Payment of Interest does not Arise in Revenue Neutral Situation, no Duty to be Paid: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), recently ruled that the payment of interest does not arise in case of revenue neutral situation and hence no duty is to be paid.

All the units of the appellant, M/s. Jai Balaji Industries Limited, sell its finished goods to independent buyers at the factory gate and also stock transfer to their sister units. In respect of sales of independent buyers, the appellant was paying duty on transaction value in terms of Section 4(1)(a) of the Central Excise Act, 1944.

The Revenue is of the view that in all the cases where either a supplementary invoice, has been issued or payment of duty has been paid with a delay on their stock transfers, the appellant is liable to pay interest on the said differential duty for the intervening period. During the whole period, a total of 12 show cause notices were issued to the appellant for the demand of interest for the intervening period.

Although in reply to the show cause notices the appellant contested even payment of duty, but the demand of interest was confirmed and penalties were also imposed. Against the said orders, the appellant is in appeals.

The Counsel for the appellant contended that if the system adopted by the Appellants either on their own volition or on insistence by the department was not legal, the department cannot compel the appellant to perpetuate the illegality. Regarding whatever duty was to be paid by the appellant, the same is entitled to Cenvat Credit to the appellant. In those circumstances, the whole exercise was revenue neutral therefore the appellant is not liable to pay interest.

The Counsel for the department contended that when duty is paid on supplementary invoices, the appellant is liable to pay interest. Therefore, the demand of interest is rightly confirmed against the appellant.

A Two-Member Bench of the Tribunal comprising Ashok Jindal, Judicial Member and K Anpazhakan, Technical Member observed that “we hold that it is the revenue neutral situation, no duty is payable by the appellant therefore whatever duty paid by the appellant Cenvat credit of the same has been availed by the sister unit, the question of payment of interest does not arise.”

To Read the full text of the Order CLICK HERE

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