2005 (2) TMI 260 - AT - Central Excise

Summary

Issues:
1. Whether "Turnover Tax" is an admissible deduction for determining the assessable value under Section 4 of the Central Excise Act, 1944.
2. Whether the denial of deduction of Turnover Tax proposed in the show cause notice is valid.
3. Whether Rule 5 of the Central Excise (Valuation) Rules, 1975 is applicable in this case.

Analysis:

1. The primary issue in this case is the admissibility of "Turnover Tax" as a deduction for calculating the assessable value under Section 4 of the Central Excise Act, 1944. The appellant contended that since the unit was exempted from paying Turnover Tax, no deduction should be allowed. The Commissioner (A) allowed the deduction, but the appellant argued that previous decisions supported disallowing deductions for exempted taxes. The Tribunal referred to relevant case law, including CCE, Bombay v. Bajaj Auto Ltd., to support the position that exempted taxes should not be deducted. Ultimately, the Tribunal found in favor of the Revenue, dismissing the appeal.

2. The second issue revolves around the validity of the denial of deduction of Turnover Tax proposed in the show cause notice. The notice was based on the grounds that the tax was not recoverable from customers as per State Sales Tax laws, despite the respondent having recovered it. The Tribunal referenced the Central Excise Act, which allows deductions for tax paid or payable from the price. Citing precedents like Karnataka Soap & Detergent Ltd., the Tribunal upheld the availability of deductions for Turnover Tax, regardless of inclusion in the value. The Tribunal also noted that the demand was time-barred, further supporting the respondent's position.

3. The final issue concerns the applicability of Rule 5 of the Central Excise (Valuation) Rules, 1975 in this case. The Tribunal examined the Department Instructions and the Ministry of Law's opinion, which indicated that taxes not included in the value need not be passed on to the consumer. The Tribunal found that the proceedings did not consider this position and that invoking Rule 5 was unnecessary. Additionally, the Tribunal highlighted the lack of consideration for Income Tax provisions regarding State Taxes collected in a backward region. Due to these factors, the Tribunal concluded that the Revenue's appeal lacked merit and needed to be dismissed, ultimately ruling in favor of the respondent.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the respondent's position on the admissibility of Turnover Tax deductions, the validity of the denial of deduction proposed in the show cause notice, and the inapplicability of Rule 5 in this case.