2019 (2) TMI 1024 - AT - Central Excise

Valuation - stock transfer - clearance of goods to the own sister units - Rule 11 read with Rules 5,8 & 9 of Central Excise Valuation (Determination of Value of Excisable Goods) Rules, 2000 - demand for differential duty - Held that - Since no sale is involved in such transfer, valuation is required to be done in terms of the Central Excise Valuation Rules, 2000. The Department, during Audit, formed an opinion that the valuation has not been done in terms of the above Rule and in terms of CAS-4 Standard prescribed in this regard - there is no legal basis for addition of this freight amount. The goods are required to be valued at the time of clearance from the appellant s unit and freight upto the recipient unit is not required to be added - there is no justification for adding such amount for arriving at the differential duty. Valuation - PVC Waste - Rule 8 of Valuation Rules - Held that - There is no infirmity in this stand since as per the decision of the Larger Bench of the Tribunal in the Ispat Industries 2007 (2) TMI 5 - CESTAT, MUMBAI , the valuation of the goods as per sale to independent buyer, may be adopted even in respect of clearance to sister unit. Revenue neutrality - Held that - This is a case for revenue neutrality inasmuch as any differential duty paid by Diamond Harbour Unit will be available as cenvat credit by receiving unit. On the ground of revenue neutrality also, there is no basis for demand of differential duty and imposition of penalty. The demand restricted for differential duty to ₹ 46,44,174/-, which has been admitted and paid by the appellant - there is no justification for imposition of penalty - appeal allowed in part.

Summary

Issues: Valuation of goods for Central Excise duty on stock transfer basis, Application of Central Excise Valuation Rules, 2000, CAS-4 Standards, Differential duty demand, Revenue neutrality, Imposition of penalty

Analysis:
1. Valuation of Goods for Central Excise Duty on Stock Transfer Basis:
The dispute revolves around the valuation of goods cleared by the appellant from one unit to another sister unit without involving a sale transaction. The Department contended that the valuation was not done in accordance with Central Excise Valuation Rules, 2000, and CAS-4 Standards. The appellant reworked the valuation based on CAS-4 and admitted and paid a differential duty amount. However, the adjudicating authority demanded further differential duty by including freight for transfer to sister units. The Tribunal found no legal basis for adding freight to the valuation, stating that goods should be valued at the time of clearance from the appellant's unit without adding freight to the recipient unit's value.

2. Application of Central Excise Valuation Rules, 2000 and CAS-4 Standards:
The appellant argued that the valuation should be based on CAS-4 Standards, while the Department insisted on adding freight to the valuation. The Tribunal ruled in favor of the appellant, stating that the valuation should not include freight for transfer to sister units. Additionally, the Tribunal referenced the Larger Bench decision in the Ispat Industries case, allowing the valuation based on sales to independent buyers for certain goods like PVC Waste.

3. Differential Duty Demand and Revenue Neutrality:
The appellant contended that any differential duty paid at the originating unit would be available as cenvat credit at the receiving sister unit, leading to revenue neutrality. Referencing the Anglo French Textiles case, the Tribunal emphasized that in cases of revenue neutrality, the demand for duty is unsustainable. The Tribunal, therefore, set aside the demand for additional differential duty beyond what the appellant had already admitted and paid.

4. Imposition of Penalty:
The Tribunal found no justification for the imposition of a penalty, given the circumstances of the case and the revenue neutrality aspect. Consequently, the penalty was set aside, and the appeal was partly allowed, restricting the demand for differential duty to the amount admitted and paid by the appellant.

In conclusion, the Tribunal's decision focused on the proper valuation of goods for Central Excise duty on stock transfer basis, emphasizing adherence to Central Excise Valuation Rules, 2000, and CAS-4 Standards. The judgment highlighted the concept of revenue neutrality in determining differential duty demands and penalties, ultimately providing relief to the appellant by setting aside the additional differential duty demand and penalty while partially allowing the appeal.