2024 (4) TMI 899 - AT - Central Excise

Short payment of Central excise duty - reversal of irregular credit - revenue neutrality - difference in book stock and physical stock - Proof of replacement of goods - Extended period of Limitation. Short payment of duty - stock transfer of goods to their sister concern - HELD THAT - Demand has been raised on the appellant holding that certain elements of cost have not been added while ascertaining the assessable value. It is observed that the department has not adduced any evidence to the effect that which cost was not included and why such cost is to be included. In the absence of any specific cost not added in the assessable value by the appellant we observe that the allegation of the department is not substantiated. Revenue Neutrality - HELD THAT - The entire exercise is revenue neutral and thus the demand is liable to be set aside on this ground alone - reliance placed on the decision of this Tribunal in the case of M/S. HINDALCO INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE BHUBANESWAR-II 2023 (5) TMI 720 - CESTAT KOLKATA wherein on similar facts this Tribunal has held that when the entire exercise is revenue neutral the demand is not sustainable as the duty paid will be available as credit for their sister unit and there is no loss of revenue to the exchequer. The demand confirmed in the impugned order on this count is not sustainable and accordingly the same is set aside. Short payment of duty on the goods sent free of cost to customers - HELD THAT - The appellant has adopted the valuation method of 110% of the cost to pay duty on the free supplies to customers - it is observed that when similar goods are not sold by the appellant the valuation adopted by the Appellant is valid and thus we hold that there is no short payment of tax. Accordingly the demand confirmed in the impugned order on this count is not sustainable and hence the same is set aside. Denial of CENVAT Credit taken on the goods rejected by the customers and returned to the supplier and subsequently replaced - HELD THAT - When the goods are purchased as inputs but are later returned for being defective and are replaced by the supplier credit cannot be denied to the supplier. In support of this contention reliance placed on the decision of the Tribunal in the case of ERICSSON INDIA PVT. LTD. VERSUS COMMISSIONER OF C. EX. S.T. JAIPUR 2014 (10) TMI 896 - CESTAT NEW DELHI Approved in COMMR. OF C. EX. S.T. JAIPUR-I VERSUS ERICSSON INDIA PVT. LTD. 2018 (1) TMI 1266 - RAJASTHAN HIGH COURT . Proof of replacement of goods - HELD THAT - It is observed that the SAP entries will prove that the goods retuned have been replaced or not. However credit on the goods returned cannot be denied to the appellant on only procedural ground. Accordingly the demand confirmed in the impugned order on this count is not sustainable and hence the same is set aside. Denial of CENVAT Credit related to services not used in relation to manufacture of final products - HELD THAT - It is observed that the credit in this case has been availed by the Appellant on certain installation and other services which were availed in respect of Erection Commissioning Installation provided by the Appellant at the head office. It is observed that there is no specific finding in the impugned order for denial of this credit to the appellant. Accordingly the appellant is eligible for this credit. Demand of duty on account of difference in book stock and physical stock in respect of Plate Hardox and MS Plate - HELD THAT - The duty has been demanded from the appellant on the assumption that the said goods have been removed without payment of duty. We observe that the department has not produced any evidence to substantiate the allegation that the goods have been clandestinely removed by the Appellant without payment of duty. It is a settled law that no demand can be raised without any evidence or proof of clandestine removal. Since there is no evidence available on record to substantiate the allegation of clandestine removal the demand confirmed in the impugned order on this count is not sustainable and accordingly the same is set aside. Since the demands of central excise duty and the reversal of Cenvat Credit confirmed in the impugned order are held to be not sustainable the question of demanding interest and imposing penalty on the appellant does not arise. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Short payment of Central Excise duty on stock transfer to sister unit.
2. Short payment of duty on goods sent free of cost to customers.
3. Denial of CENVAT Credit on goods rejected, returned, and replaced.
4. Denial of CENVAT Credit for services not used in relation to the manufacture of final products.
5. Demand of duty due to difference in book stock and physical stock.

Summary:

1. Short payment of Central Excise duty on stock transfer to sister unit:

The appellant argued that the assessable value was based on the previous year's cost, and differential duty was paid with interest once actual figures were available. The department's demand was based on an arbitrary claim that certain cost elements were not included. The tribunal found no evidence from the department to support this claim and ruled that the entire exercise was revenue neutral. Citing precedents, the tribunal concluded that there was no suppression, misstatement, or fraud, and set aside the demand.

2. Short payment of duty on goods sent free of cost to customers:

The appellant adopted a valuation method of 110% of the cost for duty on free supplies, which the department contested. The tribunal observed that the goods sent free were samples with no comparable sales, validating the appellant's valuation method. Thus, the tribunal set aside the demand.

3. Denial of CENVAT Credit on goods rejected, returned, and replaced:

The tribunal noted that credit cannot be denied when defective goods are returned and replaced by the supplier. The appellant's SAP entries supported the replacement claim. The tribunal relied on precedents to rule that credit denial on procedural grounds was unjustified and set aside the demand.

4. Denial of CENVAT Credit for services not used in relation to the manufacture of final products:

The appellant claimed credit for services related to Erection, Commissioning, and Installation at the head office. The tribunal found no specific reason for credit denial in the impugned order and ruled the appellant eligible for the credit.

5. Demand of duty due to difference in book stock and physical stock:

The department assumed goods were removed without duty payment due to stock differences. The tribunal found no evidence of clandestine removal and ruled that demands without proof were unsustainable, setting aside the demand.

Conclusion:

All demands of central excise duty and reversal of CENVAT Credit were found unsustainable. Consequently, the tribunal ruled that interest and penalties were not applicable, set aside the impugned order, and allowed the appeal.