2024 (2) TMI 499 - AT - Central Excise

Determination/calculation of deduction - deduction on equalized basis - price declaration in terms of Rule 173C of erstwhile Central Excise Rules, 1944 - HELD THAT - This Bench of the Tribunal and also the Principal Bench, New Delhi have decided the issue in favour of the appellants in their own case. Commissioner (Appeals) vide OIA dated 26.11.2015 has relied upon CBEC Circular, No. 20/90-CX-1 dated 20.08.1990, which clarified that Assessees who intend to deduct equalized sales taxes, octroi etc. from the cum duty price may be permitted to do so on the condition that such deductions are substantiated, from time to time, on the basis of information available in records regarding the actual amounts paid as taxes, octroi, etc. As long as the assessable values claimed are correct and are not manipulated in order to avoid duty, it is felt that the assessing authorities may allow deductions on account of sales tax, octroi etc. The Hon ble Apex Court in the case of Grasim Industries Ltd. 2018 (5) TMI 915 - SUPREME COURT has validated the above circular even in the new valuation regime and observed the measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy. So long a reasonable nexus is discernible between the measure and the nature of the levy both Section 3 and 4 would operate in their respective fields. Both the appeals are allowed.

Summary

Issues involved:
The issues involved in the judgment are related to the deduction on an equalized basis for taxes like sales tax, octroi, trade discount, and freight while discharging duty on medical equipment. The dispute arose when the Department issued show-cause notices challenging the deductions claimed by the appellants.

Comprehensive details for each issue:

1. Deduction on Equalized Basis:
The appellants, engaged in the manufacture and sale of medical equipment, cleared goods to various regional depots/distributors after paying duty to their Central Stocking Point at New Delhi. They adopted the "RDS (Redistributorship) Price List" for duty calculation, including taxes, trade discount, and freight. Due to the inability to determine exact deductions, they claimed deductions on an average/equalized basis based on previous year/half-year expenses. The Department disputed this practice, leading to show-cause notices covering multiple periods. The appellants informed the Department through price declaration as per Rule 173C of the Central Excise Rules, 1944.

2. Legal Precedents and Arguments:
The appellant's counsel cited previous decisions in favor of the appellants by CESTAT Chandigarh and CESTAT New Delhi, along with cases like Hindustan Unilever Ltd., Commissioner Vs Hindustan Unilever Ltd., CCE Vs Apollo Tyres Ltd., UOI Vs Bombay Tyre International Ltd., and VIP Industries Ltd. The Department's Authorized Representative reiterated the findings of the impugned order.

3. Judicial Interpretation and Decision:
After hearing both sides and examining the case records, the Tribunal noted that previous decisions by the Tribunal and the Principal Bench, New Delhi favored the appellants. The Tribunal referred to a CBEC Circular and a Supreme Court judgment in the case of Grasim Industries Ltd., validating the practice of deducting equalized sales taxes, octroi, etc., as long as the assessable values claimed are correct and not manipulated to avoid duty. The Tribunal allowed both appeals, providing consequential relief as per law.

Therefore, the Tribunal allowed the appeals in favor of the appellants, emphasizing the validity of deducting equalized taxes while discharging duty on medical equipment, as per established legal principles and precedents.