2017 (2) TMI 362 - AT - Central Excise

Valuation - inclusion of sales tax element in the amount paid by the customers of motor vehicles sold by the dealers of the appellant which was, excluded from the assessable value for discharge of liability of central excise duty - Held that - The appellant is eligible for refund/credit of the special excise duty that has also been collected and remitted after grant of reimbursement of this amount to the ultimate consumer. There is no allegation that amount of sales tax that was collected on this component of value of the car has not been deposited in the state treasury or has been collected back - once tax/duty liability has been discharged, eligibility to credit cannot be varied for any reason whatsoever - appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged inclusion of sales tax element in the amount paid by customers of motor vehicles sold by dealers, differential duty confirmation, imposition of penalty under section 11AC of Central Excise Act, 1944.

Analysis:

1. Alleged Inclusion of Sales Tax Element:
The appeal filed by M/s Fiat India Pvt Ltd challenged the inclusion of the sales tax element in the amount paid by customers of motor vehicles sold by dealers. The dispute arose as the sales tax element was excluded from the assessable value for the discharge of central excise duty liability. The original authority confirmed a differential duty, along with interest and penalty under section 11AC of the Central Excise Act, 1944. The appellant contended that the amount collected as sales tax had been deposited with the commercial tax authorities, and no refund was claimed from them. The Tribunal emphasized that the tax liability is on the ultimate customer, and the sales tax collected does not constitute consideration for the goods sold. The appellant was eligible for refund/credit of the special excise duty collected and remitted after reimbursement to the ultimate consumer. The Tribunal ruled in favor of the appellant, stating that the Revenue's claim of additional consideration was baseless.

2. Differential Duty Confirmation and Penalty Imposition:
The impugned order confirmed a differential duty of a specific amount along with interest and imposed a penalty under section 11AC of the Central Excise Act, 1944. The appellant, as a manufacturer of motor vehicles, faced challenges concerning the eligibility of vehicles for exemption from special excise duty. The appellant reimbursed the special excise duty to customers upon certification of registration as taxis, which was later availed as credit. The appellant argued that the sales tax amount collected was not sought as a refund from the state tax authority. Citing relevant circulars and precedents, the appellant contended that the tax liability is on the ultimate customer, and the sales tax collected was deposited in the state treasury. The Tribunal, considering the scheme of indirect taxation and previous judgments, allowed the appeal, setting aside the impugned order.

In conclusion, the Appellate Tribunal CESTAT Mumbai, comprising Shri M V Ravindran, Member (Judicial), and Shri C J Mathew, Member (Technical), ruled in favor of M/s Fiat India Pvt Ltd in the appeal concerning the alleged inclusion of the sales tax element in the amount paid by customers of motor vehicles sold by dealers. The Tribunal emphasized the nature of tax liability on the ultimate customer and the eligibility of the appellant for refund/credit of special excise duty. The Tribunal set aside the impugned order confirming the differential duty and penalty imposition under section 11AC of the Central Excise Act, 1944.