2002 (5) TMI 487 - AT - Central Excise

Summary

Issues:
1. Addition of the amount attributable to purchase tax in the assessable value.
2. Deduction of sales tax payable from the price of the yarn while fixing its assessable value.

Analysis:
1. The first issue revolved around the addition of the amount attributable to purchase tax in the assessable value. The Commissioner had confirmed a duty demand of over Rs. 6 lakhs, including penalty, based on this addition. The appellant argued that purchase tax on cotton, the raw material for spinning yarn, was irrelevant for assessing yarn to Central Excise duty since the duty was ad valorem based on the sale price of the yarn. The appellant's contention aligned with Section 4 of the Central Excise Act, which deems the value of goods for duty assessment as the normal selling price. As there was no dispute regarding the normal sale price of the yarn, the payability of purchase tax on raw material was deemed irrelevant. Consequently, the appellant's appeal was accepted in this regard.

2. The second issue pertained to the deduction of sales tax payable from the yarn's sale price to determine the assessable value. The appellant had deducted the sales tax paid during 1995-96 from the sale price, which was later refunded by the tax authorities. The appellant argued that the deduction was valid as the sales tax was payable and paid during the relevant period. The appellant contended that the demand for duty recovery related to the deduction was time-barred, as there was no suppression of facts or contravention involved. The Tribunal agreed that the deduction of sales tax was legitimate for the year 1995-96, as it was payable and paid during that period, despite the subsequent refund. The demand for duty recovery beyond the statutory limitation period was held as time-barred for the major portion of the amount. However, the remaining short-levy amount was deemed payable by the assessee.

In conclusion, the Tribunal confirmed the short-levy of Rs. 1,13,571, holding the Revenue's appeal partially allowed. The appellant's appeal was entirely allowed, quashing the duty demand related to the purchase tax inclusion in the assessable value and the penalty imposed. Both appeals were disposed of accordingly.