2025 (4) TMI 178 - AT - Central Excise

Levy of Central Excise duty on the amount of sales tax retained after availing benefit extended by the State Government for pre-payment of such sales tax which was collected by the appellant - Applicability of the judgment in the case of M/s Super Synotex (India) Ltd. 2014 (3) TMI 42 - SUPREME COURT for the period prior to 31.06.2000 - HELD THAT - The Tribunal felt that the issue was no longer resintegra in view of the Hon ble Supreme Court judgment in the case of M/s Super Synotex (India) Ltd. which was also followed by Co-ordinate Bench of this Tribunal in the case of Honda Motorcycles Scooters India Pvt Ltd. Vs CCE Delhi-III 2016 (9) TMI 533 - CESTAT CHANDIGARH . On going through the judgment in the case of M/s Super Synotex (India) Ltd. supra and it is found that the Hon ble Supreme Court has examined the issue of taxability in respect of amount retained by the assessee by treating the said retention as price of goods under the basic fundamental conception of transaction value as substituted with effect from 01.07.2000 under Section 4 of the Central Excise Act. It also took into account CBEC Circular No. 378/11/98 dated 12.03.1998 which protected industrial units availing incentive scheme as there was conceptual book adjustment of sales tax paid to the Department. The issue involved was that the assessee had not paid the duty on the additional consideration collected towards the sales tax. The Revenue felt that the assessee was availing exemption from the payment of sales tax even though it was showing sales tax but assessable value was shown separately for the payment of Central Excise duty. On the other hand the assessee said that it was a incentive scheme and not an exemption and therefore the sales tax collected was not includable in the assessable value and the deduction was admissible. It is therefore apparent that in the given situation what have been clearly held that in terms of amendment in Section 4 of the CEA wherein the concept of transaction value was brought unless the sales tax is actually paid to the Sales Tax Department of the State Government no benefit towards excise duty can be given under Section 4(4)(d). Therefore from the plain reading of the judgment in the case of M/s Super Synotex (India) Ltd. it is obvious that the said judgment has not considered the period before 01.07.2000 and therefore the said judgment is only applicable for the period after 01.07.2000. Conclusion - The judgment in M/s Super Synotex (India) Ltd. does not apply to the period prior to 01.07.2000. Consequently the demand for excise duty for the period up to 30.06.2000 is not sustainable. The appeal is allowed partly reflecting the Tribunal s determination that the pre-01.07.2000 period was not covered by the judgment in M/s Super Synotex (India) Ltd.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is the applicability of the judgment in the case of M/s Super Synotex (India) Ltd. for the period prior to 01.07.2000. Specifically, the issue is whether the appellant is required to discharge Central Excise duty on the amount of sales tax retained after availing benefits extended by the State Government for pre-payment of such sales tax, collected during the period from 1996-97 to 2003-04.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework revolves around Section 4 of the Central Excise Act, which deals with the concept of "transaction value" as amended with effect from 01.07.2000. The judgment in M/s Super Synotex (India) Ltd. examined the taxability of amounts retained by the assessee as part of the transaction value. The judgment held that unless sales tax is actually paid to the State Government, it cannot be excluded from the transaction value for excise duty purposes. This principle was applied post the amendment of Section 4 effective from 01.07.2000.

Court's Interpretation and Reasoning

The Tribunal was directed by the Hon'ble High Court of Telangana to ascertain whether the judgment in M/s Super Synotex (India) Ltd. applies to the period prior to 01.07.2000. The Tribunal noted that the judgment specifically addressed the period after the introduction of the concept of "transaction value" in Section 4, effective from 01.07.2000. Therefore, its applicability to the period before this date was in question.

Key Evidence and Findings

The Tribunal found that the Hon'ble Supreme Court in the M/s Super Synotex (India) Ltd. case did not consider the period before 01.07.2000. The Tribunal also reviewed the judgment in National Engineering Industries, which supported the view that the principles from M/s Super Synotex (India) Ltd. apply post-01.07.2000. Additionally, the Tribunal considered departmental circulars which indicated that sales tax payable, even if deferred, should be excluded from the transaction value.

Application of Law to Facts

The Tribunal applied the legal principles established in M/s Super Synotex (India) Ltd. and National Engineering Industries to the facts of the case. It concluded that the reliance on M/s Super Synotex (India) Ltd. for the period prior to 01.07.2000 was incorrect as the judgment's rationale was based on the amended Section 4 applicable after 01.07.2000.

Treatment of Competing Arguments

The appellant argued that the judgment in M/s Super Synotex (India) Ltd. should not apply to the period before 01.07.2000 due to conflicting views during the relevant period, which should preclude the invocation of the extended period for demand. The Tribunal found merit in this argument, noting the absence of a clear legal precedent for the pre-01.07.2000 period.

Conclusions

The Tribunal concluded that the judgment in M/s Super Synotex (India) Ltd. does not apply to the period prior to 01.07.2000. Consequently, the demand for excise duty for the period up to 30.06.2000 was not sustainable.

SIGNIFICANT HOLDINGS

The Tribunal held that the reliance on the M/s Super Synotex (India) Ltd. judgment for the period prior to 01.07.2000 was incorrect. It stated, "In view of the aforesaid legal position, unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of 'transaction value' under Section 4(4)(d), for it is not excludible." This principle was established for post-01.07.2000 scenarios.

The Tribunal set aside the order of the Commissioner (Appeals) to the extent of the period from 1996-97 to 30.06.2000, concluding that the demand for Rs. 1,50,325/- pertaining to this period was not sustainable. The appeal was allowed partly, reflecting the Tribunal's determination that the pre-01.07.2000 period was not covered by the judgment in M/s Super Synotex (India) Ltd.