2024 (1) TMI 332 - AT - Central Excise

CENVAT Credit - Stock transfer - disallowance of ineligible credit transferred by Unit-II to Unit-I - HELD THAT - The very same issue came up for consideration before the Tribunal in appellant's own case in M/S. INDO SHELL CAST PVT. LTD. (UNIT I) VERSUS THE COMMISSIONER OF GST CENTRAL EXCISE, COIMBATORE 2023 (7) TMI 429 - CESTAT CHENNAI , the Tribunal has held that the credit availed by Unit-I on account of the excess duty paid by Unit II cannot be denied. The excess duty happened to be paid because of the practical difficulties of arriving at the actual production cost at the time of clearance of goods. Further, the situation is completely revenue neutral. It also requires to be stated that when the duty has been paid by Unit-II as per the invoices, the credit cannot be denied by the department at the recipient s unit. Following the decisions in the appellant s own case for the period from April 2007 to September 2011, the demand and penalties cannot sustain and requires to be set aside. The impugned orders are set aside. The appeals are allowed.

Summary

Issues Involved:
The issue involved in the judgment is the valuation of goods transferred between two units of the same company for the purpose of payment of excise duty, and the eligibility of cenvat credit on the excess duty paid by one unit and availed by the other unit.

Valuation of Goods Transferred Between Units:
The appellant, a manufacturer of machined castings, established Unit II for manufacturing rough castings and transferring them to Unit I. The department found discrepancies in the valuation of goods transferred between the units, leading to short payment and excess payment of duty for different financial years. Show cause notices were issued proposing to disallow ineligible credit transferred by Unit II to Unit I and recover the same along with interest and penalties. The original authority and the Commissioner (Appeals) confirmed the demand. The appellant argued that the actual cost of production cannot be accurately determined at the time of clearance and that the excess duty paid was due to practical difficulties in determining the cost. The Tribunal, in a previous decision, held that the credit availed by Unit I on the excess duty paid by Unit II cannot be denied as it is a revenue-neutral situation.

Eligibility of Cenvat Credit:
The department alleged that the appellant was not eligible to take credit on the excess duty paid by Unit II. However, the Tribunal, based on previous decisions in the appellant's own case, concluded that the denial of credit cannot be sustained. It was noted that when duty has been paid by Unit II, the credit cannot be denied to the receiving unit. The Tribunal set aside the demand and penalties for the period in question, following the decisions in the appellant's previous cases.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals with consequential reliefs. The judgment reiterated that the situation was revenue-neutral and that the denial of credit on the excess duty paid could not be justified. The decision was based on the practical difficulties in determining the actual production cost at the time of clearance and the previous rulings in the appellant's favor.