2016 (7) TMI 1203 - AT - Central Excise

Determination of price for the purpose of reversal of Cenvat Credit - whether price is inclusive of 10% amount or not - demand of 10% of the price of exempted final products - Difference of opinion - Held that - Whether the amount of 10% required to be reversed in terms of provisions of Rule 6(3)(b) is to be considered as other tax so as to deduct the same from the assessable value and the appeal has to be allowed by following the earlier order of the Tribunal in the same assesse s case as held by Member (Technical) OR the said reversal of 10% in terms of the said Rule 6(3)(b) is not required to be deducted from the value of the exempted final products and the matter needs to be referred to the Larger Bench of the Tribunal for resolving the disputed issue as held by Member (Judicial)? - Matter referred to larger bench.

Summary

Issues Involved:
1. Calculation method for 10% payment under Rule 6(3)(b) of Cenvat Credit Rules.
2. Whether the 10% payment is considered "other taxes" for exclusion from the price of exempted goods.
3. Interpretation of relevant Supreme Court judgments and their applicability.
4. Need for referring the matter to a Larger Bench due to differing opinions.

Issue-wise Detailed Analysis:

1. Calculation method for 10% payment under Rule 6(3)(b) of Cenvat Credit Rules:
The appellants, engaged in manufacturing plastic pipes and other products, were required to pay an amount equal to 10% of the price of exempted final products as per Rule 6(3)(b) of the Cenvat Credit Rules. The dispute arose when the appellants deducted the 10% amount from the price on a cum-duty basis, which the authorities contested, resulting in a demand of ?44,94,723/- and a penalty of ?11,25,000/-. The Commissioner (Appeals) upheld the demand for the normal period but set aside the penalty.

2. Whether the 10% payment is considered "other taxes" for exclusion from the price of exempted goods:
The core issue was whether the 10% payment should be treated as "other taxes" and thus be excluded from the price of exempted goods. The appellants argued that this payment is a statutory levy and should be excluded. However, the impugned order rejected this plea based on the Tribunal's decision in Mahindra & Mahindra Ltd. vs. CCE Mumbai, which held that the 10% amount is neither a government levy nor a tax deduction.

3. Interpretation of relevant Supreme Court judgments and their applicability:
The Tribunal in the appellants' own case had previously ruled that the 10% amount is a statutory requirement and cannot be included in the price for calculating the 10% payment. This decision relied on the Supreme Court's ruling in CCE vs. Kisan Sahakari Chini Mills Ltd., which defined "taxes" broadly to include any compulsory exaction under an enactment. However, Member (Judicial) disagreed, stating that the reversal of 10% is not a tax but a measure to neutralize inadmissible Cenvat credit, distinguishing it from the compulsory levies discussed in the Supreme Court cases.

4. Need for referring the matter to a Larger Bench due to differing opinions:
Member (Technical) held that the 10% amount should be considered as "other taxes" and thus excluded from the price, following the earlier Tribunal decision in the same appellant's case. In contrast, Member (Judicial) argued that the 10% payment is not a tax and should not be excluded from the price, suggesting that the matter be referred to a Larger Bench due to the contradictory decisions and the need for a consistent interpretation.

Conclusion:
The judgment concluded with a difference of opinion on whether the 10% payment under Rule 6(3)(b) should be treated as "other taxes" and excluded from the price of exempted goods. Member (Technical) supported the exclusion based on previous Tribunal and Supreme Court rulings, while Member (Judicial) opposed it, emphasizing the need for a Larger Bench to resolve the issue. The matter was pronounced in the open court on 29/06/2016.