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2017 (12) TMI 162 - AT - Central ExciseValuation - removal of goods to the sister concern of the appellant - cost construction method - Rule 8 of Central Excise Valuation Rules, 2000 - revenue neutrality - Held that - the goods have been cleared by the appellant on payment of duty, therefore no malafide intention is proved. Whatever duty is discharged by the appellant unit is taken as cenvat credit by their sister concern who is recipient of the goods. Therefore any differential duty arises in this case was also available as cenvat credit to their recipient unit. This is clear case of revenue neutrality. For arriving at the revenue neutrality it is necessary to see whether the recipient unit is discharging the excise duty from the PLA or cash. The consignee unit of the appellant has paid excise duty not only from CENVAT but also from PLA which is more than the excise duty demand involved in the present case. On this fact revenue neutrality is established. If it is established that the duty payable/paid is available as cenvat credit to the recipient which is appellants own sister concern who is discharging duty from PLA which is more than the duty payable by the appellant, the case falls under the category of revenue neutrality, hence, no demand will sustain - Since we have taken a view that demand is not sustainable on revenue neutrality, we need not go to other aspect of valuation of goods - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Valuation of goods manufactured and cleared to the appellant's own unit. 2. Inclusion of certain overheads in the cost of manufacture. 3. Revenue neutrality. 4. Imposition of penalties and interest. Detailed Analysis: 1. Valuation of Goods Manufactured and Cleared to Own Unit: The primary dispute revolves around the valuation of goods manufactured by the appellant and cleared to their own unit. The appellants used the cost construction method as per Rule 8 of the Central Excise Valuation Rules, 2000, which includes actual material cost, processing cost, and 15% profit on the total cost of production. The department contended that the appellants did not correctly calculate the manufacturing cost by excluding certain overheads, leading to a differential duty of ?1,55,38,292/- initially, which was later reduced to ?18,36,911/- after denovo adjudication. 2. Inclusion of Certain Overheads in the Cost of Manufacture: The adjudicating authority included additional overheads such as outside job charges, conversion cost of stator plate, and administrative overheads related to production, which the appellants had excluded. The appellant argued that these overheads were not related to the manufacture and should not be included in the cost as per CAS-4 standards. They cited several judgments, including CCE Vs. Cadbury India Ltd. and Alstom Ltd., to support their claim that administrative expenses and professional charges are not to be included in the manufacturing cost. 3. Revenue Neutrality: The Tribunal focused on the issue of revenue neutrality, which implies that any duty paid by the appellant would be available as CENVAT credit to their sister concern. It was established that the appellant's sister unit, which received the goods, discharged excise duty from both CENVAT credit and PLA, exceeding the excise duty demand in question. The Tribunal cited multiple judgments, including Jay Yuhshin Ltd. and Textile Corpn. Marathwada Ltd., to reinforce the principle that if the duty paid is available as credit to the recipient unit, the situation is revenue neutral, and the demand does not sustain. 4. Imposition of Penalties and Interest: The appellant argued against the imposition of penalties, citing the absence of mens rea (malafide intention) as per the Supreme Court's ruling in CCE vs. Pepsi Foods Ltd. The Tribunal did not delve deeply into the penalty issue, as the primary focus was on revenue neutrality, which nullified the demand itself. Conclusion: The Tribunal concluded that the case is a clear instance of revenue neutrality since the duty paid by the appellant was available as CENVAT credit to their sister concern, who discharged duty from PLA exceeding the demand. Therefore, the demand was set aside, and the appeal was allowed. The Tribunal did not address other aspects of the valuation of goods due to the settled position on revenue neutrality. (Pronounced in Court on 30/11/2017)
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