2008 (10) TMI 517 - AT - Central Excise

Valuation - includibility - notional profit - Rule 8 of Cenvat Credit Valuation Rules, 2002 - Held that - It is not a case where the goods are being sold by one assessee to another. It is basically taking out money from one pocket and putting the same in other pocket of same trouser. The other unit at Nadiar was appellant s own unit and it was only for the procedural and technical purposes that the duty was required to be paid at the time of clearance from the assessee s unit. Tribunal, in number of cases, has held that where the duty paid in one unit is available as credit to other unit of the same assessee, the entire issue is Revenue neutral and the demand should not be confirmed on the said count. The entire demand being available as credit to their own unit, confirmation of the same was not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Correct assessable value of goods cleared by the appellant.
- Liability to pay differential duty.
- Availability of duty paid as credit to the appellant's own unit.

Analysis:
1. The appellants cleared grey fabric/MMF fabric to their own unit without including notional profit as required by Rule 8 of Cenvat Credit Valuation Rules, 2002. Proceedings were initiated for confirmation of demand of duty amounting to Rs. 35,18,232. The original adjudicating authority confirmed the duty, interest, and penalty. The Commissioner (Appeals) upheld the order, leading to the present appeal.

2. The appellant's advocate acknowledged the under-valuation of the goods but argued that the duty paid was available as Modvat credit to their other unit. They contended that the situation was revenue-neutral as the differential duty demanded could be utilized by their unit for payment of duty. Various decisions were cited in support of this argument.

3. The Revenue's representative opposed the appellant's stance, emphasizing that the availability of duty as credit to their own unit should not absolve them of the demand. It was asserted that the Tribunal's role was to determine the correct assessable value and the liability to pay differential duty, which the appellants had admitted to.

4. The Tribunal considered both parties' submissions and noted that if the appellants had paid higher duty initially, their unit would have taken credit of the same. The duty payment was likened to transferring money within the same entity. Previous Tribunal decisions and a Supreme Court ruling were cited to support the principle that when duty paid in one unit is available as credit to another unit of the same assessee, the issue is revenue-neutral. Hence, the demand should not be confirmed based on this ground.

5. The Tribunal found merit in the appellant's argument that the entire demand, being available as credit to their own unit, did not warrant confirmation. Consequently, the appeal was allowed, and the impugned order was set aside.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the legal principles relied upon by the Tribunal in arriving at its decision to set aside the demand for duty.