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2026 Supreme(Online)(CESTAT) 1426
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL BANGALORE REGIONAL BENCH - COURT NO. 1
D.M. Misra, Member (Judicial), R. Bhagya Devi, Member (Technical)
Autoliv India Private Limited – Appellant
Versus
Commissioner Of Central Tax Bengaluru East – Respondent
E/21720/2018 | E/20344/2020 | Central Excise Appeal No. 21720 of 2018 | Central Excise Appeal No. 20344 of 2020
For the Appellants/Petitioners: Syed Peeran, Md. Ibrahim, Tushar Sharma
For the Respondents: M.A. Jithendra
Section 11D of the Central Excise Act, 1944, is inapplicable to stock transfers between sister concerns where the duty has been deposited with the Government, as it requires a sale to a buyer and non-payment of collected excess duty to the Government.
Headnote:The case involves the interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 and Section 11D of the Central Excise Act, 1944. The appellant, a manufacturer of automobile parts, cleared inputs 'as such' to its sister concerns on a stock transfer basis. Instead of reversing the Cenvat credit as per Rule 3(5), the appellant discharged duty based on the CAS4 method (110% of cost of production). The Department sought to recover the excess duty paid under Section 11D(2) of the Central Excise Act, 1944, alleging it was collected from the sister concerns. The primary issue is whether excess duty paid on inputs cleared 'as such' to sister concerns via stock transfer, using the CAS4 method, is recoverable under Section 11D(2) of the Central Excise Act, 1944. The court reasoned that Section 11D is only applicable where there is a sale to a buyer and the excess duty collected has not been deposited with the Government. Since the transactions were stock transfers and the duty was already credited to the Government account, the provisions of Section 11D are not attracted. In the result, the impugned orders are set aside and appeals are allowed with consequential relief, if any, as per law.
| Table of Content |
|---|
| 1. factual background regarding cenvat credit and stock transfers of inputs. (Para 1 , 2 , 7) |
| 2. arguments against the applicability of section 11d to stock transfers. (Para 4) |
| 3. interpretation of section 11d and rule 3(5) regarding duty collection and deposit. (Para 5 , 6 , 8 , 9) |
| 4. inapplicability of section 11d to stock transfers where duty is paid to the government. (Para 10 , 11) |
PER: D.M. MISRA
These two appeals are filed against respective impugned orders passed by the Commissioner of Central Tax, Bangalore / Commissioner of Central Tax (Appeals-I), Bangalore.
2. Briefly stated the facts of the case are that the appellant are engaged in the manufacture of automobile parts viz. safety seat belts, safety air bags, steering wheels etc. falling under Chapter 87 of Central Excise Tariff Act, 1985. During the course of audit, for the period February 2014 to March 2016, it was noticed by the Department that the appellant are procuring indigenous as well as imported raw materials and availing cenvat credit on the said inputs. Further, it was noticed that the appellant also during the relevant period, cleared the inputs under the category of ‘as such clearance’ to their sister concerns. While clearing the inputs / raw materials as such, the appellant had discharged duty on the transaction value of the inputs / raw materials cleared as such to their sister concerns by adding 10% to the purchase price on account of overhead charges and 10% as notional profit instead of reversing the actual credit availed on such inputs/raw materials. Alleged that the appellant had contravened the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004 (CCR, 2004) and also wrongly utilised the credit in contravention of Rule 3(4)(b) of the CCR equal to the amount paid in excess i.e. Rs.3,73,56,725/- was proposed to be recovered under the provisions of Section 11(D)(2) of the Central Excise Act, 1944 (CEA, 1944) read with Rule 14(1) of CCR and Section 11A of CEA, 1944 along with interest and penalty for the period November 2011 to March 2016. On adjudication, the demand was confirmed and directed to be recovered in cash under provisions of Section 11(D)(2) of CEA, 1944 along with interest. On the same allegations, statement of demand for subsequent period April 2016 to March 2017 was issued on 08.05.2018 for recovery of an amount of Rs.1,17,49,202/- under the provisions of Section 11(D)(2) of CEA. On adjudication, the demand was confirmed and penalty was imposed under Section 11A C of CEA, 1944 read with Rule 15 of CCR, 2004. Aggrieved by the said order, they filed appeal before the learned Commissioner(Appeals) who in turn confirmed the demand and reduced the penalty to 10% of the demand confirmed. Hence the appellant has filed these two appeals.
3.1. At the outset, the learned advocate for the appellant has submitted that they have manufacturing facilities of automobile parts also at other places like Chennai, Manesar, Rudrapur and Mysore. They procure indigenously as well as imported various inputs and raw materials used for manufacture of final products viz. air bags, seat belts, steering wheels etc. on payment of appropriate customs duty. A portion of the inputs / raw materials so procured are cleared ‘as such’ to their branches in Manesar, Gurgaon. They have submitted that the said stock transfer of inputs is prepared in the QAD software, the Enterprise Resource Planning (ERP) software computes the value of the stock transfer as per CAS4 requirement i.e. 110% of cost of production and calculates the duty. Further, there is fluctuation in value of such inputs from time to time, owing to which the ERP adopts the latest value of the inputs as available in the system and accordingly raised the invoices to that effect. The appellant were raising invoices in respect of such clearances at value inclusive of cost of raw materials, overheads and notional profits for other sub-assemblies and stock transfers.
