2018 (1) TMI 637 - AT - Central Excise

Valuation - includibility - whether value of certain parts and accessories cleared alongwith machinery is to be added to assessable value or not? - Held that - the appellants are including the value of the bought out parts and accessories when cleared along with the main machine in the assessable value. The appellants are however not paying duty when such parts and accessories are cleared independently as replacement. The impugned order does not deal with this issue. It is not in dispute that the parts and accessories are bought out items and if the same are supplied as such no duty liability would arise as there is no manufacturing activity - demand set aside. Demand - amount of sales tax collected but not paid to the government - Held that - the deduction of sales tax is available only on actual basis and thus any amount collected in excess of the actual would form part of the assessable value - demand upheld. Time limitation - Held that - from the invoices it cannot be made out if the amount collected by them is actually paid to the government exchequer. There is no such declaration in the RT-12 return as well in these circumstances invocation of extended period is justified and penalty under Rule 173Q can be imposed - quantum of penalty reduced. Appeal allowed in part.

Summary

Issues: Valuation of goods cleared and sales tax collected but not paid to the government.

Valuation of Goods Cleared:
The appeal involved two issues. Firstly, it concerned the valuation of goods cleared by the appellant, including machinery, parts, and accessories. The appellant argued that certain parts and accessories supplied separately were not standard items provided with the machines and, therefore, should not be included in the assessable value. The appellant contended that duty was paid on parts and accessories supplied with the main items but not when supplied as replacement spares. The tribunal noted that the parts and accessories were bought-out items, and if supplied as such, no duty liability would arise due to the absence of manufacturing activity. Consequently, the demand related to this issue was set aside.

Sales Tax Collected But Not Paid:
Secondly, the issue involved the amount of sales tax collected but not paid to the government. The appellant contended that the sales tax collected but not remitted to the government should not be considered as additional consideration. The tribunal disagreed, citing case laws related to excess collections beyond actual payments to the government. Unlike cases involving freight charges, where excess collections were not included in the assessable value, in the present case, any amount collected in excess of the actual sales tax was deemed includible in the assessable value. Therefore, the demand on this count was upheld.

Limitation and Penalty:
The appellant also raised the issue of limitation, arguing that their unit was audited, and invoices submitted did not clearly indicate if the collected amount was paid to the government. The tribunal found that the lack of clarity justified the invocation of the extended period for assessment and the imposition of a penalty under Rule 173Q. However, considering the decision to set aside the duty demand on parts and accessories supplied independently, the penalty amount was reduced from ?50,000 to ?10,000. The appeal was partly allowed based on these terms.

In conclusion, the tribunal addressed the issues of valuation of goods cleared and sales tax collection, determining the duty liability and assessable value based on the specific circumstances of each issue. The decision highlighted the importance of accurately declaring and remitting taxes to the government, with penalties imposed for non-compliance despite certain aspects of the demand being set aside.