2025 (3) TMI 258 - AT - Central Excise

Revenue neutral stock transfer to sister unit under Rule 8 cannot demand duty on short payment while ignoring excess payment

M/s Steel Authority of India Limited Versus Commissioner of Central Excise & Service Tax, Ranchi I

CESTAT Kolkata allowed the appeal in a case involving undervaluation of goods during stock transfer to related units. The appellant had cleared goods to ... Extended period of limitation - undervaluation of goods - stock transfer to related units - contravention of provisions of Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 8 and Rule 9 of the Valuation Rules - Revenue Neutrality - HELD THAT:- In this case, the appellant has cleared the goods to their sister unit on payment of duty under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, by adopting 110% of the cost of the product determined as per CAS-4. If any excess duty is to be paid by the appellant, the same is entitled to take the cenvat credit by the appellant’s unit only. In that circumstances, it is the case of revenue neutrality as held by this Tribunal in the case of M/s Hindalco Industries Limited [2023 (5) TMI 720 - CESTAT KOLKATA] wherein this Tribunal has held 'When excess paid duty is adjusted against the short payment that net result is that there is no short payment by the Appellant. The Adjudicating Authority failed to do this adjustment. Demanding duty onlu on the short payment, ignoring the excess payment is bad in law. Accordingly we hold that the demand confirmed in the impugned order is not sustainable.' Accordingly, relying on the decision of this Tribunal in the case of Hindalco Industries, it is held that it is a revenue neutral situation. No demand is sustainable against the appellant. The impugned order is set aside - appeal allowed. The Appellate Tribunal considered an appeal against an order concerning the valuation of refractory materials like Fire Bricks and Mortar under the Central Excise Tariff Act. The appellant, engaged in manufacturing these materials, faced allegations of undervaluation during stock transfers to related units. The department issued Show Cause Notices invoking the extended period of limitation, alleging undervaluation under the Valuation Rules. The Appellant responded with detailed submissions, including paying differential duties for certain periods. Despite this, the Commissioner confirmed a significant demand, leading to the appeal.The core issue revolved around whether the undervaluation alleged by the department was justified. The appellant argued for revenue neutrality, stating that the duty paid would be available as credit to their sister unit, making the exercise revenue neutral. The Revenue supported the impugned order, emphasizing the alleged undervaluation.The Tribunal analyzed the situation, noting that the appellant had paid duty under Rule 8 by adopting 110% of the cost of the product as per CAS-4 for clearances to sister units. Citing the Hindalco Industries case, the Tribunal agreed with the appellant's contention of revenue neutrality. Referring to precedents, the Tribunal concluded that the duty paid by the appellant would be available as credit to their sister unit, making the entire exercise revenue neutral. Therefore, the Tribunal set aside the impugned order and allowed the appeal, finding no sustainable demand against the appellant.In summary, the Tribunal held that the appellant's actions resulted in revenue neutrality, as the duty paid would be available as credit to their sister unit. This finding, supported by relevant precedents, led to the decision to set aside the impugned order and grant relief to the appellant.