2011 (7) TMI 978 - AT - Central Excise

Inclusion in Assessable value - Turn over Tax - Rule 7 of the Central Excise (Valuation) Rules 2000 - The case of the department is that in respect of vehicles sold from the depots situated in the State of Tamilnadu the assessee has collected Turn Over Tax (TOT) from the buyers even though in the invoices issued to the buyers the column against the turnover tax is left blank - Decision of Tribunal in Bangalore Paints Ltd. Vs. (2001 (3) TMI 165 - CEGAT BANGALORE) - Held that - turn over tax is a permissible deduction and the definition of transaction value under the new section effective from 01/07/2000 also clearly states that the tax paid or payable on the goods shall not form part of the transaction value for the purpose discharge of excise duty liability - Decided in favor of assessee.

Summary

Issues Involved:
1. Deduction of Turnover Tax (TOT) from the assessable value for Central Excise duty.
2. Alleged suppression of collection of TOT by the assessee.
3. Applicability of previous judicial decisions and circulars on the issue.

Detailed Analysis:

1. Deduction of Turnover Tax (TOT) from the assessable value for Central Excise duty:

The primary issue is whether the turnover tax (TOT) collected by the assessee can be deducted from the assessable value for the purpose of calculating Central Excise duty. The department argued that since TOT cannot be legally collected from customers under the Tamil Nadu Additional Sales Tax Act, 1970, any such collection should be considered as additional consideration, thereby attracting excise duty. The assessee, however, maintained that TOT is a permissible deduction as it is a tax on the sale of goods and has been paid to the state authorities.

The judgment referenced Section 4(3)(d) of the Central Excise Act, 1944, which defines "transaction value" and excludes sales tax and other taxes actually paid or payable on the goods from the assessable value. The Tribunal upheld the assessee's contention, citing the Supreme Court's decision in UOI Vs. Bombay Tyres International Pvt Ltd., which allows deduction of additional sales tax, surcharge on sales tax, and turnover tax from the sale price to arrive at the assessable value.

2. Alleged suppression of collection of TOT by the assessee:

The department alleged that the assessee suppressed the fact of collecting TOT from customers by not showing it in the invoices and instead issuing debit notes. The department claimed that this amounted to suppression of facts and thus the differential duty was payable.

However, the Tribunal found that the assessee had not collected TOT over and above the price but had included it as part of the wholesale price. This was evidenced by the blank column for TOT in the debit notes issued to customers, indicating that the tax was not separately recovered but was part of the overall price. The Tribunal concluded that the assessee's practice did not amount to suppression of facts and thus no additional excise duty was payable.

3. Applicability of previous judicial decisions and circulars on the issue:

The Tribunal considered various judicial precedents and circulars to reach its decision. The department relied on the Tribunal's decision in Geep Industrial Syndicate Ltd., which held that the deduction of TOT is not permissible if it is collected over and above the price. However, the Tribunal clarified that in the present case, TOT was included in the price and not collected separately, thus making it a permissible deduction.

The Tribunal also referenced the Supreme Court's decision in CCE, Bangalore Vs. Sujata Textiles Mills Ltd., which upheld that TOT payable under state law is a permissible deduction even if not shown in the invoice. Additionally, the Tribunal cited a circular issued by the Finance Ministry in consultation with the Law Ministry, which confirmed that TOT should be allowed as a deduction from the sale price to arrive at the assessable value.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, M/s. Mahindra & Mahindra Ltd., granting them the relief of deducting TOT from the assessable value for Central Excise duty. Consequently, the appeal filed by the Revenue was dismissed as devoid of merits. The judgment emphasized that TOT is a permissible deduction under the Central Excise law, provided it is included in the price and not collected separately from customers.