2022 (6) TMI 705 - AT - Central Excise

Valuation - inclusion of TCS collected from the buyer over and above the price of the goods, from the buyer of scrap, or not - the TCS amount be treated as amount of money value of additional consideration and Central Excise duty is required to be paid - HELD THAT - From the plain reading of Section 206C of Income Tax Act,1962, it is clear that the amount collected as TCS has nothing to do with the price of the goods but it is a tax collected from the buyer of the scrap and the same is deposited in the income tax department, therefore, the amount collected as TCS is a tax and in terms of Section 4, the tax is not includable in the assessable value - it is clear that any additional amount if it is flowing from the buyer to the assesse directly or indirectly the same is includable in the assessable value meaning thereby any amount which is coming from the buyer and retained by the appellant alone will be includable in the assessable value. In the present case the TCS is collected not as a additional consideration but explicitly as tax and same is deposited to the income tax department, therefore, it cannot be said that the amount of TCS belongs to the appellant - the amount of TCS cannot be considered as additional consideration flowing from the buyer to the appellant accordingly, the same is not includable in the assessable value for charging Excise Duty - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Inclusion of Tax Collected at Source (TCS) in the assessable value for charging Central Excise Duty.

Analysis:
The case involved the appellant engaged in manufacturing M.S Drums, with scrap generated during the process sold along with the goods, and TCS collected. The department contended that the TCS collected should be part of the transaction value for Central Excise duty payment. The adjudicating authority and the Commissioner (Appeals) upheld this demand, leading to the appellant's appeal.

Issue 1: TCS as part of assessable value
The appellant argued that TCS, collected as per Income Tax Act Section 206C, was not part of the sale price but a tax deposited to the income tax department, with no benefit to them. They highlighted that Rule 6 of Central Excise Valuation Rules, invoked by the authority, applies to additional consideration flowing to the assessee, which TCS did not as it was directly deposited to the tax department.

Issue 2: Interpretation of Income Tax Act Section 206C
The Revenue reiterated the demand, emphasizing the TCS collection from the scrap buyer. The Tribunal analyzed Section 206C, which mandates sellers to collect TCS from buyers of specified goods, including scrap. The Tribunal noted that TCS was a tax collected and deposited to the income tax department, not forming part of the goods' price.

Judgment and Conclusion
After reviewing submissions and provisions, the Tribunal concluded that TCS, being a tax collected from buyers and deposited to the income tax department, was not additional consideration flowing to the appellant. Therefore, it was not includable in the assessable value for charging Excise Duty. The Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. The judgment was pronounced on 07.06.2022 by the Appellate Tribunal CESTAT AHMEDABAD.