2018 (2) TMI 64 - AT - Central Excise

Valuation - inclusion of amount shown in certain debit notes raised by the respondent after the supply of excisable goods - Held that - there is no evidence of realization of amount towards debit notes. We find that the said reason cannot be validly held against levy of excise duty. Excise duty is on goods manufactured and cleared and is not upon realization of sale proceeds - Commissioner records that these debit notes were in fact fictitious in nature and were issued only to show higher turnover, for some other purposes. When the debit notes themselves were held to be fictitious, we find no valid excise duty can be charged on such documents. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Inclusion of engineering charges in excisable goods for excise duty assessment.

Analysis:
The case involved a dispute regarding the inclusion of engineering charges shown in debit notes issued by the respondent after supplying excisable goods for the purpose of Central Excise duty assessment. The Revenue demanded the recovery of differential excise duty based on these debit notes, considering engineering charges as part of the assessable value of the goods cleared by the respondent. The original authority upheld the demand and imposed a penalty, but the Commissioner (Appeals) set aside the decision, deeming the debit notes as fictitious and issued to inflate turnover figures without any actual realization of amounts. The Revenue contended that under Section 4, actual receipt of consideration for debit notes is not necessary for excise duty levy, arguing that engineering charges should be treated as additional consideration subject to excise duty.

Upon hearing the Revenue's argument, it was noted that the absence of evidence of realization of amounts towards the debit notes should not invalidate the levy of excise duty, as duty is imposed on manufactured and cleared goods, not on sales proceeds realization. However, the Commissioner found the debit notes to be fictitious, issued solely to inflate turnover figures, and subsequently written off by the respondent's Board of Directors. Given the fictitious nature of the debit notes, it was concluded that no valid excise duty could be charged on such documents. Consequently, the appellate tribunal agreed with the Commissioner's decision, dismissing the appeal for lack of merit.

In conclusion, the appellate tribunal upheld the Commissioner's ruling, emphasizing that excise duty is not contingent upon the realization of amounts related to debit notes, but rather on the manufactured and cleared goods. Since the debit notes were deemed fictitious and issued for the purpose of inflating turnover figures without actual realization, the imposition of excise duty on such documents was deemed invalid, leading to the dismissal of the Revenue's appeal.