2017 (12) TMI 1091 - AT - Central Excise

Adjustment of excess paid duty with short paid duty - Intermediate goods - Appellant clears SSFA Noodles to its sister concerns located in tax exempted areas, who use such SSFA noodles in the manufacture of toilet soaps, which are cleared without payment of duty by availing area based exemption - Department was of the view that appellant will not be entitled to adjustment between short paid duty and excess paid duty, since no provisional assessments have been ordered in respect of the assessee. Held that - The goods have been cleared by the appellant to their own sister unit located in tax exempted areas. Consequently, the appellant is require to pay excise duty on goods so cleared. The basis of valuation is also required to be done in terms of Rule 8 of the Central Excise Valuation Rules, 2000 following the Cost Accountant Standards (CAS-4). It is not in dispute that valuation has been done properly as per CAS-4. However, such valuation has been done on the basis of CAS-4 certificate prepared on the basis of annual cost of production. The appellant has paid duty on a month to month basis on the basis of the cost of the goods for the previous month. When the valuation is finalised on an annual basis, there has been short payment of duty in some months as well as excess payment in other months. The appellant has already paid the excess duty wherever the value as per CAS-4 is more than the value adopted for payment of duty, but after adjusting the excess paid duty in other months. Such adjustment has not been permitted by the adjudicating authority even in the denovo adjudication. An identical issue has been considered by the Tribunal in the case of Essar Steel India 2016 (9) TMI 1175 - CESTAT NEW DELHI , in which the Tribunal held that duty paid in excess in certain months has been availed as credit by sister unit hence, cannot be adjusted towards short payment also not tenable. The appellant has claimed that they have already paid the short paid duty payable after deducting adjusting the excess. The adjudicating authority is directed to verify the same and recover only the differential, if any, after such adjustment. Appeal allowed by way of remand.

Summary

Issues:
- Valuation of goods for excise duty purposes based on Rule 8 of the Central Excise Valuation Rules, 2000.
- Adjustment between short paid duty and excess paid duty without provisional assessments.
- Tribunal's consideration of similar cases for permitting such adjustments.

Analysis:

Issue 1: Valuation of goods for excise duty purposes based on Rule 8 of the Central Excise Valuation Rules, 2000:
The appellant, engaged in manufacturing soap noodles, cleared goods to sister concerns in tax-exempt areas. The valuation was determined under Rule 8 based on the Cost Accounting Standard-4 (CAS-4) methodology, specifically 110% of the cost of production. The appellant paid duty monthly using the previous month's cost. However, discrepancies arose when goods were cleared below the assessable value, leading to short payment of duty.

Issue 2: Adjustment between short paid duty and excess paid duty without provisional assessments:
The Department contended that without provisional assessments, no adjustment between excess and short paid duty could be made. The adjudicating authority confirmed the short paid duty demands, disregarding excess paid duty. The appellant argued for adjustments citing Tribunal cases like Jindal Steel & Power Ltd. and Essar Steel India Ltd., where such adjustments were permitted.

Issue 3: Tribunal's consideration of similar cases for permitting adjustments:
The Tribunal analyzed cases like Essar Steel India Ltd., emphasizing that duty liability based on annual CAS-4 valuation should consider adjustments for excess and short paid duty. The Tribunal found the impugned order unsustainable and set it aside, directing the adjudicating authority to verify and recover only the differential duty, if any, after adjusting excess payments.

In conclusion, the Tribunal allowed the appeal, highlighting the need for proper consideration of excess and short paid duty, especially in cases where valuation is done on an annual basis under CAS-4. The judgment emphasized the importance of adjusting excess payments to avoid unjust enrichment and ensure fair duty liability calculations.