2023 (9) TMI 717

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....h found that the appellant had sold goods to M/s. GRP Ltd [GRP]. which was its parent company and hence a related party and paid duty on the invoice values. GRP, in turn, used the waste rubber granules to manufacture its final products. 3. Revenue felt that since it was a case of sale of goods to a related party who, in turn, consumed the goods captively, duty should have been paid under Rule 8 of Customs Valuation Rules, 2000 [Rules] at the rate of 110% of the cost of production as certified in the CAS 4 certificates and not on the invoice values. Accordingly, it was felt that differential duty needs to be paid by the appellant. A memorandum dated 12.3.2020 was issued to the appellant asking it to pay the differential duty and the appellant by a letter dated 25.05.2020 declined to pay it on the ground of revenue neutrality. Thereafter, a Show Cause Notice [SCN  ] dated 27.7.2020 was issued to the appellant proposing recovery of the differential excise duty invoking extended period of limitation under section 11A along with interest under Section 11AA. It was also proposed to impose penalty under section 11AC. The appellant contested the proposals in the SCN but they were c....

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....this appeal. 5. We have heard learned counsel for the appellant and learned authorized representative for the Revenue and perused the records. The appellant is not contesting that its customer M/s. GRP is its related party. It is also not contesting that GRP used the materials and had not further sold them and therefore, duty must be assessed at 110% of the cost of production certified in CAS 4 certificates. It is only contesting the demand on the grounds of limitation for two reasons: a) It had filed the ER 1 returns and had not suppressed any information which it was required to provide and there is no evidence to establish any of the elements required to invoke extended period of limitation- fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of act or rules with an intent to evade payment of duty. b) The entire exercise is revenue neutral because whatever duty it had paid was available as CENVAT credit to its parent company to whom it sold the goods. Therefore, there cannot be any intention to evade payment of duty. 6. The appellant is also contesting the demand of interest on the ground that the demand itself....

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....l whether the buyer is likely to get CENVAT credit of the duty so paid and use it. 12. We have considered the submissions. We proceed to deal with the issue of limitation because the entire period of demand is beyond the normal period of limitation. It is not in dispute that Section 11A provides for a limitation of one year for issuing the SCN. This period can be extended to five years in case the duty is not paid, short paid, not levied, short levied or erroneously refunded on account of fraud or collusion or willful statement or suppression of facts or violation of the provisions of Act or Rules with an intent to evade the payment of duty. The case of the Revenue in the SCN, order-in-original and the impugned order is that the appellant had deliberately suppressed facts with intent to evade payment of duty because firstly it did not assess duty correctly and secondly, it had not accepted the contentions of the audit and thirdly because if audit had not pointed out, the undervaluation would have remained undetected. It is also the case of the Revenue that the Excise Returns do not show if the appellant had sold the goods to related persons or not and that such a relationship co....

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....(4)]. The relevant extracts of these rules are below: Rule 4. Duty payable on removal.- (1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided Xxxxxxx Rule 6. Assessment of duty.- The assessee shall himself assess the duty payable on any excisable goods: Provided that in case of cigarettes, the Superintendent or Inspector of Central Excise shall assess the duty payable before removal by the assessee. Rule 8. Manner of payment. - The duty on the goods removed from the factory or the warehouse during a month shall be paid by the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case: Provided that in case of goods removed during the month of March, the duty shall be paid b....

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....ed to self-assess duty and file ER-1 return, a check against such self-assessment was the scrutiny which the officers were mandated to do by Rules. Audit is the next level of check against the scrutiny by the officers. If the audit points out some wrong assessment which was not pointed out by the officer scrutinising the ER-1 return, the fault lies at the doorstep of the officer. It does not, by itself, establish that the assessee had suppressed any facts. 20. As far as the question of Revenue neutrality is concerned, the Commissioner (Appeals) was correct in stating that even if a related person would get CENVAT credit, duty has to be paid if it is to be paid as per law. Revenue neutrality is a concept which has evolved through a series of decisions only for the limited purpose of determining if the assessee could have had an intention to evade payment of duty. This intention is an essential ingredient to invoke extended period of limitation. If it is Revenue neutral situation where, the excess duty, if paid, would have been available to the appellant itself or its another unit or a related unit as CENVAT credit, there cannot be an intention to evade because the assessee would ....