2010 (1) TMI 494 - AT - Central Excise

Remand - The appellant having deposited the entire amount of duty before issuance of show cause notice, hence is not liable for interest and penalty. Held that - it could not be said that there was intention to evade duty, extended period could not be invocked. Penalty also set aside, especially there was no finding that transactional value incorrect or there was misstatement or clandestine removal.

Issues Involved:

1. Liability for differential duty, interest, and penalty.
2. Revenue neutrality and its impact on duty demand.
3. Allegation of suppression of facts and extended period of limitation.
4. Validity of duty demand on non-excisable goods (molten metal).
5. Applicability of penalty under Section 11AC of the Central Excise Act.
6. Liability for interest under Section 11AB of the Central Excise Act.
7. Scope of remand by the Supreme Court.

Issue-wise Detailed Analysis:

1. Liability for Differential Duty, Interest, and Penalty:
The appellant, a manufacturer of Pig Iron and Molten metal, sold these goods to its group company LKCL, treating the transaction value as the assessable value for excise duty. The Revenue contended that LKCL was a related person under Section 4(3)(b)(ii) of the Central Excise Act, necessitating valuation under Rule 8 of the Central Excise Valuation Rules, 2000. A show cause notice was issued demanding differential duty, interest, and penalty. The Tribunal initially held that the appellant, having paid the duty before the issuance of the show cause notice, was not liable for interest and penalty. However, the Supreme Court remanded the matter for fresh consideration.

2. Revenue Neutrality and Its Impact on Duty Demand:
The appellant argued that the situation was revenue neutral since the differential duty paid by one unit was available as credit to the other unit within the same company. This argument was supported by several decisions, including Super Forgings & Steels Ltd. v. Commissioner of Central Excise and Sundram Fasteners Ltd. v. Commissioner of Customs & Central Excise, which held that in revenue-neutral situations, no differential duty, interest, or penalty could be demanded.

3. Allegation of Suppression of Facts and Extended Period of Limitation:
The appellant contended that there was no suppression of facts as all relevant information was available in the public domain through their annual reports. They argued that the extended period of limitation under the Proviso to Section 11A(1) of the Central Excise Act could not be invoked. This was supported by decisions like Aurobindo Pharma Ltd. v. Commissioner of Central Excise and MRF Ltd. v. Commissioner of Central Excise, which held that in the absence of intent to evade duty, the extended period could not be applied.

4. Validity of Duty Demand on Non-Excisable Goods (Molten Metal):
The appellant argued that a significant portion of the differential duty demand related to molten metal, which was not an excisable commodity. They cited decisions such as DRM Steel Industries (P) Ltd. v. Commissioner and TISCO v. Collector of Central Excise, which confirmed that no duty was payable on non-excisable goods, thus invalidating the duty demand on molten metal.

5. Applicability of Penalty under Section 11AC of the Central Excise Act:
The Tribunal noted that the Supreme Court had directed a fresh consideration of the applicability of Section 11AC. Given the absence of any misstatement, suppression, or intent to evade duty, the Tribunal held that the conditions for invoking Section 11AC were not satisfied, thus setting aside the penalty.

6. Liability for Interest under Section 11AB of the Central Excise Act:
The Tribunal held that since the entire duty demand was time-barred, the question of liability for interest did not arise. This was based on the finding that the appellant had adopted the transaction value in good faith and there was no suppression of facts.

7. Scope of Remand by the Supreme Court:
The Supreme Court's remand was an open remand, allowing the Tribunal to consider all issues afresh. The Tribunal interpreted this to mean that it could examine the entire grounds of appeal, including the non-leviability of duty, penalty, and interest. This interpretation was supported by the Supreme Court's decision in Orient Papers & Inds. Ltd. v. Tahsildar-Cum-Irrigation Officer, which allowed for a comprehensive re-examination of all issues on remand.

Conclusion:
The Tribunal concluded that the duty demand was time-barred and there was no basis for imposing penalty or interest. The appeal was allowed, and the impugned order was set aside to the extent it imposed penalty and demanded interest. The Tribunal also noted that since LKCL had already taken Cenvat credit for the duty paid, no refund was due to the appellant.

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