Non-reversal of SAD credit on stock transfer can justify extended-period demand where revenue neutrality is not established.

Non-reversal of SAD credit on transfer of imported inputs as such was treated as a substantive compliance failure, and the demand, interest and equal penalty were sustained. The Tribunal found that the omission was disclosed in ER-1 returns, but the appellant still refused reversal on limitation grounds, which supported invocation of the extended period. Revenue neutrality was rejected on the facts because availability of credit in another unit did not negate the statutory requirement to reverse the credit or the consequences of non-compliance.

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Issues: Whether non-reversal of SAD component on transfer of imported inputs as such between units attracted demand, interest and penalty by invoking the extended period, and whether the plea of revenue neutrality could defeat such demand.

Analysis: The appellant admitted that reversal of SAD credit was required on the transfer of imported inputs as such, but it was not done. The Tribunal noted that the omission was reflected in the ER-1 return and that the appellant later declined to reverse the credit on the ground of limitation. It held that revenue neutrality was not established on the facts because the receiving unit could not effectively avail the benefit once the matter had travelled to demand proceedings and the availability of credit to another unit did not negate the statutory consequence of non-compliance. The Tribunal also held that the conduct justified invocation of the extended period, as the omission was not a mere neutral procedural lapse.

Conclusion: The demand, interest, and equal penalty were upheld; the plea of revenue neutrality was rejected and invocation of the extended period was sustained in favour of Revenue.

Ratio Decidendi: Revenue neutrality is a question of fact and cannot be assumed merely because credit may be available elsewhere; where reversal of credit is statutorily required and the assessee withholds compliance, the extended period and consequential demand may be invoked.

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