2017 (1) TMI 1575 - HC - Central Excise

Valuation - part of sales consideration or not? - Delivery charges - Whether the Tribunal was justified in setting aside the entire order when the respondent did not press before the Tribunal the amount of duty demanded? Held that - It is true that the Tribunal could not have allowed the entire appeal which may result in the duty also being set aside and the claim for refund possibly being made by the respondent. To that extent the order of the Tribunal requires modification especially in view of the concession made at the time of hearing before the Tribunal. The delivery charges cannot constitute part of the consideration. We say this on the assurance that no claim for refund will be made on duty already appropriated from the respondent. Once it is clear that delivery charges cannot form part of the sale consideration the demand for interest and penalty are liable to be set aside. Appeal allowed in part.

Summary

Issues involved: Appeal under Section 35G of the Central Excise Act, 1944 regarding duty demand, interest, and penalty on delivery charges collected by the respondent.

Analysis:
1. Background: The respondent was registered for warehousing non-duty paid Naphtha and cleared it after paying excise duty to two companies. The Commissioner initiated proceedings alleging that the respondent collected delivery charges from customers amounting to nearly ?3.00 crores, leading to an Order-in-Original confirming a duty demand, imposing penalties, and directing interest payment.

2. CESTAT Appeal: The respondent filed an appeal before CESTAT, which allowed the appeal without independent analysis based on previous cases. The Revenue challenged this decision in 2006 after a delay, which was condoned in 2016.

3. Question of Law: The main legal issue was whether the Tribunal was justified in setting aside the entire order when the respondent did not contest the duty demand before the Tribunal. The Tribunal's decision was based on the respondent's plea that the demand itself was not lawful.

4. Judgment: The High Court found that the delivery charges could not be considered as part of the sale consideration. While the Tribunal erred in setting aside the entire Order-in-Original, the interest and penalty portion was upheld. This decision was based on the fact that the delivery charges were reflected in the invoices without any suppression by the respondent.

5. Conclusion: The High Court partially ruled in favor of the Revenue, maintaining the validity of the Order-in-Original but upholding the setting aside of interest and penalty. The judgment clarified that the collection of delivery charges did not impact the duty payment and that no refund claim would be entertained. The miscellaneous petitions were closed, and no costs were awarded.