2018 (11) TMI 729 - AT - Central Excise

Method of Valuation - stock transfer from one unit to another - revenue neutrality - Held that - Since such transfer does not involve sale, the valuation is required to be adopted in terms of Rule 8 of the Central Excise Valuation Rules, 2000. This Rule prescribes that the valuation is to be determined at the rate of 115%/110% (as prevalent at the relevant time) of the value of the goods arrived at as per CAS-4 Standard. Such Standard have been prescribed by the Institute of Cost & Works Accountants of India (ICWAI). The valuation adopted for such stock transfer by the appellants is admittedly is not meeting such Standards - Neither the value adopted by the appellants for payment of duty nor the value finally adopted by the Revenue, is as per CAS-4 Certificate. The valuation adopted by the Department has not been certified by the Cost Accountants. Revenue Neutrality - Held that - It is not in dispute that any differential duty paid by Durgapur Unit will be available as cenvat credit in the Burdwan Unit. This leads to revenue neutral situation. The demand for differential duty, arrived at by questionable means, does not merit to be sustained - demand with penalty do not sustain - appeal allowed in part.

Summary

Issues:
1. Valuation of goods for stock transfer from Durgapur Unit to Burdwan Unit
2. Shortages of finished goods at Durgapur Unit and subsequent duty payment
3. Applicability of revenue neutrality in the case

Analysis:

Issue 1: Valuation of goods for stock transfer
The dispute centered around the valuation of goods transferred from the Durgapur Unit to the Burdwan Unit. The Department contested the value adopted by the appellants, leading to a redetermination of the value and a demand for differential duty. The appellants argued that the CAS-4 Certificate, certified by a Chartered Accountant, should be considered for valuation. Despite the CAS-4 Certificate indicating a higher assessable value than the one adopted for duty payment, the Department did not accept it. The appellants claimed a revenue-neutral situation due to the inter-unit transfer, citing relevant case laws. The Tribunal noted discrepancies in valuation but ultimately relied on the principle of revenue neutrality to set aside the demand for differential duty and associated penalties.

Issue 2: Shortages of finished goods and duty payment
During stock verification at the Durgapur Unit, shortages of finished goods were identified, leading to duty payment by the appellants. The Tribunal upheld the duty on the goods found short, along with interest and penalties equal to the duty amount, as the appellants did not contest this issue.

Issue 3: Applicability of revenue neutrality
The Tribunal emphasized the concept of revenue neutrality in cases where differential duty paid in one unit can be availed as cenvat credit in another unit of the same appellant. Citing precedents, the Tribunal concluded that in a revenue-neutral scenario, allegations of suppression and demands for differential duty are not sustainable. Consequently, the demand for differential duty and penalties were set aside, including the penalty on the Director of the Appellant Company. The Tribunal clarified that while intervening in the valuation dispute, the findings regarding shortages were left undisturbed.

In conclusion, the appeals were partly allowed based on the principles of revenue neutrality, setting aside the demand for differential duty and associated penalties while upholding duty payment for shortages of finished goods.