2016 (9) TMI 533 - AT - Central Excise

Valuation - whether or not the amounts collected by the appellants as Sales Tax from the customers but not paid to the State Sales Tax authorities should be included in the assessable value for the purpose of levy of Central Excise duty - appellants obtained an Entitlement Certificate dated 20.10.2003 by the Haryana VAT authorities - Appellant contended that they are eligible for full education of Sales Tax payable by them in terms of the Entitlement Certificate as they have discharged 50% of the deferred tax liability and the remaining 50 % is deemed to have been discharged in full and as such nothing has been retained by the appellants Held that - the Sales Tax/VAT payable/paid to the Haryana State Government is only 50% which was eligible for education. The remaining amount is legally allowed to be retained by the appellants and is not payable to the State exchequer. In such scenario, we find that the impugned order is correct in upholding the inclusion of that portion of Sales Tax/VAT in the assessable value collected by the appellants but not paid or payable to the State Government followed by the various decision of Hon ble Supreme Court. Invokation of extended period of limitation - Demand for the period April 2003 to June 2006 - SCN issued on 02.07.2007 - Held that - it is found that there is nothing in the impugned order which examined the party s submissions against longer period demand. We note that in the present case the correct valuation for Central Excise purpose is in dispute. The dispute is directly relatable to Sales Tax amount paid/payable by the appellants directly relatable to Sales Tax amount paid/payable by the appellants to the State authorities. The Sales Tax amounts collected were all reflected in the invoices issued to the clients. Out of this amount, the appellants retained 50 % based on a scheme announced by the State Government. In this factual matrix, we find that the allegation of fraudulent intent or suppression of fact against the appellants is not sustainable. It is apparent that the issue involved is one of legal interpretation and without a positive evidence for deliberate suppression of fact with intent to evade payment of Central Excise duty invoking the extended period for demand, is not legally sustainable. Accordingly, we hold that the appellants will be liable to different duty of Central Excise during the normal period of demand as confirmed by the lower authority. The demand for extended period as well as penalties are set aside. Cum duty value for calculation of differential excise duty - eligibility - no amount representing excise duty has been collected from the buyers on this differential amount - Held that - the appellants pleaded that differential duty, if any, payable should be arrived at taking the additional consideration as inclusive of excise duty as they have not collected any excise duty on such value from the customers. We find that in view of the facts discussed in the order, the appellants are eligible for such calculation of duty liability. - Appeal disposed of

Issues Involved:
1. Correct quantum of Sales Tax/VAT to be deducted while arriving at the transaction value in terms of Section 4 of the Central Excise Act, 1944.
2. Eligibility for cum duty value for calculation of differential excise duty.
3. Applicability of extended period for demand and imposition of penalties.

Issue-wise Detailed Analysis:

1. Correct Quantum of Sales Tax/VAT Deduction:
The appellants argued that they are eligible for full deduction of Sales Tax payable as they have discharged 50% of the deferred tax liability, which is deemed to have been fully settled. They relied on the definition of "transaction value" under Section 4(3)(d) of the Central Excise Act, 1944, and the Supreme Court decision in Purolator India Ltd. vs CCE, Delhi-III, 2015 (323) ELT 227 (SC). The appellants contended that the actual Sales Tax payable at the time of removal has been correctly claimed for exclusion from the transaction value, citing the Tribunal's decision in Uttam Galva Steels Ltd., 2016 (331) ELT 21 (Tri. – Mum).

The Department argued that the Explanation inserted under Section 4(1) in 2003 clarifies that the exclusion of Sales Tax is based on the actual paid amount. The exemption granted by the State Sales Tax authorities, which allowed the appellants to retain 50% of the Sales Tax, cannot be treated as Sales Tax but as additional consideration.

The Tribunal found that the concession extended by the State Sales Tax authorities was an exemption scheme converted into a deferment scheme. The Hon’ble Supreme Court in Commissioner of Central Excise, Delhi-III vs Maruti Suzuki India Ltd., 2014 (307) ELT 625 (SC), held that the amount retained by the assessee as Sales Tax, which was not actually paid to the exchequer, should be included in the transaction value. Similarly, in Commissioner of Central Excise, Jaipur vs Super Synotex (India) Ltd., 2014 (301) ELT 273 (SC), the Supreme Court held that only the amount actually paid as Sales Tax to the State Government is excludible from the transaction value.

2. Eligibility for Cum Duty Value:
The appellants argued that they are eligible for cum duty value for calculation of differential excise duty as no amount representing excise duty has been collected from the buyers on the differential amount confirmed by the lower authority.

The Tribunal agreed with the appellants, stating that they are eligible for such calculation of duty liability as they have not collected any excise duty on the additional consideration from the customers.

3. Applicability of Extended Period for Demand and Imposition of Penalties:
The appellants claimed that the demand is substantially time-barred, covering the period April 2003 to June 2006, as there is no case for suppression against them. The extended period cannot be invoked.

The Tribunal found merit in the appellants' plea regarding the time bar. The original authority had not provided sufficient reasons for upholding the extended period of demand. The Tribunal noted that the issue involved is one of legal interpretation, and without positive evidence of deliberate suppression of fact with intent to evade payment of Central Excise duty, invoking the extended period for demand is not legally sustainable. Accordingly, the demand for the extended period and penalties were set aside.

Conclusion:
The Tribunal upheld the inclusion of the portion of Sales Tax/VAT retained by the appellants in the assessable value for Central Excise purposes. However, it set aside the demand for the extended period and penalties. The appellants were found eligible for cum duty value calculation for the differential excise duty. The appeal was disposed of in these terms.

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