenue neutrality aspect for clearances to the sister concern and the appellant's genuine understanding of duty discharge requirements.

Judgment Summary:
The Tribunal addressed the dispute over the valuation of goods cleared to a sister concern, emphasizing revenue neutrality and the appellant's bona fide belief in discharging duty. The demand and interest liability for the product Ethion Technical were set aside due to revenue neutrality, aligning with the Special Steel Ltd case. Penalties were not imposed considering the appellant's genuine interpretation of duty discharge requirements. The appeal was disposed of based on these considerations.