2023 (11) TMI 363 - AT - Central Excise

Recovery of Central Excise Act with penalty - definition of transaction value in section 4(3)(d) of Central Excise Act, 1944 requires that any additional consideration would have to be added for the purpose of determination of duty liability or not - HELD THAT - It is clear from the facts and circumstances of the proceedings that the scheme did not involve retention of any amount on the part of the assessee. On the other hand, it entailed premature payment restricted to the present value, net discounting term for measuring the time value of the money. In effect, what was foregone by the State Government was merely the cost incurred by the assessee for not awaiting the appropriate date of payment for discharge of tax liability. A similar dispute had came up before the Tribunal in Uttam Galva Steels Ltd 2015 (10) TMI 1727 - CESTAT MUMBAI and it was held that When the goods are being cleared (i.e. time of removal) actual sales tax paid is nil but sales tax actually payable is the normal sales tax or what has been collected by the assessee from its customers. Among the terms actually paid or actually payable used in transaction value, actually paid is not relevant in the present set of appeals. What is relevant is actually payable. In view of the decisions of the Tribunal, relating to the peculiarity of the scheme which was prevailed insofar as the impugned order is concerned, the demand is set aside - appeal allowed.

Summary

Issues Involved:
1. Recovery of Rs. 7,16,470/- under section 11A of the Central Excise Act, 1944.
2. Imposition of penalty of like amount under section 11AC of the Central Excise Act, 1944.

Issue 1: Recovery of Rs. 7,16,470/- under Section 11A of the Central Excise Act, 1944

The appeal pertains to the recovery of Rs. 7,16,470/- under section 11A of the Central Excise Act, 1944. The appellant, M/s Rational Engineers Pvt Ltd, challenged the confirmation of the demand upheld by the original authority and the Commissioner of Central Excise (Appeals), Mumbai. The appellant argued that the issue was settled by the Tribunal in Commissioner of Central Excise, Raigad v. Uttam Galva Steels Ltd [2016 (331) ELT 261 (Tri.-Mumbai)] and Kinetic Engineering Ltd v. Commissioner of Central Excise, Pune, Nagpur, Nashik [2012 (283) ELT 229 (Tri.-Mumbai)], which distinguished the implications of remission based on 'net present value (NPV)' from other schemes for foregoing tax collected. The Tribunal noted that the scheme did not involve retention of any amount by the assessee but entailed premature payment restricted to the present value, net discounting term for measuring the time value of money.

Issue 2: Imposition of Penalty under Section 11AC of the Central Excise Act, 1944

The imposition of a penalty of like amount under section 11AC of the Central Excise Act, 1944, was also contested. The Tribunal referenced the decision in re Kinetic Engineering Ltd, which emphasized that the deduction towards sales tax is permissible based on the amount billed or charged from customers in accordance with the law, irrespective of whether the amount is retained by the assessee or incentives are given by the State Government. The Tribunal concluded that subsequent changes in sales tax law cannot impact the assessable value determined at the time of removal of goods.

Conclusion:

The Tribunal, considering the decisions in re Uttam Galva Steels Ltd and re Kinetic Engineering Ltd, set aside the demand and other detriments, allowing the appeal. The Tribunal emphasized that the scheme's peculiarity and the consistent legal interpretation support the appellant's position. The order was pronounced in the open court on 18/10/2023.