2017 (5) TMI 748 - AT - Central Excise

Cenvat Credit - Removal of goods as such - Goods cleared to sister unit was returned back - The case of the department is that the duty should have been paid on the quantity which was supplied by the appellants but subsequently returned back to them - recovery mechanism under Rule 3(4) - time limitation - Held that - the duty is payable only on the net quantity which has been supplied by the appellants. The quantity which has come back to the appellants cannot be considered as removal of input and no duty can be demanded on that quantity - demand not sustainable - issue of limitation not taken up as demand set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Duty payment on cleared inputs to sister concern
2. Duty payment on net quantity after return
3. Recovery mechanism under Rule 57AB
4. Time bar for demand

Analysis:
1. The case involved a dispute regarding the payment of excise duty on inputs cleared to a sister concern. The appellants had cleared inputs to their sister concern, and at the end of the month, they paid excise duty on the actual quantity remaining with the sister concern. The department contended that duty should have been paid on the quantity cleared, irrespective of any returns. The adjudicating authority confirmed the demand, which was appealed by the appellants.

2. The Commissioner (Appeals) allowed the appeal on the grounds that there was no recovery mechanism for the amount payable under Rule 3(4) and that the demand was time-barred. However, a penalty was imposed for contravention of the rule. The revenue challenged this decision, arguing that duty should have been paid on the quantity cleared from the factory, regardless of returns.

3. The respondent argued that the duty was correctly discharged as per the net quantity supplied to the sister concern, for which duty was paid at the end of the month. They emphasized that duty should only be paid on the net quantity supplied and not on the quantity returned. They relied on a previous case upheld by the Supreme Court to support their position.

4. The Tribunal carefully considered the submissions and found that duty should only be paid on the net quantity supplied, not on the quantity returned. The duty on the returned quantity was deemed unsustainable. As a result, the impugned order was upheld, and the revenue's appeal was dismissed. The Tribunal also disposed of the cross objection in this matter.