2023 (5) TMI 600 - AT - Central Excise

Valuation - scope of show cause notice (SCN) - clearance of PP Medicaments - Deduction claim - it is contended that Octroi charges and Additional Sales Tax to be calculated on an equalized basis rather than on actual basis - secondary freight - HELD THAT - The language and the tenor of the SCN are very clear to seek denial of deduction claimed on account of Octroi and Additional Sales Tax. Though, the word PME is used in both SCNs, in the SCN in respect of Appeal No. E/1226/2012, denial of deductions on account of Octroi and Additional Sales Tax are mentioned after the word PME not once but twice. Moreover, in the said SCN in Para 5, the deductions have been clearly mentioned to be on account of Octroi and Additional Sales Tax etc. without use of word PME . It was further found that in the SCN relating to the other Appeal No. E/1226/2012 word PME followed by Octroi charges and Additional Sales Tax in brackets was mentioned only once and term etc. is also used once. Notwithstanding the mere mention of the words PME and etc. in one or two places, the gist of the SCNs was to deny the deduction on account of Octroi and Additional Sales Tax for the reason that the same are claimed on an equalized basis, even though paid on some non-excisable goods. The SCN needs to be understood in that perspective alone. It has been held in several cases that the SCN is not an empty formality and the same needs to be clear and unambiguous. It is not open for the Department just to seek a demand on the basis of figures supplied by the appellant by mistake - In the instant case, there was no whisper of seeking denial of deduction on secondary freight and to that extent, there is no ambiguity in the SCN and it is not open for the Department to claim confirmation of duty on account of secondary freight at this juncture. Thus, Tribunal has clearly stated that the deduction on account of Octroi and Additional Sales Tax are permissible and the remand to the Original Authority to allow the deductions on the lines indicated in the order - appeal allowed.

Summary

Issues: Appeals against orders of Commissioner (Appeals) filed, involving denial of deduction on Octroi charges and Additional Sales Tax on equalized basis.

Issue 1: Denial of deduction on technical grounds
The appellants, engaged in manufacturing and clearance of PP Medicaments, claimed deduction on Octroi charges and Additional Sales Tax on equalized basis. The Preventive Unit observed discrepancies during a visit to the factory, leading to issuance of show cause notices (SCNs) which were confirmed. The appellants argued that the SCNs were clear in seeking denial of deduction only on Octroi charges and Additional Sales Tax, not secondary freight. The Tribunal agreed, emphasizing the need for clarity in SCNs and limiting the scope of deductions to statutory levies. The appellants' case on technical issues and merits was upheld, with the Tribunal allowing the appeals.

Issue 2: Interpretation of SCNs
The Authorized Representative for the Department contended that even if specific words like "Secondary Freight" were not mentioned in the SCNs, the liability of the appellants was clear. However, the Tribunal analyzed the language and tenor of the SCNs, finding them unambiguous in seeking denial of deductions on Octroi and Additional Sales Tax. The Tribunal highlighted that the term "etc." used in conjunction with statutory levies indicated a specific focus, excluding other expenses like secondary freight. It was emphasized that SCNs should not be vague, and the Department cannot claim confirmation of duty based on inadvertent figures provided by the appellant. The Tribunal ultimately ruled in favor of the appellants, allowing the deductions as per the remand order.

Decision:
Appeal No. E/1226/2012 and E/1227/2012 were allowed by the Tribunal, emphasizing the importance of clear and unambiguous SCNs in tax matters. The judgment was pronounced on 11.05.2023.