2017 (4) TMI 984 - AT - Central Excise

Valuation - quantification of sales tax abatement - Section 4 (d) of CEA, 1944 - Held that - only that amount of sales tax will be permissible as detection u/s 4 as is equal to the amount legally permissible under the local sales tax law to be charged/billed from the customer/buyer - It is clear in the present case that the amount claimed as abatement is the amount charged/billed by the appellant from their buyers. The sales tax assessment also records the full sales tax liability and the manner of discharging such liability by the appellant - appeal allowed - decided in favor of assessee.

Summary

Issues:
Quantification of sales tax abatement for Central Excise valuation under Section 4(d) of the Central Excise Act, 1944.

Analysis:
The case involved a dispute regarding the quantification of sales tax abatement for Central Excise valuation under Section 4(d) of the Central Excise Act, 1944. The appellants, engaged in the manufacture of HV & LV Coils and transformers, were contesting an order from the Commissioner (Appeals-I), Jaipur, which confirmed a differential Central Excise duty and imposed a penalty under Section 11AC of the Central Excise Act, 1944. The Revenue argued that the appellant collected a higher amount of sales tax from buyers but paid a lesser amount to the State Government, leading to the initiation of proceedings resulting in the disputed order. The appellant claimed sales tax exemption under a notification by the Rajasthan Government, allowing for exemption from sales tax payable by the dealer to the extent of tax paid on raw material purchased. The appellant's counsel argued that the scheme operated similarly to the Modvat scheme in Central Excise, and the set-off in payment of sales tax did not affect the effective rate of tax payable to the State Government. The appellant submitted sales tax assessment orders for the relevant years and relied on a Board Circular and various Tribunal decisions to support their case.

Upon hearing both sides and examining the appeal records, the Tribunal noted that the sales tax liability for the entire financial year was calculated and settled by the appellant through cash payment and set-off of sales tax already paid on purchases. Referring to a Board Circular from 2002, the Tribunal emphasized that set-off schemes of sales tax did not alter the rate of sales tax payable on finished goods. The Tribunal highlighted that only the amount legally permissible under local sales tax law to be charged from customers could be claimed as abatement for Central Excise valuation under Section 4. Citing various Tribunal decisions, including those involving M/s Vardhman Electro Mech. (P) Ltd. and others, the Tribunal concluded that the impugned order was unsustainable. Therefore, the Tribunal set aside the order and allowed the appeal in favor of the appellant.

In conclusion, the Tribunal's decision centered on the interpretation of sales tax abatement provisions for Central Excise valuation under Section 4(d) of the Central Excise Act, 1944. The case highlighted the importance of adhering to legal requirements and established principles in determining the permissible amount of abatement based on sales tax liabilities and payments made to the State Government. The Tribunal's ruling, supported by relevant legal precedents and a Board Circular, underscored the necessity for accurate calculation and compliance with local sales tax laws for Central Excise valuation purposes.