CESTAT Upholds Penalty Against Hindustan Coca Cola For Excise Duty Evasion On Pretext Of Stock Transfer

The tribunal consisting of Rachna Gupta (Judicial Member) has observed that the proviso to Rule 3(5A) of the CCR, 2004 is applicable to the transaction of the generator set after use by the appellant/assessee from one unit to another. Since the appellant has given the value in the invoice while making the transfer, the value has to be considered for calculating the reversal amount.

The appellant has been involved in manufacturing of water including mineral water and aerated water and was also availing CENVAT Credit facility on inputs, capital goods, and input services under the CENVAT Credit Rules 2004 (CCR, 2004). During the course of audit and on verification of the sales ledger, it was observed that the appellants had purchased capital goods valued at Rs. 26,72,414. The capital goods were cleared by them on declaring the value of Rs.6,14,322 to its another unit i.e. M/s Hindustan Coca Cola Beverages Pvt. Ltd.

The Department observed that the appellant has not paid the amount equal to the duty leviable on transaction value on the clearance of capital goods, as per proviso to sub rule 5A (a) (II) of Rule 3 of CCR, 2004.

A Show Cause Notice was served upon the appellant proposing the recovery of amount along with interest and proportionate penalty. The proposal was initially confirmed but later on the appeal was rejected.

The issue raised was whether Rule 3(5A)(a) of the CCR, 2004 is applicable to the impugned transfer of Generator set after use by the appellant to its sister concern where the value of Rs.6,14,322/- has been assigned to that transfer.

Counsel for the appellant has submitted that the appellant had purchased a generator set in the year 2004 which was used by them at their Jaipur plant. After 12 years of its use, since the Jaipur plant got closed, the said generator was shifted to another plant of appellant in Hapur. As such, the transfer was nothing but a stock transfer of the said capital goods. Rule 3(5) A (a) of CCR, 2004 is mentioned to not be applicable to the given facts and circumstances. It is emphasised that for the applicability of said Rule, the value in question is to be the transaction value.

It was further added that Section 4 D of Central Excise Act 1944 defines transaction value which is the value involved during the transaction of sale. Since in the present case, the capital goods were transferred from one unit of the appellant to another unit, there is no question of sale.

On the other hand, the counsel for the department stated that the assessee has cleared used capital goods after 10 years to other unit, therefore, as per calculation at the rate of 2.5% for each quarter, the payable amount is zero and as per transaction value declared in sale documents i.e. Rs. 6,14,322/-, the payable amount is Rs. 75,930/- equal to the duty leviable on the transaction value of the capital goods at the time of clearance of capital goods from the factory premises. The amount so calculated at the rate of 2.5% i.e. zero is less than the amount of Rs.75,930/- equal to the duty leviable on transaction value. Therefore, the assessee was required to pay an amount of Rs.75,930/- equal to the duty leviable on transaction value as per proviso to sub-rule 5A (a) (ii) of Rule 3 of the CENVAT Credit Rules, 2004.

The Tribunal has observed that the provision makes it clear that the transfer of possession of goods is the essence of sale and transfer of goods between two individual members takes place during the transfer of goods. Applying the same to the present case it is clear that the possession of the generator set has been transferred from one person to another and from one place to another for cash. The definition does not exempt the transfer between two sister units.

The tribunal found that the appellant has tried to mislead on the pretext of stock transfer. Such misleading has benefitted him evading the amount of Rs. 7,15,930/- for which he would have been liable being the amount equal to the duty leviable on the transaction value on clearance of capital goods.

"The plea of the learned Counsel that it was an interpretational error is not acceptable. It is a settled law that what is stated in the plain language in the statute has to be understood as it is. It is not permissible to assume any different intention or a different governing purpose than what has been mentioned in the statute," the CESTAT said.

Case Title: Hindustan Coca Cola Beverages Pvt. Ltd. Versus Commissioner Central Excise & CGST, Jaipur-I

Citation: Excise Appeal 50816/2021

Counsel For Appellant: Advocate Mrinal Bharat Ram

Counsel For Respondent: Authorised Representative Tamana Alam

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