2015 (10) TMI 278 - AT - Central Excise

Demand of interest - CENVAT Credit - inter unit transfer - revenue neutral situation - period of limitation - Held that - Appellants not contravened any provisions of CCR. The clearance of inputs amounts to inter-unit transfer of inputs and it is not the case of the department that appellant s Unit-II has utilized the credit. The decision of the Tribunal s Principle Bench in the case of Kesarwani Zarda Bhandar (2007 (2) TMI 531 - CESTAT, NEW DELHI) and in the case of Sona Koyo Steering Systems Ltd. (2012 (4) TMI 528 - CESTAT NEW DELHI) are squarely applicable to the facts of the present case. - demand of interest raised after three years is hit by limitation. By respectfully following the above decision, I hold that the appellants are not liable for demand of interest and also not liable for penalty. Accordingly, demand of interest and imposition of penalty are liable to be set aside. - Decided in favour of assessee.

Summary

Issues:
Demand of interest on credit availed and reversed on inputs cleared from one unit to another within the same company.

Analysis:
The appeal was filed against the Commissioner's Order demanding interest on the credit amount availed and reversed on inputs cleared between two units of the same company. The appellant, a manufacturer of 'Transmission & Conveyor Belts', had Unit-I and Unit-II in the same town. The dispute arose when a show cause notice was issued demanding interest on the credit amount availed and reversed on inputs cleared from Unit-II to Unit-I during 2008-09 to 2010-11. The adjudicating authority confirmed the demand of interest and imposed a penalty, stating that the appellant wrongly availed the credit as the goods were not inputs for Unit-II's final products. The Commissioner (Appeals) upheld the demand and penalty, leading to the appeal.

During the hearing, the appellant's consultant argued that both units belonged to the same entity, sharing a PAN number and profit and loss account. They followed Cenvat Credit Rules for clearing inputs between units and contended that interest was demanded beyond the limitation period. The consultant cited relevant case laws to support the appellant's position. On the other hand, the respondent argued that the inputs were not intended for Unit-II's final products, justifying the demand for interest.

The Tribunal analyzed the case, noting that both units belonged to the same company and followed the prescribed procedures for inter-unit transfers. The Tribunal found that the appellant did not contravene any CCR provisions and that the clearance of inputs between units did not result in the utilization of credit by Unit-II. Referring to precedent cases, the Tribunal held that the demand of interest beyond the limitation period was not sustainable. Citing the decisions in various cases, including the Apex Court's judgment in a similar matter, the Tribunal set aside the demand of interest and the penalty. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the demand of interest on the credit availed and reversed on inputs cleared between the units of the same company was not justified. The Tribunal emphasized compliance with CCR provisions and cited legal precedents to support its decision, ultimately setting aside the demand of interest and penalty imposed by the lower authorities.