2022 (4) TMI 603 - AT - Central Excise

Valuation - clearance of entire stock transfer of Ethyl Alchohol to Appellant s Sister Unit - inclusion of margin of profit in the cost of production or not - any under valuation resulting in a short payment of duty or otherwise? - period from November 1997 to March 2000 - invocation of extended period of limitation - Revenue Neutrality - HELD THAT - It is found that whether assessable value for clearance of Ethyl Alcohol was inclusive of profit or not can decide the entire issue on merits of the case. When revenue is making such an allegation, the burden is on revenue only to establish this factor with sufficient evidences. Revenue has only assumed that the element of profit was not included in the assessable value, without producing any evidence in support of their allegation. The cost of production and element of profit depends on various factors prevailing in the market from time to time. Revenue has assumed and adopted cost of production ₹ 17 per Ltr for the entire period in question without showing how and which data they have relied upon to formulate such value and the charges of under valuation framed against Appellant. Certificate submitted from Chartered Accountant shows that element of profit was included in assessable value in clearance of Ethyl Alcohol to Appellant s sister unit. Certificate of Chartered Accountant could not be brushed aside, without any other reliable contra evidence. Thus, Revenue has not adduced any positive, clinching, sufficient evidence to prove case on merits in facts of this case. Extended Period of limitation - Revenue Neutrality - HELD THAT - It is a settled legal position that Revenue cannot invoke larger period of limitation in cases involving Revenue Neutral Situation, because an assessee would not have any intent to evade payment of duty in a Revenue Neutral situation. Appellant has discharged substantial excise duty liabilities on its final product from PLA during relevant period. Cenvat of amount of duty under dispute could have been utilized by the Appellant - Show Cause Notice and demand against an assessee would not be justified, if assessee himself was entitled to avail Cenvat credit of disputed duty demanded when assessee is in a position to utilize Cenvat credit for payment of duty on clearance of their final products. The issue involved is also of pure interpretation of provisions of levy of duty including profit in assessable value in clearance of goods to sister unit for captive use. In such facts of case, it cannot be said that the Appellant had any mala fide intentions to evade payment of duty, which otherwise was available to Appellant as Cenvat Credit in sister unit and that Appellant have not suppressed assessable value with intention to evade payment of duty. There is nothing on record to show that suppression of facts or wilful misstatement were made by Appellant to evade payment of excise duty - charge of suppression or willful misstatement with intention to evade payment of duty cannot be sustained against the Appellant. Hence extended period for demand cannot be invoked. No mala fides can be attributed to Appellant for such issue of interpretation and hence extended period of time limitation is not invocable in the facts of this case. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the stock transfer of "Ethyl Alcohol" to the Appellant's Sister Unit included a margin of profit in the cost of production.
- Whether there was under-valuation resulting in a short payment of duty.
- Whether the duty demand was time-barred.
- Whether the extended period of limitation can be invoked in a revenue-neutral situation.

Analysis:

1. Margin of Profit in Cost of Production:
The Appellant, a chemical manufacturer, transferred Ethyl Alcohol to its sister unit for Captive Consumption. The Revenue alleged that the assessable value did not include the profit element, resulting in short payment of duty. The Appellant contended that the profit was included, supported by a Chartered Accountant's certificate. The Tribunal found that the Revenue failed to provide sufficient evidence to support its claim, and the certificate was not adequately challenged. The burden to prove the absence of profit in assessable value rested on the Revenue, which it failed to discharge.

2. Under-Valuation and Time Limitation:
The Revenue demanded duty for the period from November 1997 to March 2000, invoking the extended period of limitation. The Appellant argued that the duty demand was time-barred due to revenue neutrality. The Tribunal agreed that in a revenue-neutral situation, where the Appellant could utilize Cenvat credit for duty payment, the extended limitation period could not be invoked. The Appellant had no intent to evade duty, having paid substantial amounts from PLA during the relevant period.

3. Judgment and Relief:
The Tribunal held that the Order-in-Original confirming the duty demand was unsustainable. The interest and penalty imposed on the Appellant were also set aside. The Tribunal allowed the appeal, granting consequential reliefs as per the law. The decision was pronounced in open court on 12.04.2022. The judgment favored the Appellant based on the lack of evidence from the Revenue and the circumstances of the case, including revenue neutrality and compliance with duty payment requirements.

This detailed analysis covers the key issues raised in the legal judgment, highlighting the arguments presented by both parties and the Tribunal's reasoning leading to the final decision in favor of the Appellant.