Relief for SAIL: CESTAT Sets Aside Excise Duty Demand on Inter-Unit Transfers Due to Revenue Neutrality [Read Order]

The Kolkata Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) recently ruled in favor of Steel Authority of India Limited (SAIL), setting aside the excise duty demand of ₹13.02 crore related to inter-unit transfers, citing revenue neutrality.

Steel Authority of India Limited,appellant-assessee,manufactured refractory materials and supplied them to both its own units and independent buyers. In 2012, the department started an investigation, alleging undervaluation in stock transfers to related units.

Two show cause notices were issued,one in August 2014 for the period July 2009 to March 2014, and another in May 2015 for April 2014 to March 2015. The department claimed the appellant should have valued the goods at 110% of cost of production under Rule 8/9 of the Valuation Rules, instead of using transaction value.

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A common order was passed in October 2015, confirming a total excise duty demand of ₹13.02 crore with interest and penalty. Although the assessee had made some payments, the Commissioner did not appropriate them in the final order.

The assessee appealed before the tribunal.

The assessee said the duty demand was not valid as the goods were sent to its own units, which used them to make dutiable products and paid excise duty. Since those units took credit for the duty already paid, there was no revenue loss.

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The assessee also said the tribunal had earlier dropped a similar demand in its own case, and in the Hindalco Industries case, on the same issue. So, it argued the demand should be set aside.

The two member bench comprising Ashok Jindal(Judicial Member) and K.Anpazhakan(Technical Member) reviewed the case and found that the main issues were whether the excise duty demand was valid for inter-unit transfers where the receiving unit could claim credit, and whether the valuation should include 10% of the cost of production.

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The tribunal noted that the issue had already been decided in the assessee’s previous case, where it was ruled that no duty was due as the situation was revenue neutral. It also referred to the Hindalco Industries case, which supported this view.

Since the duty paid by one unit was available as credit to the other, the CESTAT concluded there was no revenue loss. Based on these decisions, it set aside the duty demand, and as a result, interest and penalties were also dropped.

In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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