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TMI Blog2018 (9) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... lity - Held that:- The demand is on duty short paid or not paid which is a consolidated exercise. In this case, since the department has opted to rely on the cost audit report of DPA, they should do so fully recalculating the duty payable on all clearances during the period. The figures submitted by the learned counsel would show that such a calculation would eliminate the demand because they have paid in excess of what would have been payable - the demand in respect of their Malkapur unit does not survive as far as the question of under-valuation is concerned. The demands in respect of the Jeedimetla and Balanagar units follow from the demand in Malkapur unit and hence will not survive either. CENVAT credit on rejected material - Held that:- There is nothing on record to show that the material had not entered the factory of manufacturer or have not been taken into production process. This being a part of quality control of manufacture of final products, they are entitled to the credit on the rejected inputs. Appeal allowed - decided in favor of appellant. - E/340/2009 E/341/2009 E/342/2009 E/2022/2012 E/2023/2012 E/2067/2012 E/2068/2012 E/2069/2012 E/2389/2012 - A/31104-311 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment doubted the accuracy of this cost sheet because these values were the same as were reported earlier without taking into account the 15% addition as well as the cost of royalty which they were paying to their Spanish parent company; addition of these cost elements and notional profit should have enhanced the cost and it didn t. 4. Therefore, the department appointed M/s DZR and company (Cost Accountants) to verify the cost of the products adopted by the appellant at Malkapur unit for the period 2002-06. M/s DZR finalised the cost audit report from which the department observed that the appellant had short paid duty on some clearances and accordingly issued show cause notice No.120/2006 dated 29.01.2007 for the period 19.09.2002 to March, 2006 demanding a duty of ₹ 81,62,729/-. Since the goods are supplied by Malkapur to Jeedimetla and Balanagar units, show cause notices were also issued to these two units demanding duty based on the higher value of the goods received from Malkapur. The show cause notice issued to Balanagar unit was show cause notice No.70/2007 dated 04.10.2007 covering period from September, 2002 to September, 2006 and show cause notice issued to Jee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one the date of hearing and it was postponed to 09.03.2012. It is his submission that despite repeated requests, the department had not furnished the report of Director (Cost) to them nor was it relied upon by the Commissioner in the impugned Order-in-Original (denovo) while confirming the demand and imposing penalty. He further submits that they received a reply from the Addl. Commissioner vide letter dated 08.06.2012 that the report of the Director (cost) was not relied upon document with respect to the show cause notice and hence they need not be provided with the copy of the same. 6. Regarding the proceedings related to the Jeedimetla unit, learned counsel submits that demand was confirmed taking into account the alleged undervaluation in their Malkapur unit. The learned counsel appealed against the impugned orders on the following grounds: (1) In their Malkapur unit, the assessable value was determined by the three different cost auditors who came to three different conclusions. (2) Even if the report of cost auditor appointed by the department DPA is considered, it can be seen that there was excess payment in some clearances and short payment on account of other clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edimetla and Balanagar units only if the entire production is cleared for captive consumption and not to independent buyers. In this case, they have also sold the goods to independent buyers. The learned Commissioner violated principles of natural justice in not giving them a copy of the report of the Director (Cost). The entire exercise is revenue neutral since their units in Jeedimetla and Balanagar would have got credit of any excess duty paid at Malkapur and similarly their own unit at Faridabad would have got credit of any excess duty paid in Jeedimetla and Balanagar units. Therefore, the entire exercise is more academic and department would not gain anything by this exercise. He relied upon the following cases: i. Textile Corporation of Marathawada 2008 (231) ELT 195 (SC) ii. CCE, Jamshedpur Vs Jamshedpuram Beverages 2007 (214) ELT 321 (SC) iii. CCE Vs Indeos ABS Ltd 2010 (254) ELT 628 (Guj) iv. Jet Airways Ltd Vs CST, Mumbai 2016 (44) STR 465 which was affirmed by the Hon ble Apex Court in 2017 (7) GSTL 35 (SC). 11. The appellant is entitled for the credit of rejected materials because they have received the inputs and have taken into production but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of duty, no suppression, no misstatement, no fraud, etc. If such a stand is taken, the entire provisions of the statute could be rendered meaningless leading to undesirable consequences. 14. She relied on the decision of the Five Member Bench of the CESTAT in the case of M/s Jay Yushhin Ltd Vs CCE, New Delhi [2002-TIOL-126- CESTAT-DEL-LB] in which the criteria for accepting the contention of revenue neutrality have been laid down. In the instant case, assessee have opted to pay duty on the goods cleared to their sister concerns for captive consumption but had not followed relevant provisions viz., Rule 8 of Central Excise Valuation Rules, 2000 read with Sec. 4(1)(b), thereby leading to suppression of value of clearances and consequent short payment of duty spread over a large period of time with an intent to evade payment of duty. Therefore, the concept of revenue neutrality should not apply in this case. When the departmental officers visited the Malkapur unit, they found that the cost sheet did not include technical knowhow fee and royalty and 15% addition as required and therefore, there was suspicion that the duty was not discharged correctly. The cost sheet provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELT 1032 (Tri-Mumbai), it has been held that revenue neutrality cannot be a ground in invoking the extended period of limitation by alleging suppression of facts. In the case of Automotive Stampings and Assemblies Ltd 2015 (5) TMI 374 (CESTAT-Mumbai), it has been held that It is straight law, irrespective of any other factors as and when a manufactured good is cleared from the factory of the manufacturer he is bound to pay the correct duty leviable thereon, there is no explanation provided in the excise law that if buyer is entitled for the CENVAT credit, no duty is required to be paid. Therefore, we do not agree that merely because recipient of the goods are entitled for the CENVAT credit, it is a case of revenue neutrality. The availment of CENVAT credit is subsequent act and that cannot be basis for payment of duty in the clearance of the goods from the manufacturer factory. Learned Commissioner (AR) vehemently opposed the appeals and argued that they are liable to be dismissed on the above grounds. 19. We have considered the arguments on the both sides and perused the records. The facts of the case are not in dispute. The entire demands stem from the question of valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther unit of their own assessee gets or would have got credit of Modvat/CENVAT it does not mean that tax liability on the assessee vanishes. If this argument is taken to the extreme, there is never any loss of revenue to the Government except at the stage of final products reaching the users because credit of every material will get set off against one another and in some way or other someone may get credit of the same. The scheme of taxation under the statute requires duty to be levied at various points and it has to be levied and paid and it cannot be escaped because somebody else or their own sister unit will get credit. In specific cases where the Courts and Tribunals have found that because there is no net gain to the appellant, there could not have been an intention to evade the payment of duty requiring the invocation of extended period under Sec.11A. Therefore, revenue neutrality is only acceptable to the extent where the intention to evade the payment of duty under Sec.11A is required and revenue neutrality could be one of the factors to determine whether or not such an intention existed with the assessee. We, therefore, in this case, agree with the department on relying s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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