2016 (2) TMI 284 - AT - Central Excise

Sales tax permissible for deduction for valuation under Central Excise Law - Held that - In the present case, we find the whole issue cropped up during the course of scrutiny of purchase invoices by the audit party and certain ledger accounts maintained by the appellants. It is not disputed that the present demand arose because of the difference between the sales tax amount collected by the appellant from the buyer and actually paid to the State Government. This is as per a incentive scheme announced by the State. All these transactions are duly accounted for and maintained. As already stated there is a clear possibility of bonafide doubt regarding the quantum of deduction of sales tax in view of different interpretations prevalent during the time. The Tribunal in the case of Indian Oil Corporation Ltd. vs. CCE, Ahmedabad reported in ( 2013 (9) TMI 310 - CESTAT AHMEDABAD ), in a matter involving Central Excise duty consequent on re-calculation of sales tax, held that the issue involved bonafide dispute as requires interpretation of valuation provisions and no extended period can be invoked. Considering the above discussion, we are of the opinion that while the appellants are liable to pay the Central Excise duty as per the valuation determined in the impugned order the demand for extended period cannot be sustained. Accordingly, the penalty on the appellants is also set aside. As such, the appeal is partly allowed in the above terms.

Summary

Issues:
1. Time bar aspect of the first demand dated 04/11/2008.
2. Interpretation of the quantum of deduction of sales tax for valuation under Central Excise Law.
3. Applicability of extended period of limitation under Section 11A of the Central Excise Act, 1944.

Analysis:
1. The appeal challenged an order-in-original passed by the Commissioner of Central Excise, Chandigarh-II, regarding the recovery of Central Excise duty short paid by the appellant during a specific period. The issue revolved around the appellant not paying the full amount of VAT received on the sale of finished goods to the sales tax department, retaining a certain amount as per a scheme announced by the Punjab Government. The demand for differential central excise duty was based on the contention that the retained amount should be considered additional consideration for central excise levy. The impugned order confirmed the demands and imposed penalties, leading to the appeal against this decision.

2. The appellant did not contest the merits of the valuation and consequent demand, citing the decision of the Hon'ble Supreme Court in a relevant case. However, the appellant raised the issue of the time bar aspect of the first demand dated 04/11/2008, arguing that there was no fraud, collusion, or suppression on their part. The dispute centered around different interpretations regarding the VAT amount retained by the assessee under various incentive schemes by State Governments. The Tribunal's and Board's previous decisions and circulars were cited to support the appellant's argument regarding the interpretation of the quantum of deduction of sales tax for valuation under Central Excise Law.

3. The Tribunal considered the settled legal position established by the Hon'ble Supreme Court in relevant cases regarding the deduction of sales tax amount in Central Excise value. It was noted that the issue had been a subject of dispute and interpretation during the relevant time, with the Supreme Court providing clarity on the matter. The Tribunal found merit in the appellant's plea of bonafide belief and non-existence of elements like fraud or collusion. The show cause notice's failure to elaborate on the reason for invoking the extended period was deemed unsustainable, leading to the conclusion that the demand for the extended period could not be upheld. Consequently, the penalty on the appellants was set aside, and the appeal was partly allowed based on the above considerations.