Appellant not liable for differential duty under Rule 8; no statutory interest where duty not exigible and revenue-neutral

CESTAT held the appellant not liable to pay differential duty under Rule 8 of the Central Excise Valuation Rules, 2000. Relying on HC precedent, the tribunal found no statutory interest payable where duty was not exigible and the matter was revenue-neutral because the sister unit had availed CENVAT credit on amounts paid. The impugned order was set aside and the appeal allowed with consequential relief.

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Issues Involved:
1. Liability to pay interest on differential duty paid via supplementary invoices.
2. Revenue neutrality and its impact on the obligation to pay interest.
3. Applicability of extended period for demand.

Issue 1: Liability to Pay Interest on Differential Duty Paid via Supplementary Invoices
The appellant, a manufacturer of iron and steel products, paid differential duty on stock transfers between its units using supplementary invoices but did not pay interest on this differential duty. The Revenue argued that interest was due on the differential duty for the intervening period. The Tribunal held that since the appellant was not liable to pay duty in terms of Rule 8 of the Central Excise Valuation Rules, 2000, the question of paying interest on such additional duty does not arise. This conclusion was supported by the Gujarat High Court's decision in CCE & C, Vadodara-II v. Gujarat Narmada Fertilizers Co. Ltd., which stated that if the duty is not legally payable, interest on such duty cannot be demanded.

Issue 2: Revenue Neutrality and Its Impact on the Obligation to Pay Interest
For appeals mentioned at Sl.No.2-12, the Tribunal considered the appellant's argument that the situation was revenue neutral because the sister units availed Cenvat Credit for the differential duty paid. The Tribunal referenced the Larger Bench decision in Jay Yuhshin Ltd. v. CCE, New Delhi, which held that in a revenue-neutral situation, the question of paying interest does not arise. The Tribunal concluded that since the duty paid by the appellant was available as Cenvat Credit to their sister units, the entire exercise was revenue neutral, and thus, no interest was payable.

Issue 3: Applicability of Extended Period for Demand
The appellant contended that the demands were time-barred as there was no misstatement or suppression of facts, and hence, the extended period could not be invoked. The Tribunal did not explicitly address this issue in the summary provided but focused on the revenue neutrality and the non-applicability of interest on differential duty.

Conclusion:
The Tribunal set aside the impugned orders demanding interest and imposing penalties on the appellant, allowing all appeals with consequential relief. The decision emphasized that in a revenue-neutral situation, the payment of interest does not arise, and if the duty itself was not legally payable, interest on such duty cannot be demanded. The Tribunal's decision was pronounced in the open court on 22.06.2023.

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