Tribunal rules no interest due on duty differential as transaction was revenue neutral. Appellant prevails.

The Tribunal held that interest on the differential duty was not payable as there was no short payment of duty and the transaction was revenue neutral. The Appellant correctly paid duty based on prescribed methods, and the situation was deemed revenue neutral. The Tribunal set aside the Impugned Order, ruling in favor of the Appellant on 17.07.2023.

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Issues involved:
The judgment involves the issue of whether interest is payable on the differential duty in a case where the duty was paid correctly as per the prescribed method, and there was no short payment of duty. The Appellant, a manufacturer of bulk drugs, cleared goods to its other units during the disputed period, and the recipient units captively consumed the goods in further manufacture of their finished dutiable goods.

Details of the judgment:

1. The Appellant discharged duty at the time of clearance based on the cost certificate available on that date. After the first 6 months of the year, they obtained a cost certificate based on the cost of the immediate past current period and paid the applicable differential duty immediately on receipt of the new cost certificate.

2. The dispute revolved around the question of whether interest is payable on the differential duty. The Appellant contested the demand of interest on the grounds that there was no short payment of duty at any point, and the transaction being revenue neutral, interest liability did not arise.

3. The Adjudicating Authority and Appellate Commissioner held that interest is payable, relying on various decisions including CCE vs SKF India and other similar cases.

4. The Appellants argued that interest becomes payable only for short payment or non-payment of duty as per Sec 11AB of the CE Act, and since there was no short payment on the due date, interest liability does not arise.

5. The Appellants further contended that the clearances being inter-unit transfers and the recipient unit availing Cenvat credit, the transaction was revenue neutral, and therefore, interest being compensatory in nature for revenue loss suffered, the issue of interest liability did not arise.

6. The Tribunal, after considering the contentions of both parties, found that the Appellant had correctly assessed the value on which duty was paid as per the prescribed method. The payment of duty was in accordance with Circulars and Trade Notices issued by the Hyderabad Commissionerate, and there was no case of short payment of duty. The situation was deemed revenue neutral, and therefore, the Tribunal allowed the appeal and set aside the Impugned Order.

7. The Tribunal pronounced the judgment in the Open Court on 17.07.2023.

This summary provides a detailed overview of the judgment, focusing on the issue of interest liability on differential duty payments and the arguments presented by both parties in the case.

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