2017 (5) TMI 746 - AT - Central Excise

Interest - penalty - reversal of CENVAT credit availed on the inputs which were cleared as such to sister concern - Revenue authorities during the period were of the view that central excise duty needs to be discharged after arriving at the assessable value as per Section 4 of the Central Excise Act on the inputs, considering them as if manufactured by the appellant - Held that - the law of the land is, an appellant when he removes the inputs on which cenvat credit availed, he has to only discharge the amount of duty which is availed as cenvat credit on the said quantity of the inputs. This position cannot be called in for any deliberations. Since during the relevant time the appellant had paid differential duty on being convinced by the Revenue, he definitely can take a plea for non-discharge of interest and non-imposition of penalty before the judicial forum. It is the settled law that in the first place if the duty liability does not arise, the question of payment of interest and imposition of penalty will not arise. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interest liability and penalty imposed on the appellant for the differential duty demanded and paid.

Analysis:
The appellant availed cenvat credit on inputs cleared to their sister concern and reversed the appropriate cenvat credit. The Revenue claimed duty should have been paid by considering the inputs as if manufactured by the appellant. The appellant paid the differential duty and a show cause notice was issued for interest and penalty. The appellant argued that as per settled law, interest and penalty were not required after reversing cenvat credit. The department contended that interest was payable as the appellant accepted duty liability and paid the differential duty. The Tribunal considered the issue of interest liability and penalty imposed on the appellant.

During the relevant period, the appellant cleared inputs to their sister concern by reversing cenvat credit availed. The Revenue's view on discharging central excise duty based on assessable value was rejected by the apex court. The law states that the appellant only needs to discharge the duty availed as cenvat credit on the inputs cleared. As the duty liability did not arise, interest and penalty should not be imposed.

The appellant's payment of differential duty based on Revenue's insistence allows them to argue against interest and penalty. The principle of revenue neutrality applies when goods are cleared to a sister concern, as confirmed by a High Court ruling. The Tribunal found merit in the argument that no duty payment means no interest or penalty imposition.

Case laws cited by the departmental representative were distinguished, and the Tribunal emphasized the specific issue in this case. The doctrine of election does not prevent the appellant from contesting interest and penalty after discharging duty. The Tribunal set aside the order confirming interest demand and penalty imposition, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, holding the impugned order unsustainable and setting it aside. The appeal was allowed, emphasizing the appellant's position regarding interest liability and penalty for the paid differential duty.