2016 (11) TMI 1205 - AT - Central Excise

Valuation - Benefit of abatement of Sales Tax/VAT on equalized basis - inadmissible deduction - Held that - both the lower authorities (of Revenue) below held that equalized or average sales tax cannot be allowed for abatement under Section 4 of the Central Excise Act 1944. Further, we find that this issue is no longer res integra in view of the various decisions of the Tribunal in the appellants own case and also the judgment of the Hon ble Supreme Court in the appellants own case where it was held that - Considering above discussions and decision of the Hon ble Supreme Court in the appellants own case, we hold that the impugned orders are not sustainable in both the cases and are hereby set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of benefit of abatement of Sales Tax/VAT on equalized basis
- Interpretation of provisions of law regarding admissible deduction of sales tax/VAT
- Application of CBEC instructions and circulars
- Legal validity of the impugned orders

Analysis:

Issue 1: Denial of benefit of abatement of Sales Tax/VAT on equalized basis
The appellant, engaged in manufacturing various products, was denied the benefit of abatement of Sales Tax/VAT on an equalized basis. The dispute arose when a show-cause notice was issued proposing to deny the claim for deduction of sales tax and other taxes exceeding 12.5%. The lower authorities upheld the denial of equalized or average sales tax as an abatement under Section 4 of the Central Excise Act 1944. However, the Tribunal, in various decisions including the appellant's own case, allowed the deduction of equalized sales tax from the transaction value. The Tribunal cited precedents where equalized sales tax was permitted, emphasizing the need for segregation of expenses exclusively for excisable goods. Consequently, the impugned orders denying the abatement were set aside, and the appeals were allowed with consequential relief.

Issue 2: Interpretation of provisions of law regarding admissible deduction of sales tax/VAT
The appellant argued that the impugned order was not sustainable in law as it contravened provisions of law, judgments, and CBEC instructions related to admissible deductions of sales tax/VAT. The appellant contended that sales tax should be allowed as a deduction on an equalized basis, as long as it does not exceed the amount paid to the State Exchequer. The Tribunal, after considering submissions from both sides, held that the appellant was entitled to claim the abatement of equalized sales tax from the transaction value, based on previous judgments and legal principles.

Issue 3: Application of CBEC instructions and circulars
The appellant relied on CBEC instructions and circulars to support their claim for the deduction of sales tax/VAT. The appellant cited specific orders passed in their favor by various Tribunals and the Hon'ble Supreme Court of India. The Tribunal acknowledged the relevance of CBEC instructions and circulars in determining the admissibility of deductions, ultimately allowing the appellant's claim for the abatement of equalized sales tax.

Issue 4: Legal validity of the impugned orders
The Revenue challenged the Tribunal's decision before the Hon'ble Supreme Court, which dismissed the appeal, affirming the Tribunal's decision in favor of the appellant. The Tribunal, considering the Supreme Court's decision and the precedents cited in the appellant's case, held that the impugned orders were not sustainable and set them aside, allowing the appeals with consequential relief.