Commissioner of Central Excise And Service Tax Vs Steel Authority of India Limited (Supreme Court of India)
Supreme Court Admits Revenue’s Appeal on Revenue Neutrality in Inter-Unit Excise Valuation Dispute
The Supreme Court has admitted the Revenue’s appeal challenging a finding of revenue neutrality in an inter-unit excise valuation dispute, keeping the question of law open. The dispute arose from demands raised on alleged undervaluation of refractory materials cleared by a manufacturer to its own units following an amalgamation. The Department alleged that valuation should have been determined under Section 4(1)(b) of the Central Excise Act read with Rules 8 and 9 of the Central Excise Valuation Rules, applying 110% of cost of production, and issued show cause notices covering August 2009 to March 2015 with substantial duty, interest, and penalty. The assessee contended that the valuation adopted was consistent with past practice and that any differential duty would be revenue neutral since recipient units availed CENVAT credit and used the goods in manufacture of dutiable final products. The CESTAT Kolkata accepted this position, set aside the demand and penalties, and held that no sustainable demand arose in a revenue-neutral situation. On appeal, the Supreme Court condoned delay and admitted the Revenue’s challenge without examining merits, indicating that the sustainability of excise demands in revenue-neutral inter-unit transfers and the correct application of valuation rules will be examined. The matter will now proceed for detailed adjudication by the Supreme Court of India.
