2013 (6) TMI 639 - HC - VAT and Sales Tax

Levy of interest - valuation dispute - admitted tax - held that - The applicant is contesting the liability of tax on the amount of Central Excise Duty since very beginning. At no stage the liability has been admitted. In the present revision also, the liability is being disputed. There is no earlier decision of this Court or Apex Court in the case of assessee or in any other case on the similar facts and circumstances, at the relevant time wherein it has been held that the Central Excise Duty is part of the turnover and liable to tax. Therefore, it is a case where the assessee is bonafidely disputing the liability of tax on the Central Excise Duty. Thus, it cannot be treated as admitted tax and the interest under Section 8 (1) of the Act cannot be levied and demanded. The authority below is only entitled for the interest under Section 8 (1-B) of the Act and not under Section 8 (1) of the Act. - Decided partly in favor of assessee.

Summary

Issues:
1. Imposition of tax on Notional Excise Duty
2. Legal treatment of Excise Duty under Central Excise Act
3. Treatment of disputed tax as admitted tax and liability for interest
4. Levy of interest on assessed tax on Notional Excise Duty

Issue 1: Imposition of tax on Notional Excise Duty
The revision raised questions regarding the justification of confirming tax imposition on Notional Excise Duty, which was payable by the purchasing oil company as per statutory provisions of the Central Excise Act. The Tribunal upheld the tax imposition, considering whether the Central Excise Duty paid by the purchaser should form part of the turnover and be liable to tax. A similar issue was addressed in another case where it was held that such Central Excise Duty would indeed be part of the turnover and subject to tax.

Issue 2: Legal treatment of Excise Duty under Central Excise Act
Question 2 focused on the legal treatment of Excise Duty under the Central Excise Act, emphasizing that the Duty payable at the time of removal of excise goods from the warehouse should not be considered as tax payable by the applicant-Corporation. The argument revolved around the specific provisions of the Central Excise Act, Rules, and relevant notifications. The judgment highlighted the importance of assessing the Duty at the time and place of removal for determining tax liability.

Issue 3: Treatment of disputed tax as admitted tax and liability for interest
The issue of treating the assessed tax on Notional Excise Duty, disputed from the beginning, as part of the taxable turnover and whether it should be considered as admitted tax was deliberated. The judgment referred to previous court decisions emphasizing that interest under Section 8(1) of the Act cannot be levied in cases where there is a genuine dispute, such as a classification dispute resolved during assessment proceedings. The petitioner's contention that the liability of tax on Central Excise Duty was always disputed was upheld, leading to the conclusion that interest under Section 8(1) could not be demanded.

Issue 4: Levy of interest on assessed tax on Notional Excise Duty
Regarding the levy of interest on the assessed tax related to Notional Excise Duty, the judgment clarified that interest under Section 8(1) of the Act should not be imposed due to the genuine dispute regarding the tax liability. The decision allowed the revision in part, upholding the tax imposition on Central Excise Duty while setting aside the demand for interest under Section 8(1) and directing the modification of the order to allow interest under Section 8(1-B) of the Act.