2010 (7) TMI 496 - AT - Central Excise

Waiver of pre-deposit - valuation - sales tax collected and retained by the assessee - Held that - retention of amount of Rs. 7,99,70,453/- was not on account of deduction from the Sales Tax but on account of loss, which would be suffered by the appellants on account of pre-matured re-payment of the loan amount of sales tax, which was converted into a loan amount in terms of the scheme issued by the State Government. The same being not on account of deduction from the Sales Tax, as such, the question of refusal of deduction of amount of Rs. 7,79,70, 453/- do not appear to be in consonance with the concept of transactional value within the meaning of said expression under the said Act. - a prima facie case has been made out for waiver of amount demanded - full waiver granted.

Summary

Issues:
Challenge to order passed by Commissioner (Appeals) confirming demand, interest, and penalty. Interpretation of scheme for deferred pre-payment of Service Tax. Discrepancy between tax collected and paid under the scheme. Applicability of Section 4(4)(b)(ii) of Central Excise Act, 1944. Consideration of loss on pre-mature repayment. Decision on waiver of the demanded amount during the appeal.

Analysis:

The appellant contested the order dated 7-7-2009 by the Commissioner (Appeals), which upheld a demand of Rs. 67,73,810 along with interest and penalty. The dispute arose from the difference between the Service Tax amount calculated by the appellant from customers and the tax paid under a deferred pre-payment scheme. The scheme allowed the appellant to collect Service Tax at Sales Tax rates from customers and repay it in installments, but a change required premature repayment. This premature repayment led to benefits granted to the appellant due to potential losses. The appellant had collected Rs. 12,36,47,755 as sales tax and paid Rs. 4,36,77,308 prematurely, resulting in a deduction of Rs. 7,99,70,453 from the total calculated amount, treated as income in their books.

The adjudicating authority held that since the appellant collected full sales tax but paid only a part to the State Government, the remaining amount treated as income could not be deducted from the assessable value. However, it was found that the retention of Rs. 7,99,70,453 was due to the potential loss from premature repayment, not a deduction from Sales Tax. This distinction was crucial as it affected the transactional value concept under the Central Excise Act, 1944. Consequently, a prima facie case was established for waiving the demanded amount pending the appeal, as it was not in line with the Act's principles.

In conclusion, the Tribunal allowed the application for waiver of the demanded amount until the appeal's disposal. The decision highlighted the importance of understanding the nature of deductions and losses in the context of tax schemes and their impact on assessable values under relevant legal provisions.