2013 (1) TMI 223 - AT - Central Excise

Reversal of charge of collection of an amount of 8% of the value of exempted goods - invoking provisions of Section 11D - Held that - The scheme of Central Excise duty payment is that a manufacturer removed goods from the factory of production after payment of duty. While selling the goods, the manufacturer recovered the duty so paid. In doing so, an assessee is recouping the tax already paid. The arrangement is not that the assessee first collected the tax from the buyer of the goods and then remits the amount to the government. Section 11D has to be read keeping this scheme in view. Therefore, the provisions for every person who is liable to pay duty........ and has collected any amount from the buyer of any goods in any manner representing as duty of excise, shall forthwith pay the amount so collected to the credit to the Central Government has application only when equivalent duty had not been deposited at the time of removal of the goods. The scheme of the law is that manufacturers shall not collect amounts falsely representing them as central excise duty and retain them, thus, unjustly, benefiting themselves. In the present cases irrespective of whether the 8% payments were duty or not) since the 8% amount remain already paid to the revenue, and no amount is retained by the assessee, Section 11D has no application. The real identity of the amount collected (whether excise duty payable or not) is of no relevance for Section 11D - the provisions of Section 11D of Central Excise Act, 1944, is liable to be set-aside.

Summary

Issues involved:
1. Reversal of 8% amount on value of exempted goods collected from customers.
2. Under valuation of final product manufactured and cleared.

Comprehensive Analysis:
Issue 1: The appellant, engaged in manufacturing medicaments, used common inputs for exempted and dutiable goods, availing cenvat credit. They reversed 8% amount on value of exempted goods collected from customers, which was challenged by the adjudicating authority. The first appellate authority upheld the demand under Section 11D of the Central Excise Act. The appellant argued citing the case of Unison Metals Limited that Section 11D cannot be invoked for recovery of such amounts collected from customers. The Tribunal concurred, stating that the appellant had collected the amount from customers and Section 11D does not apply when the amount has already been paid to the revenue.

Issue 2: The appellant did not press the point of under valuation before the Tribunal. The Tribunal upheld the findings of the lower authorities regarding under valuation. The Tribunal referred to the judgment in the case of Nu-Wave Shoes and Mafatlal Industries, emphasizing that the scheme of Central Excise duty payment involves manufacturers recouping the tax already paid and not collecting tax from buyers and then remitting it to the government. Therefore, Section 11D does not apply when the amount collected has already been paid to the revenue. The Tribunal confirmed the view taken in the case of Nu-Wave Shoes, setting aside the charge of contravention of Section 11D.

In conclusion, the Tribunal partially allowed the appeal, setting aside the confirmation of payment under Section 11D of the Central Excise Act, 1944. The issues of reversal of 8% amount on exempted goods and under valuation were analyzed in light of relevant legal provisions and precedents, ultimately leading to the decision in favor of the appellant based on the interpretation of Section 11D and the established scheme of Central Excise duty payment.