2016 (8) TMI 839 - AT - Central Excise

Valuation - determination of assessable value u/s 4 by deducting permissible deductions from the wholesale price - Held that - Revenue s contention that the assessee did not raise the point earlier that the expenses under various heads furnished were provisional is factually incorrect as we have already recorded that the assessee had clearly stated in its letter that the deductions under various heads were on provisional basis and the actual expenditure can be ascertainable only after finalisation of accounts. It is a fact that even as per the show cause notice expenses on account of transportation, container services and trade discounts were held to be deductible and accordingly provisional figures relating to these heads were allowed to be deducted in the show cause notice itself. In the wake of the fact that the actual figure of the total expenses under the aforesaid three heads held to be deductible from the wholesale price is ₹ 9558556/- which is far more than the total deductions claimed for the year 1994-1995 (viz. ₹ 58982962/- axiomatically no demand would survive after allowing deduction of the actual expenses relating to the said permissible three heads. Consequently we need not go into the merits of disallowing the expenses incurred under other various heads for the purpose of deciding whether the impugned demand is sustainable. As regards the contention of Revenue that by adopting the actual figures for deduction, the Commissioner has gone beyond the remand order dated 21.4.2011 of CESTAT, we have perused the CESTAT order and we are unable to fathom from the CESTAT s remand order as to how adopting the actual figures of permissible expenses for arriving at the assessable value is in disharmony therewith while at the same time doing so is in harmony with the order of the Supreme Court dated 15.5.2015. - Decided in favour of assessee

Issues Involved:
1. Admissibility of deductions claimed by the assessee.
2. Determination of assessable value based on provisional figures.
3. Whether the actual expenses should be considered for assessment.
4. Whether the impugned demand of central excise duty is sustainable.

Issue-wise Detailed Analysis:

1. Admissibility of Deductions Claimed by the Assessee:
The appellant contended that the figures for deductions claimed under various heads were provisional and estimated, and the actual figures for the period 1994-1995 would only be known at the end of the financial year. The deductions on account of transportation, container service, and trade discount were held to be admissible in the show cause notice itself. However, deductions under heads such as "Mazdoor and cartage," "Expenses towards Sales and Shipping Department," "Shell repair cost," "Interest on containers," "Service Charges," "Trade discounts to privileged customers," "Other trade discount," and "Breakage, Burst and Leakage of aerated water" were held to be inadmissible, amounting to ?97,04,384 (though the final figure was ?1,00,33,582).

2. Determination of Assessable Value Based on Provisional Figures:
The appellant argued that the assessable value was given on the basis of provisional figures for the year 1994-95, based on expenses for the year 1993-1994. Despite this, the show cause notice was issued proposing to disallow deductions of expenses under certain heads without waiting for the final figures. The appellant submitted that even if all proposed disallowed deductions were disallowed, the total deductions under heads held to be admissible were higher than the total deductions claimed. The actual expenses under the heads allowed to be deducted in the show cause notice were more than the total deductions claimed provisionally.

3. Whether the Actual Expenses Should Be Considered for Assessment:
The appellant provided a chart of actual expenses under various heads, certified by a Chartered Accountant, which was not contested by the Revenue during the hearing. The actual expenses under the three heads (transportation, returnable container service, and trade discounts) allowed to be deducted in the show cause notice were more than the total deductions claimed provisionally. The Hon'ble Supreme Court observed that once expenses under certain heads were allowed to be deducted, the actual expenses under those heads should be deducted. The Commissioner, in the subsequent year's case, considered the actual expenses, supporting the view that the actual figures should be adopted for assessment.

4. Whether the Impugned Demand of Central Excise Duty is Sustainable:
The impugned demand was confirmed on the ground that certain deductions were not admissible. However, the total figure of ?95,58,556 claimed as actual expenses under the three heads was far more than the total deductions claimed for the year 1994-1995 (?58,98,962). Therefore, no differential duty would arise after allowing the actual expenses under the permissible heads. Consequently, the impugned demand was not sustainable. The Commissioner, in the order dated 25.6.2012, dropped the demand and penal proceedings on the ground that the availability of cushion supported by adequate admissible deductions resulted in offsetting the demand.

Conclusion:
The Tribunal allowed the assessee's appeal, dismissing the Revenue's appeal, and concluded that the impugned demand was unsustainable as the actual expenses under the permissible heads were more than the total deductions claimed provisionally. The Tribunal emphasized the need to consider actual expenses for assessment, aligning with the Supreme Court's observation. The cross-objections were also disposed of.

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