2011 (7) TMI 860 - AT - Central Excise

Demand - Eligibility certificates for new units for sales tax incentive under Sales Tax Incentive 1988 Scheme or Part-I of 1993 packages scheme as notified by the Government of Maharashtra Resolution dated 30/09/88 or 1998 Power Generation Promotion Policy - Sales Tax Deferral Scheme - Time limitation - CBDT issued a circular No.496 dated 25/09/1987 - As per the circular, if the sales tax laws contain a deeming provision to treat the payment of NPV as discharge of liability towards deferred sales tax, deduction under Section 43B will be allowed for the full amount of sales tax and NOT for the amount of NPV paid - Held that it is very evident that the deduction towards sales tax is permissible based on the amount billed or charged from the customers in accordance with the law irrespective of the fact whether the amount is retained by the assessee or incentives are given by the State Government to the assessee in respect of the sales tax so collected - apex Court in Paper Products Ltd., Vs. CCE reported in (1999 -TMI - 45222 - SUPREME COURT OF INDIA) held that the circulars issued by the CBEC are binding on the department and the department is precluded from challenging the correctness of the circulars even on the basis that the same is inconsistent with the statutory provision - Decided against the revenue

Issues Involved:
1. Eligibility for sales tax incentive under various schemes.
2. Treatment of Net Present Value (NPV) of deferred taxes.
3. Inclusion of sales tax collected but not paid in transaction value for excise duty.
4. Time-barred demands and limitation period.

Issue-wise Detailed Analysis:

1. Eligibility for Sales Tax Incentive under Various Schemes:
The appellants applied for eligibility certificates for new units under the Sales Tax Incentive 1988 Scheme, 1993 Package Scheme, and 1998 Power Generation Promotion Policy. These schemes allowed deferment of sales tax, permitting appellants to retain collected sales tax and pay it in installments after a specified period. The eligibility certificates were issued by SICOM Ltd./MEDA, Pune.

2. Treatment of Net Present Value (NPV) of Deferred Taxes:
An amendment to Section 38(4) of the Bombay Sales Tax Act in 2002 allowed eligible units to prematurely pay the NPV of deferred taxes. On making such payments, the deferred tax was deemed to have been paid. The appellants opted for this scheme, and the sales tax department verified and issued assessment certificates discharging them from further deferred tax payments.

3. Inclusion of Sales Tax Collected but Not Paid in Transaction Value for Excise Duty:
The department scrutinized records and found that the appellants paid sales tax at NPV, lower than the deferred amount collected from customers, showing the difference as 'gain on extinguishment of deferment liability.' The department argued that this difference should be treated as additional consideration and included in the transaction value for excise duty, issuing show-cause notices for differential duty invoking the extended period under Section 11A(1) of the Central Excise Act, 1944.

The appellants contended that the sales tax 'actually payable' is the amount specified in the invoice, deductible under Section 4(3)(d) of the Central Excise Act, 1944. They argued that the NPV payment discharged the entire sales tax liability, supported by judicial pronouncements and CBEC circulars, indicating that sales tax collected and retained under incentive schemes remains deductible.

4. Time-barred Demands and Limitation Period:
The appellants argued that some demands were time-barred, issued beyond the extended period of five years. The department countered that the limitation period should be computed from the date of knowledge of fraud by the department, making the demands within time.

Judgment:
The tribunal analyzed the legal provisions and CBEC circulars, concluding that the amount of sales tax deductible from the transaction value should be the amount billed or charged from customers, irrespective of subsequent NPV payments. The tribunal emphasized that assessable value and duty liability must be determined at the time of removal of goods, unaffected by later changes in sales tax law. The tribunal also noted that the CBEC circulars are binding on the department, rejecting the department's arguments against the appellants' claims.

The tribunal set aside the impugned orders, allowing the appeals with consequential reliefs, if any, without addressing the time-bar aspect due to the decision on merits.

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