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2017 (5) TMI 43 - AT - Central ExciseValuation - goods cleared to own units - IC engine sold in the market and IC engine supplied to Nashik plant - As per circular no. 692/8/2003-CX dated 13.02.2003 the cost of production should be in accordance with CAS-4 which was not followed in the present case - The department s objection is that the assessable value which is on cost construction method is not correct in as much as the appellant have not included various expenses - Held that - even if the duty as demanded in the SCN would have paid by the appellant the same was available as a cenvat credit to their Nagpur and Rudrapur therefore, there was neither gain nor loss either to revenue or to the assessee - reliance placed in the appellant s own case 2017 (3) TMI 369 - CESTAT MUMBAI , where it was held that even though duty is payable and the recipient unit is part of the same entity and is eligible for MODVAT/CENVAT credit paying duty from PLA also then it is a revenue neutral exercise - the impugned order, on the ground of revenue neutrality, is not sustainable - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Incorrect valuation method for duty payment. 2. Revenue neutrality due to internal transactions and CENVAT credit. 3. Applicability of extended period for demand and penalty. Issue-wise Detailed Analysis: 1. Incorrect Valuation Method for Duty Payment: The appellants, engaged in manufacturing tractors, IC engines, and parts, were using a cost construction basis for duty payment based on a cost certificate issued by a cost accountant. It was observed that the appellants used the material cost of inputs from the previous accounting year instead of the current period's weighted average cost or moving average cost. Similarly, freight, octroi, R&D expenses, and conversion costs were based on the previous year’s data. This led to a short payment of duty, as the correct valuation method under Rule 8 of the Central Excise Valuation Rules, 2000, requiring 110%/115% of the cost of manufacture of goods, was not followed. The adjudicating authority confirmed the demand and imposed a penalty and interest under Section 11AB. 2. Revenue Neutrality Due to Internal Transactions and CENVAT Credit: The appellants contended that the short payment of duty was not recoverable due to revenue neutrality. The IC engines and parts were supplied to their own units at Nagpur and Rudrapur for captive consumption, where the duty paid was available as CENVAT credit. The Nagpur and Rudrapur units paid excise duty from PLA, which was more than the demand raised. Therefore, any duty paid would be available as credit to these units, resulting in no gain or loss to the revenue or the assessee. The Tribunal acknowledged this revenue-neutral situation, citing previous judgments where similar issues were resolved in favor of the appellants due to the revenue neutrality principle. 3. Applicability of Extended Period for Demand and Penalty: The demand was raised for the extended period invoking the proviso to Section 11A of the Central Excise Act, 1944. The appellants argued that there was no suppression of facts as they regularly submitted cost data, and the department was aware of the valuation method used. Therefore, the extended period for demand was not sustainable, and the penalty under Section 11AC was not imposable. The Tribunal agreed, noting that the facts of valuation were known to the department, and there was no intent to evade duty. Judgment: The Tribunal set aside the impugned order on the grounds of revenue neutrality, following the ratio of previous judgments. The appeals were allowed, and the adjudicating authority was given the liberty to verify the factual matrix regarding revenue neutrality, such as the availment of CENVAT credit and payment of duty from PLA by the recipient units. The Tribunal did not delve into the valuation issue, as the decision was based on revenue neutrality. Conclusion: The Tribunal concluded that the duty demand was not sustainable due to the revenue-neutral situation, and the appeals were allowed. The extended period for demand and penalty was also deemed unsustainable due to the lack of suppression of facts. The adjudicating authority was instructed to verify the factual submissions regarding revenue neutrality.
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