Thermo Fisher Scientific India Revenue Neutrality Rejected

The dispute arose from inter-unit transfer of imported raw materials by Thermo Fisher Scientific India Pvt. Ltd. between its manufacturing facilities during 2016–2017. While transferring the imported inputs “as such,” the assessee reversed Cenvat credit relating to Countervailing Duty and education cess but failed to reverse credit attributable to the Special Additional Duty (SAD) component as required under Rule 3(5) of the Cenvat Credit Rules, 2004.

The lapse was detected during Special Audit proceedings conducted by the DG Audit team. Despite departmental objection, the assessee refused to reverse the SAD credit on the ground that the matter was revenue neutral because any reversal at the transferring unit would have become available as credit to the receiving unit. 

The adjudicating authority invoked the extended period under Section 11A(4), confirmed duty demand with interest and equal penalty, and the Commissioner (Appeals) affirmed the order. Before the Tribunal, the assessee relied heavily upon revenue-neutrality jurisprudence and absence of mens rea.

The Tribunal rejected the assessee’s contentions after closely examining Rule 9(1)(b) of the Cenvat Credit Rules, the assessee’s own correspondence, and Supreme Court jurisprudence in Star Industries. The Bench held that once extended-period allegations involving suppression came into operation, the receiving unit itself became disentitled from availing corresponding credit under Rule 9(1)(b). Consequently, the foundational premise of revenue neutrality collapsed.