GUJARAT STATE FERTILIZERS & CHEMICALS LTD. Vs. COMMISSIONER, CENTRAL EXCISE & SERVICE TAX
LAWS(CE)-2015-8-3
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on August 05,2015

GUJARAT STATE FERTILIZERS AND CHEMICALS LTD. Appellant
VERSUS
Commissioner, Central Excise And Service Tax Respondents


Referred Judgements :-

CCE JAMSHEDPUR VS. JAMSHEDPUR BEVERAGES [REFERRED TO]
COMMISSIONER OF CENTRAL EXCISE VS. SIDDHESHWAR TEXTILE MILLS PVT. LTD. [REFERRED TO]
P.T.C. INDUSTRIES LTD. VS. CCE [REFERRED TO]
COMMR OF C EX AND CUS VS. INDEOS ABS LIMITED [REFERRED TO]


JUDGEMENT

H.K.THAKUR,MEMBER (T) - (1.)THIS appeal has been filed by the Appellant against OIO No. 38/Demand/Commr.1/2008, dt. 24.12.2008, passed by Commissioner of Central Excise & Customs, Vadodara -I, under which demand of interest amounting to Rs. 11,13,289.00 has been confirmed as per the provisions of Section 11AB of the Central Excise Act, 1944. A penalty of Rs. 1,00,000.00 has also been imposed upon the Appellant under Rule 25 of the Central Excise Rules, 2002.
Shri Willingdon Christian, (Advocate) appearing on behalf of the Appellant argued that show cause notice dt. 21.07.2008, demanding interest for the clearances made during April to December 2006, is clearly time barred. He relied upon the following case laws: -

i) GSFC Ltd. Vs. CCE Vadodara -I [ : 2013 (289) ELT 489 (Tri -Ahmd)]

ii) GSFC Ltd. Vs. CCE & ST, Vadodara -I [Order No. A/10539/2015, dt. 16.02.2015 (Appeal No. E/689/2008)]

2.1 On merits, learned Advocate argued that in case of cost construction method, for goods supplied to Appellant's sister concern, interest cannot be demanded on revenue neutrality as per the following case laws: -

i) CCE & C Vadodara -II Vs. Indeos ABS Ltd. [ : 2010 (254) ELT 628 (Guj.)] also upheld by Hon'ble Supreme Court [2010 (267) ELT A 155 (SC)

ii) CCE Pune -III Vs. Siddheshwar Textile Mills Pvt. Ltd. [ : 2015 (320) ELT 524 (Bom.)]

iii) P.T.C. Industries Ltd. Vs. CCE Jaipur -I [ : 2003 (159) ELT 1046 (Tri -Del)]

iv) CCE Jamshedpur Vs. Jamshedpur Beverages [2007 (214) ELT 321 (SC)]

(2.)SHRI Govind Jha (AR) appearing on behalf of the Revenue argued that differential duty was paid on 06.08.2007 and show cause notice demanding interest was issued on 21.07.2008 which is well within one year from the date of payment of differential duty. That relevant date under Section 11A of the Central Excise Act, 1944 has to be mutatis mutandis read as date of payment of differential duty on which date interest was also required to be paid. It was his case that demand of interest in these proceedings is not time barred.
3.1 On Revenue Neutrality, learned Authorized Representative relied upon the following case laws to argue that demand is required to be upheld against the Appellant: -

i) Bayer ABS Ltd. Vs. CCE Vadodara [2012 (281) ELT 96 (Tri -Ahmd)]

ii) Automotive Stampings & Assemblies Ltd. Vs. CCE Pune -I [2015 -TIOL -836 -CESTAT -MUM]

(3.)HEARD both sides and perused the case records. Appellant was supplying Caprolactum to their sister concern GSFC Fibre Unit at Kosamba for which duty was required to be discharged @ 110% of the cost of production under the Central Excise Valuation Rules. The duty was discharged on the basis of previous year's cost data and subsequently CAS -4 certificate was produced by the Appellant for the relevant period. Differential duty of Rs. 82,52,210.00 was paid by the Appellant on 24.08.2007 for the clearances made during April 2006 to December 2006. Show cause notice demanding duty and for imposing penalty was issued on 21.07.2008. It is the case of the Appellant primarily that demand of interest is made beyond a period of one year from the date of clearances as per relied upon case law including one in their own case. It is observed from their case law GSFC Ltd. Vs. CCE & C Vadodara -I (supra) that in that case of the Appellant differential duty was paid by the Appellant on 24.01.2006 and show cause notice was issued on 20.09.2007. The demand SCN itself was clearly issued after a period of one year from the date of payment of differential duty. However, in the present case differential duty was paid on 06.08.2007 and show cause notice was issued on 21.07.2008 which is within a period of one year. Argument of the Appellant that period of one year should be calculated from the date of clearances is not correct because no return of payment of interest is required to be filed by Appellant as per Explanation -1(b)(i) & (ii) of Section 11A of the Central Excise Act, 1944. The relevant date for demanding interest will have to be mutatis mutandis, one year from the date of payment of interest made under Section 11A of the Central Excise Act, 1944, because on the date of payment of duty only the exact amount of interest, from the date of clearances to the date of payment of differential duty, can be calculated for the purpose of issuing a quantified demand on account of interest. The demand for interest was thus issued within a period of one year.
So far as non -payment of interest on account of Revenue Neutrality is concerned, learned Authorized Representative has relied upon the Order of CESTAT Mumbai in the case of Automotive Stampings & Assemblies Ltd. Vs. CCE Pune -I (supra) to argue that doctrine of Revenue Neutrality will not be applicable in this case. In this regard, learned Advocate appearing on behalf of the Appellant has relied upon the case laws of CCE & C Vadodara -II Vs. Indeos ABS Ltd. (supra) and in the case of CCE Pune II Vs. Siddheshwar Textile Mills Pvt. Ltd. (supra) where in both Hon'ble Gujarat High Court and Hon'ble Bombay High Court have held that in the case of supplies to sister concern, demands cannot be upheld being a revenue neutral situation. However, Revenue Neutrality may not arise in a case where buyer and seller are not sister concerns. Hon'ble Bombay High Court in the case of CCE Pune II Vs. Siddheshwar Textile Mills Pvt. Ltd. (supra) held as follows: -

8. The matter was carried by the Revenue against this Tribunal's order in the Supreme Court and the Supreme Court confirmed the Tribunal's view by holding that if the Assessee carries out bleaching, dyeing, printing and mercerizing of textile fabrics, which would invite levy of excise duty on each stage of manufacture, however, if the Assessee is also entitled to Modvat credit on duty paid at each stage, then something which is required to be paid or remitted at the final stage could be set off or there is a revenue neutrality. That approach is a permissible approach. The only thing that Mr. Kantharia points out from this judgment of the Hon'ble Supreme Court is that the Supreme Court was dealing with the controversy of excise duty/additional excise duty and not interest. Therefore, this judgment is not a binding precedent. We are unable to agree. If the component of interest is on the tax or duty demanded on the product and if that duty or tax is liable to be set off or adjusted against the credit available at the intermediate stage, then the demand itself was neutralized. Once it was so neutralized and in terms of the judgment of the Hon'ble Supreme Court, then, one cannot segregate or take out the interest component and call upon the assessee to pay the sum demanded as interest. The approach of the Tribunal, therefore, in holding that there is a revenue neutrality cannot be termed as illegal or erroneous. The view taken is a possible and probable one. It is taken in the given facts and circumstances and peculiar to the Assessee. In such circumstances, the same cannot be termed as perverse or vitiated by any error of law apparent on the face of record enabling us to entertain this further Appeal. The Appeal is devoid of merits. It is dismissed. No costs.

5.1 It is observed that none of these two High Court orders were placed before the cases relied upon by the learned Authorised Representative. Jurisdictional Gujarat High Court held in CCE & C, Vadodara -II Vs. Indeos ABS Ltd. (supra) that when supplies are made to the sister concerns then demand cannot be upheld on Revenue Neutrality which means both differential duty and interest cannot be demanded. Further, in view of Hon'ble Bombay High Court's order in the case of CCE Pune II Vs. Siddheshwar Textile Mills Pvt. Ltd. (supra) when duty demand itself is not sustainable on Revenue Neutrality, it will not be correct to demand interest on differential duty voluntarily paid by the Appellant.

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