2020 (1) TMI 312 - AT - Central Excise

Demand of interest on differential duty - valuation under cost construction method - at the time of the removal the cost of manufacturing not available they were paying duty on the provisional value and after the finalization of the books of the companies they were calculating the exact cost of the manufacture and were paying a differential duty - Time limitation - HELD THAT - Hon ble Supreme Court in the case of M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE RAIPUR 2019 (5) TMI 657 - SUPREME COURT held that the interest is chargeable from the due date as prescribed in rule 8 of Central Excise Rules 2002 and not from the payment of differential duty. Therefore the demand of interest on merit is sustainable however the appellant have strongly argued on the limitation. Time Limitation - HELD THAT - The appellant had practice to pay the duty on provisional value at the time of removal of the goods and only on finalization of books of accounts the actual cost of manufacturing is arrived at and whenever there is a short of value they were paying the differential duty - there is no suppression of facts and mala fide on the part of the appellants. Accordingly the demand for extended period is not sustainable. Demand set aside on the ground of limitation.

Summary

Issues:
Whether interest on differential duty should be paid from the due date of duty payment or from the date of payment of differential duty.

Analysis:
The case involved a dispute regarding the payment of interest on differential duty by the appellants who were engaged in manufacturing Cotton Yarn and supplying it to interrelated units/group companies. The appellants valued their goods using the cost construction method and paid duty on a provisional value at the time of removal, later adjusting it based on the final cost of manufacturing. The main issue was whether interest on the differential duty should be calculated from the due date of duty payment or from the date of payment of the differential duty.

The appellant's counsel argued that interest should start from the date of payment of differential duty, citing the Supreme Court's ruling in the Steel Authority of India Ltd case. The counsel contended that the appellant had disclosed their valuation method and there was no suppression of facts. Additionally, reliance was placed on various judgments such as Apar Industries Ltd, Larsen and Toubro, and Hindustan Insecticides Ltd to support their argument. It was also highlighted that the transaction was revenue-neutral due to Cenvat Credit entitlement for the consignee within the same company, making the invocation of the extended period unjustifiable.

On the other hand, the Revenue's representative supported the findings of the impugned orders, emphasizing the interest payment requirement. After considering the arguments from both sides and examining the records, the Tribunal held that interest on the differential duty should be charged from the due date as per the Central Excise Rules, aligning with the Supreme Court's stance. However, the Tribunal acknowledged the appellant's consistent practice of paying differential duty after finalizing the cost of manufacturing, even before audits, indicating no malafide intent or suppression of facts. Notably, the supply of goods within the same company entitled the consignee to Cenvat Credit, resulting in a revenue-neutral situation that precluded the invocation of the extended period. Consequently, the demand for the extended period was deemed unsustainable, leading to the allowance of the appeal involving the extended period demand.

In a separate appeal, where the amount in question was minimal, the appellant did not contest and agreed to pay the demanded interest amount, resulting in the dismissal of that appeal.