2014 (9) TMI 942 - AT - Central Excise

Determination of assessable value - deduction of the sales tax - Assessee not paying sales tax - Held that - Respondents were enjoying sales tax exemption and as such, were not paying any sales tax to the State Government. However, it is seen that they were still collecting an amount towards sales tax from their customers and at the same time, they were also claiming sales tax deduction for determining the assessable value. When they were collecting an amount towards sales tax from their customers, while they were not under any obligation to pay the same to the State Government and as such, they were not paying any sales tax to the State Government, the amount collected from customers as sales tax has to be treated as part of the transaction value and hence, its deduction would not be admissible. In any case, since the sales tax was not payable in view of the exemption, its deduction would not be admissible in view of the provisions of Section 4(3)(d)(ii) of the Central Excise Act, 1944. Though the Commissioner on this point has given a clear finding that this issue had not been decided by the Asstt. Commissioner while finalizing the provisional assessment but still, he has not confirmed the demand of the differential duty on account of wrong deduction of sales tax for determining the assessable value. - The duty demand for the period from 17-7-1991 to 7-4-1994 (sic), as made in the show cause notice, is, therefore, confirmed and the impugned order to this extent stands modified - Decided in favour of Revenue.

Summary

Issues:
1. Whether the appellant is eligible for deduction of sales tax for determining assessable value under Section 4 of the Central Excise Act, 1944.
2. Correctness of the duty demand and penalty imposed by the Commissioner of Central Excise.
3. Admissibility of deduction of sales tax for the period from 17-7-1991 to 8-3-1994.
4. Review of the Commissioner's order and subsequent appeal filed by the Revenue.

Analysis:

Issue 1:
The appellant, a manufacturer of Cathode Ray Picture Tubes, was found collecting sales tax from customers without remitting it to the Sales Tax Department. The department issued a show cause notice for recovery of short paid duty and penalty. The Tribunal's Final Order upheld the duty demand for certain periods and remanded the matter for de novo adjudication for the remaining period. The subsequent de novo adjudication by the Commissioner confirmed the provisional nature of assessments due to non-availability of certain deductions. However, the Commissioner did not confirm the differential duty demand but imposed a penalty. The Committee of Chief Commissioners reviewed this order and directed the Commissioner to file an appeal for correct determination of points, including the issue of deduction of sales tax for determining assessable value.

Issue 2:
During the hearing, the Departmental Representative argued that the appellant, despite enjoying sales tax exemption, collected sales tax from customers, making them ineligible for deduction of sales tax for determining the assessable value. Citing a Supreme Court judgment, the representative contended that the impugned order not confirming the demand for short paid duty due to incorrect deduction of sales tax was erroneous.

Issue 3:
The Tribunal considered that for the period in question, the appellant was exempt from paying sales tax but still collected it from customers. As they did not remit the collected sales tax to the State Government, it had to be treated as part of the transaction value, making its deduction inadmissible. The Tribunal found that since sales tax was not payable due to the exemption, its deduction was impermissible under Section 4(3)(d)(ii) of the Central Excise Act, 1944. Despite the Commissioner's acknowledgment that the issue was not decided during the provisional assessment, the Tribunal modified the impugned order, confirming the duty demand for the relevant period.

Issue 4:
The Tribunal allowed the Revenue's appeal, finding the impugned order incorrect in not confirming the duty demand for the period in question. The Tribunal held that the differential duty demand made in the show cause notice was confirmed, modifying the impugned order accordingly.

This comprehensive analysis summarizes the judgment's key issues and the Tribunal's findings on each, providing a detailed understanding of the legal reasoning and decisions involved.