2023 (7) TMI 429 - AT - Central Excise

Tribunal rules no intent to evade duty, upholds normal period demand, overturns credit denial

The Tribunal concluded that the demand invoking the extended period for Central Excise duty could not be sustained as there was no intent to evade duty, ... Extended period of limitation - demand of differential duty for the period from April 2007 to January 2009 and April 2011 to September 2011 - short and excess payment of duty - allegation is that the assessable value adopted for payment of duty on rough castings is not based on 110% of the cost of production arrived at based on CAS-4 statement as certified by Chartered Accountant - CENVAT credit on the excess duty paid by Unit II. HELD THAT:- It is an undisputed fact that for the same reason of not adopting assessable value as per CAS-4 there is indeed excess payment of duty. It can be seen that for the periods 2007-08, 2008-09, and 2011-12 there is short payment of duty. There is excess payment of duty during the periods 2008-09, 2009-10, 2010-11, 2011-12 & 2012-13. During conduct of audit in July 2008, the non-payment of duty was noted by the audit party. In August 2008 itself, the appellant has written a letter to the department requesting to clarify in regard to the quantification of short payment of duty. Ld. Counsel has submitted that the audit party had informed them to pay the differential duty which was calculated on the basis of cost of production of the company as a whole including Unit I & II. Further a letter dated 21.1.2008 was issued to the department. Appellant has also furnished all the details as and when requested by department. However, the show cause notice has been issued only on 2.5.2012 invoking the extended period of limitation alleging that the appellant has suppressed facts with intention to evade payment of duty. It has to be noted that appellant has paid excess duty for certain periods. This being so, it cannot be alleged that there is any deliberate act on the part of the appellant to suppress facts with intent to evade payment of duty. Further, the entire situation is revenue-neutral as Unit I would be able to take credit of the duty paid by Unit II. The Hon’ble Supreme Court in the case of NIRLON LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI [2015 (5) TMI 101 - SUPREME COURT] had occasion to consider a similar issue and it was held that The question is about the intention, namely, whether it was done with bona fide belief or there was some mala fide intentions in doing so. It is here we agree with the contention of the learned Senior Counsel for the appellant, in the circumstances which are explained by him and recorded above. It is stated at the cost of repetition that when the entire exercise was revenue neutral, the appellant could not have achieved any purpose to evade the duty. From the ratio laid down by the above judgement, there are no hesitation to conclude that the facts present is a revenue-neutral situation and therefore the demand invoking extended period cannot sustain and requires to be set aside. The demand for the normal period is sustained. The appellant succeeds on the ground of limitation. Denial of cenvat credit - It is alleged by the original authority that the appellant is not eligible to take credit on the excess duty paid by Unit II - HELD THAT:- The excess duty happened to be paid because of the same reasons of short payment of duty. When the duty has been paid by Unit II as per the invoices, the credit cannot be denied to the receiving unit. Further in the appellant’s own case for different periods, subsequently, the Commissioner (Appeals) has held the issue in favour of the appellant and held hat credit is eligible. For these reasons, the denial of credit cannot sustain and requires to be set aside. Appeal allowed. Issues Involved:1. Valuation of goods for Central Excise duty.2. Short payment and excess payment of duty.3. Denial of CENVAT credit.4. Invocation of extended period for demand.Summary:Valuation of Goods for Central Excise Duty:The appellant, engaged in manufacturing rough castings, transferred these to its Unit I for further processing. Both units are registered separately under Central Excise Rules. The valuation of goods for Central Excise duty should be done as per Rule 8 of Central Excise Valuation Rules, 2000, which mandates that the value shall be 110% of the cost of production when goods are used captively.Short Payment and Excess Payment of Duty:The department found that the value adopted by the appellant for duty payment was not based on 110% of the cost of production as per CAS 4 statements certified by a Chartered Accountant. This led to short payment of duty in some financial years and excess payment in others. The non-adoption of the correct assessable value resulted in the issuance of a show cause notice demanding differential duty and disallowing CENVAT credit availed on the excess duty paid.Denial of CENVAT Credit:The original authority confirmed the demand for differential duty and disallowed the CENVAT credit availed by Unit I on the excess duty paid by Unit II. The appellant argued that the excess duty paid was eligible for credit and that the short payment occurred because the actual cost of production could not be determined at the time of clearance.Invocation of Extended Period for Demand:The appellant contended that the demand invoking the extended period was unsustainable as there was no suppression of facts with intent to evade duty. The entire situation was revenue-neutral since Unit I could avail credit for the duty paid by Unit II. The Tribunal agreed, noting that the appellant had paid excess duty for certain periods and had corresponded with the department regarding the discrepancies.Conclusion:The Tribunal concluded that the facts presented a revenue-neutral situation, and therefore, the demand invoking the extended period could not sustain. The demand for the normal period was sustained. The denial of credit was set aside, and the appeals were allowed with consequential relief. The impugned order was set aside.