2019 (5) TMI 138 - AT - Central Excise

Valuation - some customers had paid excess amount than the actual purchase value; that such excess payment was not adjusted in subsequent years - inclusion of such excess value in the assessable value of goods - Section 4(3)(d) of the Central Excise Act 1944 - HELD THAT - The appellants have discharged duty liability on the entire assessable value. However the customers on the course of delay in dispatch of the goods have held back certain amounts as Liquidated damages. On negotiation such held back amounts were paid to the appellant - There cannot be any allegation that the appellants have not discharged the total duty liability that was required to be paid at the time of clearance of the goods. The allegation of short-payment of duty is unjustified. This being so the impugned order cannot sustain - appeal allowed - decided in favor of appellant.

Issues:
1. Whether excess amount collected from customers should be treated as additional consideration for excise duty calculation.
2. Whether the appellant is liable to pay excise duty on the excess amount collected.
3. Whether the demand for short-paid duty liability along with interest and penalty is justified.
4. Whether the appellant's argument regarding liquidated damages and miscellaneous income is valid.
5. Whether the appellant had discharged the central excise duty liability appropriately.

Issue 1:
The department contended that excess amounts collected from customers should be considered as additional consideration for calculating excise duty under Section 4(3)(d) of the Central Excise Act, 1944. It was argued that the excess payments not adjusted in subsequent years should be included in the transaction value. The Show Cause Notice proposed a demand for short-paid duty liability along with interest and penalties.

Issue 2:
The appellant argued that they had paid excise duty on the entire amount at the time of removal of goods. They presented a scenario where customers retained certain amounts as liquidated damages due to delays in supply. The appellant maintained that they had discharged the total duty liability required at the time of goods clearance, and the allegation of short-payment of duty was unjustified.

Issue 3:
The original authority and Commissioner (Appeals) upheld the demand for short-paid duty liability, interest, and penalties. However, the Tribunal found that the appellant had discharged the central excise duty liability on the entire assessable value shown in the invoice. As there was no dispute regarding the assessable value, and the appellant had received the held-back amounts from customers after negotiations, the allegation of short-payment of duty was deemed unjustified.

Issue 4:
The appellant's argument regarding liquidated damages and miscellaneous income was crucial. They presented a sample transaction where a customer initially paid a lower amount than the billed value, with subsequent payments made at later dates. The appellant contended that such amounts were booked under Miscellaneous Income and that demanding duty liability on these amounts was incorrect.

Issue 5:
The Tribunal concluded that the appellant had discharged the total duty liability required to be paid at the time of goods clearance. There was no evidence of negotiation for additional amounts over and above the assessable value. The demand for short-paid duty liability was deemed unjustified, and the impugned order was set aside, allowing the appeal with consequential relief as per the law.

This judgment clarifies the treatment of excess amounts collected from customers in excise duty calculations, emphasizing the importance of assessing whether the total duty liability was appropriately discharged at the time of goods clearance. The Tribunal's decision highlights the significance of considering all relevant factors, such as liquidated damages and miscellaneous income, in determining excise duty obligations to ensure a fair and accurate assessment of duty liabilities.

← Previous Next →