2024 (3) TMI 488 - AT - Central Excise

Liability to pay interest on the goods cleared to their sister unit in terms of proviso to Rule 9 read with Rule 8 of the Valuation Rules, 2000 - duty was levied @ 110% of the cost of production determined on the basis of annual CAS-4 certificates/guidelines of stock transferred goods in accordance with CBEC Circular No.692/08/2003-CX dated 13.02.2003 - Revenue Neutrality - HELD THAT - The only argument that the Ld.Commissioner has been able to make out in his order is the proposition that since the value of goods could not be determined at the time of clearance, the appellant could have opted for provisional assessment for delayed payment of duty, interest as automatic and is better considered as compensation . For these findings, the Ld.Commissioner has relied upon the Hon ble Supreme Court s pronouncement in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS INTERNATIONAL AUTO LTD. 2010 (1) TMI 151 - SUPREME COURT . At the outset it may be pointed out that the aforesaid two situations relied upon by the Ld.Commissioner(Appeals) do not cater to a situation of revenue neutrality and are concerned where price revision had happened and duty short paid was subsequently paid by way of supplementary invoices raised in favour of the customers to whom the goods were sold form the factory gate. There is marked difference with the scenarios and for this reason, the aforesaid Supreme Court s decisions are not applicable to the facts of the present case. It is not deniable that there ought to be an adjustment of excess duty paid against the cases of short payment of duty. However, the appellant is not seeking any such interference at this stage. It is a fact that ignoring duty paid in excess and only considering the duty that has been short paid would lead to an anomalous situation where it would tantamount to retention of undue tax by the Government in clear violation of the stipulation of Article 265 of the Constitution. Revenue Neutrality - HELD THAT - There are series of cases wherein it has been held that in a revenue neutral situation demand for duty does not arise - Reliance can be placed in the case of Hindalco Industries Ltd. v. CCE, Bhubaneswar-II 2023 (5) TMI 720 - CESTAT KOLKATA . Further, even if the disputed amount of duty is paid by the appellant, question of saddling them with payment of interest clearly does not arise. In the present matter, no case has been made out by the department - the order of the lower authority set aside - appeal allowed.

Summary

Issues involved:
The liability of the appellant to pay interest on goods cleared to sister unit based on valuation rules.

Summary:
The appellant, a manufacturer of various products, transferred goods to a sister unit for further processing. The dispute arose regarding the appellant's liability to pay interest on the goods cleared to the sister unit. The department demanded interest on the differential duty paid by the appellant. The appellant argued that they had already paid differential duty and excess duty was not claimed as a refund. The case revolved around the method of duty payment and the adjustment of excess and shortfall in duty.

The appellant contended that the duty payment method was compliant with Rule 8 and that the duty was not payable as the transferee unit had already paid duty. They argued that any excess duty paid should be adjusted against short duty paid during the same financial year. The appellant emphasized that interest liability does not accrue in revenue-neutral scenarios where no duty is payable.

The Tribunal noted that there should be an adjustment of excess duty paid against short payment of duty. Ignoring excess duty paid and only considering short payment would lead to an anomalous situation. Various judicial authorities allowed adjustment of duty in cases involving valuation issues. The Tribunal referenced several case laws supporting the adjustment of duty in similar scenarios.

Regarding the payment of interest, the Tribunal held that in a revenue-neutral situation, no interest is payable. Citing previous decisions, the Tribunal emphasized that if duty is not payable, then the payment of interest does not arise. They referred to specific cases where interest was not payable in revenue-neutral situations. The Tribunal concluded that no interest was payable by the appellant in the present matter, setting aside the lower authority's order and allowing the appeal with consequential relief.