2024 (8) TMI 87 - AT - Central Excise

Rejection of the appellant s application towards fixation of special rates - duty exemption on the value addition - benefit of N/N. 20/2007-CE dated 25/4/2007 - valuation of Aerated Water - Applicability of Section 4A valuation for goods falling under Chapter 22 - whether discounts and incentives will have to be removed from the total turnover to arrive at the net turnover? - HELD THAT - N/N. 20/2007-CE dated 25/4/2007 specifies that for the goods covered under Serial No. 16, the minimum value addition shall be to the extent of 36%.This Notification grants Excise Duty exemption for this value addition of 36%. In terms of Para 3(1), if the value addition is more than 115% of this rate, the assessee can seek fixation of special rate. In this case, in order to be eligible for fixation of special rate, the value addition should be 41.4% (being 115% of 36%). Even after considering both VAT amount and discount as not part of the turnover, still the turnover comes to Rs. 52,29,41,710, whereas the appellant/Chartered Accountant has taken the turnover as Rs. 52,85,90,385/-. Based on their figure of Rs. 52,85,90,385/-, the appellant has arrived at the figure of value addition of 91.57%. If the turnover is considered as 52,29,41,710/-, still, the value addition would be more than 85%, whereas the value addition required in this case is to the extent of 41.4%. Rejection of turnover on account of discount - HELD THAT - There are no merits in the arguments of the appellant. It is on record that the appellants have given the discount to the buyers in the same year and as a matter of fact the Chartered Account has removed this amount while arriving at the net turnover. Therefore, the Adjudicating Authority was correct in removing the discount/incentive amount from the total sales so as to arrive at the net sales turnover. The goods in question Aerated Water fall under Chapter 22. In terms of Notification No. 49/2008-CE (NT) dated 24/12/2008, the goods are subjected to Section 4A valuation. As per Section 4A Valuation, the Excise Duty is required to be paid based on the abatement given as a percentage of Retail Sale Price. Therefore, the provisions contained in Section 4 and Valuation Rule 2000 cannot be applied to arrive at the transaction value - even the Chartered Accountant has removed this amount, from the total turnover to arrive at the Valuation @ 91.57%. Hence, the appellant s arguments for including the VAT amount for arriving at the net turnover, cannot be accepted. Even if the turnover figure given by the appellant is different from the figure arrived at as per above calculation, still the value addition is likely to be more than 85%. Therefore, the matter remanded to the Adjudicating Authority to consider these aspects and arrive at the correct value addition. If it is found that the value addition is more than 41.4%, the request of the appellant towards fixation of special rate should be entertained. Appeal disposed off.

Summary

Issues involved:
1. Duty exemption eligibility based on value addition under Notification No. 20/2007.
2. Rejection of application for special rate by the Adjudicating Authority.
3. Treatment of discounts and incentives in turnover calculation.
4. Treatment of VAT under The Assam Industries (Tax Remission) Scheme, 2005.
5. Applicability of Section 4A valuation for goods falling under Chapter 22.
6. Correct calculation of value addition for excise duty exemption eligibility.

Issue 1: Duty exemption eligibility based on value addition under Notification No. 20/2007:
The judgment revolves around the eligibility criteria for duty exemption under Notification No. 20/2007, specifying a minimum value addition of 36%. The appellant claimed a value addition of 91.51%, well above the required threshold. The Tribunal analyzed the provisions of the Notification and the value addition calculation submitted by the appellant to determine eligibility for a special rate.

Issue 2: Rejection of application for special rate by the Adjudicating Authority:
The Adjudicating Authority had rejected the appellant's application for a special rate despite the claimed value addition exceeding the prescribed limit. The Tribunal reviewed the arguments presented by both sides, including case laws cited by the appellant, to assess the correctness of the rejection and whether the appellant should be granted the special rate as requested.

Issue 3: Treatment of discounts and incentives in turnover calculation:
A significant aspect of the case involved the treatment of discounts and incentives in the turnover calculation. The appellant argued that the Adjudicating Authority erroneously deducted the incentive value from the turnover, impacting the value addition calculation. The Tribunal considered relevant case laws and accounting practices to determine the appropriate treatment of discounts and incentives in arriving at the net turnover.

Issue 4: Treatment of VAT under The Assam Industries (Tax Remission) Scheme, 2005:
The appellant operated under a beneficial VAT Scheme where 99% of the VAT was remitted by the State Government. The dispute arose regarding whether the VAT amount should be excluded from the turnover calculation. The Tribunal analyzed precedents and legal provisions to ascertain the correct treatment of VAT in determining the net turnover for duty exemption eligibility.

Issue 5: Applicability of Section 4A valuation for goods falling under Chapter 22:
The judgment addressed the applicability of Section 4A valuation for goods falling under Chapter 22, specifically 'Aerated Water.' The Tribunal examined the relevant provisions and valuation rules to determine the appropriate method for calculating excise duty based on the abatement percentage of the Retail Sale Price, considering the specific nature of the goods in question.

Issue 6: Correct calculation of value addition for excise duty exemption eligibility:
Ultimately, the Tribunal focused on ensuring the accurate calculation of value addition to determine the appellant's eligibility for excise duty exemption. By considering all aspects, including discounts, incentives, and VAT treatment, the Tribunal remanded the matter to the Adjudicating Authority to reevaluate the value addition calculation. If the value addition exceeded the required threshold, the appellant's request for a special rate should be entertained.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's decision-making process in addressing each aspect of the case.