2018 (3) TMI 267 - AT - Central Excise

Demand of Differential duty - N/N. 06/2006-CE dated 01.03.2006 - Department was of the view that in respect of 160 duty paid chassis on which body was built by Unit-II, duty was required to be paid by Unit-II on the entire value of chassis body built thereon at the time of returning the same to Unit-I. Held that - The unit which has received the duty paid chassis from M/s Tata Motors has availed the Cenvat Credit of such duty paid before sending the same to other unit for body building. After getting the body built by the other unit and return of the same, the first unit has paid the duty on value including that of the chassis. The excise duty demand has been raised on the second unit where the body has been built - Since the second unit has not taken the credit of duty paid on the chassis, the second unit is allowed to discharge the duty without including the value of chassis. It is found that such duty has already been paid. Consequently, the demand for differential duty raised against the two units cannot be sustained. The differential duty raised in the course of audit objection has already been paid by both the units but Revenue has raised the issue that such duty has been paid after delay and hence interest is required to be paid - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dispute regarding differential duty on chassis received from M/s Tata Motors by two units.
2. Interpretation of Notification No. 6/2006 dated 01/03/2006.
3. Liability of the units to pay differential duty and interest.

Analysis:

Issue 1:
The dispute involves two units engaged in body building over chassis supplied by M/s Tata Motors. One unit availed Cenvat Credit on duty paid chassis and transferred them to the other unit for body building. The returning unit paid duty on the value of the vehicle excluding the chassis. The original unit paid duty on the full value while returning the vehicle. Revenue demanded differential duty from both units for chassis returned after body building.

Issue 2:
Notification No. 6/2006 provides options for duty payment on body built on chassis. If Cenvat Credit on chassis duty is taken, duty is payable on the full vehicle value. If no credit is taken, duty is payable excluding chassis value. The second unit, where body building occurred, did not take credit on chassis duty. Hence, it should discharge duty without including the chassis value, as already paid. This interpretation aligns with the notification's provisions.

Issue 3:
The appellant argued for revenue neutrality, as paying differential duty creates Cenvat Credit for the sending unit. Citing precedents, the Tribunal agreed, emphasizing that the duty was already paid. The demand for differential duty is unsustainable. The issue of interest on delayed duty payment does not arise as there is no liability for differential duty. Therefore, both impugned orders were set aside, and appeals were allowed.

This judgment clarifies the duty payment obligations concerning chassis used in body building activities, emphasizing compliance with Notification provisions and ensuring revenue neutrality between interconnected units of the same company.