Jai Balaji Industries Limited Vs Commissioner of Central Excise, Bolpur (CESTAT Kolkata)
The CESTAT, Kolkata in M/s Jai Balaji Industries Limited v. Commissioner of Central Excise, Bolpur [Excise Appeal No. 552 of 2011 dated June 22, 2023] set aside the order confirming interest on differential duty and held that where the differential duty paid by the assessee is available as CENVAT credit to the Assessee’s sister concern then it is a revenue-neutral situation. Thus, as duty was not actually payable, the payment of interest does not arise in the case of revenue neutral situation.
Facts:
M/s Jai Balaji Industries Limited (“the Appellant”) is engaged in manufacturing of iron and steel products. The Appellant sells finished products to independent buyers at the factory gate at which the Appellant was paying duty on the transaction value as determined in terms of section 4(1)(a) of the Central Excise Act, 1944 (“the Excise Act”).
Besides it, the Appellant also transferred products to its sister units on which the Appellant was paying duty in terms of Rule 4 of the Central Excise Valuation Rules, 2000 (“the Excise Rules”) which was being used by the sister units as input of production.
Show Cause Notice dated September 10, 2010 (“the SCN”) was issued to the Appellant demanding interest for the period FY 2006-07 to FY 2008-09 (“the Impugned Period”).
The Appellant filed reply to the SCN contesting the payment of duty but the demand of interest of INR 1,26,23,235 was confirmed and penalties were imposed vide order dated March 18, 2011 (“the Impugned Order”). Aggrieved by the Impugned Order, the Appellant filed an appeal before the CESTAT.
The Appellant contended that interest on payment of additional duty does not arise as no duty was legally payable and further contended that any amount of duty that the Appellant would have paid, it would be available as CENVAT credit to the sister units and since the whole exercise was revenue neutral the Appellant was not liable to pay any interest.
Issue:
Whether the Appellant is liable to pay interest on the amount of differential duty paid which is available as CENVAT Credit to the Appellant’s Sister Concern?
Held:
The CESTAT, Kolkata in Appeal no. 552 of 2011 held as under:
