2006 (4) TMI 24 - AT - Central Excise

Central Excise - Cenvat/Modvat - Assessee added 8% of amount in the valuation on which the duty collected and deposited with the Govt. - Assessee to re-deposit 8% with Govt. is not justified

Summary

Issues:
1. Interpretation of Rule 57CC regarding payment of 8% on exempted goods.
2. Application of Section 11D of the Central Excise Act, 1944.
3. Assessment of duty on collected amounts representing excise duty.
4. Consideration of Modvat credit and its impact on tax liability.

Issue 1: Interpretation of Rule 57CC regarding payment of 8% on exempted goods:
The case involved a dispute regarding the interpretation of Rule 57CC, which mandates payment of 8% on the price of final products that are exempted if the manufacturer does not maintain separate accounts for exempted and dutiable products. The Joint Commissioner's Order-in-Original (OIO) emphasized that the amount reversed under Rule 57CC is not considered as "duty" but as an "amount." The OIO cited precedents where it was held that collecting and passing on this amount to the government does not contravene Section 11D, especially when the end users have not availed Modvat credit. The OIO highlighted that the provisions of Section 11D would not be attracted if the duty reversed under Rule 57CC is not considered as duty.

Issue 2: Application of Section 11D of the Central Excise Act, 1944:
The Commissioner (Appeals) reversed the OIO's findings, asserting that the respondents had collected amounts representing excise duty from buyers and must pay it to the government. The Commissioner held that since the respondents had shown the amount as Central Excise duty in their invoices and collected it from buyers, they were liable to pay it to the government under Section 11D. The Commissioner rejected the contention that the collected amount was not duty and emphasized that the respondents were liable to pay the specified duty amounts as per the Act.

Issue 3: Assessment of duty on collected amounts representing excise duty:
The Tribunal analyzed the case in light of previous judgments and rulings, noting that the respondents had not collected the 8% amount as duty but had added it to the assessable value and paid duty accordingly. The Tribunal cited precedents where it was held that Section 11D is attracted only when actual duty is collected but not paid to the exchequer. The Tribunal emphasized that the respondents had not collected duty but had added the 8% to the assessable value, which was already paid to the government, thus rejecting the Commissioner's order to pay additional amounts as double taxation.

Issue 4: Consideration of Modvat credit and its impact on tax liability:
The case also discussed the impact of Modvat credit on tax liability. The OIO and Tribunal noted that the respondents had not availed Modvat credit and had correctly debited the 8% amount on exempted goods. The Tribunal ruled that the respondents had not collected the 8% as duty, as claimed by the Commissioner (Appeals), and had already paid the applicable duty to the government. Therefore, the Tribunal allowed the appeal, confirming the OIO's order as legally correct and directing consequential relief if needed.

In conclusion, the Tribunal's judgment clarified the interpretation of Rule 57CC, the application of Section 11D, the assessment of duty on collected amounts, and the impact of Modvat credit on tax liability, providing a detailed analysis based on legal precedents and rulings to resolve the dispute effectively.