2019 (3) TMI 1277 - AT - Central Excise

Method of Valuation - clearance to their sister concern consignments of HR strips - case of Revenue is that the assessable value is not correct, sales to their own unit has to be treated as captive consumption - period July 2000 to June 2001 - Held that - There is no doubt as to the fact that the Patancheru unit is functioning under the name and style of PM Telelinnks Ltd., and consuming the HR sheets in their factory premises for manufacturing of CR sheets. The findings of the lower authorities is that the valuation should be based upon the Rule 8 of Central Excise Valuation Rules 2000, is also correct to the extent that it has been cleared for captive consumption to their own factory. To that extent, the order of the First Appellate Authority as well as the adjudicating authority is correct - however, the lower authorities have not considered the fact that the HR sheets which are manufactured by the appellant are cleared to their own concern under duty paying document. Revenue neutrality - Held that - The entire demand becomes revenue neutral as the clearances were to their own sister concern who availed the CENVAT Credit - Tribunal in the case of Kansai Nerolac Paints Ltd. 2013 (8) TMI 1022 - CESTAT AHMEDABAD have held that There cannot be any intention to evade duty on such clearance made to their own sister concern, as the said sister concerns admittedly are discharging the duty liability on the final products manufactured by them; which would mean that the sister concerns could have availed the Cenvat credit of any duty paid by the appellant on clearance of resins to them. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of differential duty on goods cleared to own unit for captive consumption based on valuation rules.

Analysis:
The appeal challenged an Order-in-Appeal regarding the demand of differential duty on goods cleared by the appellant to their own unit for captive consumption. The appellant had paid duty based on transaction value, but revenue authorities sought duty based on valuation rules. The lower authorities confirmed the differential duty demand, citing under-valuation. The appellant argued that the clearances were revenue neutral as they were to their sister concern, citing relevant case law. The issue was whether the differential duty demand was justified based on valuation rules.

The Tribunal acknowledged that the goods were cleared for captive consumption to the appellant's own factory. While the lower authorities' valuation based on Central Excise Valuation Rules was correct, they failed to consider that the goods were cleared under duty-paying documents. The appellant's argument of revenue neutrality was supported by case law, emphasizing that the duty paid was available as credit to their sister concern. The Tribunal noted similar decisions supporting this view and set aside the demand, allowing the appeal.

The judgment referenced various cases, including Kansai Nerolac Paints Ltd. and Indeos ABS Ltd., which upheld the concept of revenue neutrality in similar situations. The Tribunal emphasized that where duty paid is available as credit to the same assessee's unit, the issue is revenue neutral. The judgment cited additional cases and a Supreme Court ruling to support this principle. Ultimately, the Tribunal found merit in the appellant's contention of revenue neutrality and allowed the appeal, setting aside the demand for differential duty.

The Tribunal's decision was in line with previous judgments and established principles of revenue neutrality in cases where duty paid is available as credit to the same assessee's unit. The judgment emphasized the importance of considering the specific circumstances and practical implications of duty payments within related entities. The appeal was allowed, and the demand for differential duty was set aside based on the principle of revenue neutrality.