2018 (10) TMI 1470 - AT - Central Excise

Valuation - increase in the administrative overheads from 12.58% to 15.98% - clearance made to sister unit - revenue neutral situation - Held that - Undisputedly, the clearances are made to their own sister units and even if the differential duty is paid by the appellants, the assessee units would be able to take cenvat credit of the same. On these grounds, it can be seen that there is no loss to the Government and no gain to the appellant which discloses revenue-neutral situation. The Hon ble jurisdictional High Court in the case of CCE Chennai Vs Tenneco RC India Pvt. Ltd. 2015 (7) TMI 342 - MADRAS HIGH COURT had considered a similar issue and observed that entire exercise is revenue-neutral, the appellant could not have achieved any purpose to evade duty and held the issue in favour of the assessee. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Violation of Rule 8 of Central Excise Valuation Rules and Section 4 of Central Excise Act, 1944 regarding transfer of excisable goods to sister concerns without accounting for increase in administrative overheads.

Analysis:
The case involved the contravention of Rule 8 of Central Excise Valuation Rules and Section 4 of the Central Excise Act, 1944 by the appellants for transferring excisable goods to their sister concerns without considering the increase in administrative overheads. The appellants had paid duty on 110% of the value determined by CAS-4 but did not factor in the rise in administrative overheads from 12.58% to 15.98%. This led to a show cause notice, and the original authority confirmed a demand of &8377;41,73,962 along with interest and imposed a penalty, which was upheld by the commissioner (Appeals), prompting the appeal.

The appellant argued that administrative overheads were calculated based on the preceding financial year as the current year's data would only be available after finalizing the balance sheet in the subsequent financial year. They presented a detailed breakdown of overhead rates for different years to support their position. The appellant contended that despite any increased duty paid, the exercise was revenue-neutral as the clearances were made to sister units, allowing for cenvat credit, resulting in no loss to the Government or gain to the appellant. The appellant cited various legal precedents to support their argument.

The department, represented by the Ld. A.R Shri A. Cletus, reiterated the findings in the impugned order during the hearing. After hearing both sides, the tribunal observed that the demand was raised due to the appellants not considering actual overheads for respective financial years. However, given the revenue-neutral nature of the transactions and the ability of the sister units to claim cenvat credit for any differential duty paid, the tribunal found no loss to the Government or gain to the appellant. Citing a relevant High Court case and a Supreme Court decision, the tribunal held in favor of the assessee, setting aside the impugned order and allowing the appeal with any consequential benefits as per law.

In conclusion, the tribunal ruled in favor of the appellant, stating that the demand could not be sustained as the entire exercise was revenue-neutral, and there was no intent to evade duty. The decision was based on the principle that the transactions did not result in any loss to the Government or gain to the appellant, ultimately leading to the appeal being allowed with consequential benefits as per the law.