2025 (3) TMI 264 - AT - Central Excise

Valuation of Central Excise duty - inclusion of components like Royalty Stowing Excise Duty (SED) and Assam Land Tax in the assessable value - invocation of extended period of limitation - penalty - HELD THAT - As on date the issue as to whether Royalty is tax of not stands clearly held against the appellant in view of the 9 Member Supreme Court decision in the case of MINERAL AREA DEVELOPMENT AUTHORITY ANR. VERSUS M/S STEEL AUTHORITY OF INDIA ANR ETC. 2024 (7) TMI 1390 - SUPREME COURT (LB) . Therefore on merits the appellants do not have any case. Accordingly we hold that the Royalty component is required to be added to arrive at the Assessable Value. We dismiss the appeal on merits to this extent in respect of Royalty component. he levy is being termed as Duty of Excise and also being treated as such. It is also not disputed that in the case of the goods in question the Stowing Excise Duty is being paid by the appellant. The Revenue cannot take a contorted and narrow view that only when the Duty of Excise is paid as Central Excise Duty such exclusion is available. It is to be noted that the word used is duty of excise along with sales tax and other taxes which would clarify that if these are paid to State Govt or to any other agency also the transaction value should exclude the same. Assam Land Tax - HELD THAT - The very word used therein is Tax. As we have observed above the Section 4 (3) (d) when speaking of Tax speaks of Central Govt and State Govt Taxes. Hence we hold that the Assam Land Tax is not required to be included while arriving at the Assessable Value. Accordingly we set side the confirmed demand on account of the Assam Land Tax component. Time limitation - HELD THAT - Admittedly the appellant is a reputed Public Sector Undertaking having no necessity to indulge in any suppression with an intent to evade Excise Duty payment. They have been paying the Excise Duty on the AV arrived at by them as per their interpretation and filing their Returns. Hence no case of suppression has been made out by the Revenue so as to invoke the extended period provisions. Levy of penalty - HELD THAT - When the penalty under Section 11AC is waived on the ground that no case of suppression has been made out even the duty demand would not legally sustain. There cannot be a case where it is held that there is no suppression but only the penalty is dropped but the Duty is confirmed. Both the Duty as well as penalty are required to be dropped if the case of suppression is not made out. Conclusion - i) The demand on account of Royalty component sustains. ii) The demand on account of Stowing Excise Duty and Assam Land Tax components gets set aside. iii) The confirmed demand towards the extended period stands set aside and the demand stands allowed on account of time- bar to this extent. Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the components of Royalty, Stowing Excise Duty, and Assam Land Tax should be included in the assessable value for excise duty purposes under Section 4(3)(d) of the Central Excise Act, 1944.
• Whether the extended period for demand under Section 11A of the Central Excise Act, 1944, is applicable, given the appellant's practices and the alleged absence of suppression or intent to evade duty.

2. ISSUE-WISE DETAILED ANALYSIS

Royalty Component

• Relevant legal framework and precedents: The appellant relied on the 1990 Supreme Court decision in India Cements, which held that royalty is a tax. However, subsequent judgments, including the 2004 Kesoram Industries case and the 2024 Mineral Area Development Authority case, clarified that royalty is not a tax.
• Court's interpretation and reasoning: The Tribunal concluded that the 2024 Supreme Court decision, which is retrospective, prevails. Thus, royalty is not considered a tax and must be included in the assessable value.
• Application of law to facts: The Tribunal dismissed the appellant's argument based on the India Cements case, as the prevailing legal interpretation requires inclusion of royalty in the assessable value.
• Conclusions: The appeal fails concerning the royalty component, as it must be included in the assessable value.

Stowing Excise Duty Component

• Relevant legal framework and precedents: The Coal Mines (Conservation and Development) Act, 1974, describes the levy as a "Duty of Excise." Section 4(3)(d) of the Central Excise Act excludes duties of excise from the transaction value.
• Court's interpretation and reasoning: The Tribunal noted that the levy is treated as a "Duty of Excise" and should be excluded from the assessable value, aligning with the statutory language.
• Conclusions: The Tribunal set aside the confirmed demand concerning the Stowing Excise Duty, allowing the appeal on this component.

Assam Land Tax Component

• Relevant legal framework and precedents: The Assam Taxation (on specified lands) Act, 1990, levies this tax, which falls under the exclusions in Section 4(3)(d) of the Central Excise Act.
• Court's interpretation and reasoning: The Tribunal recognized the Assam Land Tax as a tax within the meaning of Section 4(3)(d) and excluded it from the assessable value.
• Conclusions: The Tribunal set aside the demand concerning the Assam Land Tax, allowing the appeal on this component.

Time-Bar and Extended Period of Demand

• Relevant legal framework and precedents: Section 11A of the Central Excise Act allows for an extended period of demand in cases of suppression, fraud, or wilful misstatement.
• Court's interpretation and reasoning: The Tribunal found no evidence of suppression or intent to evade duty, as the appellant had been transparent and compliant in its filings and payments.
• Key evidence and findings: The Adjudicating Authority had already concluded that there was no case for penalty under Section 11AC due to the interpretational nature of the dispute.
• Conclusions: The Tribunal set aside the confirmed demand for the extended period, ruling it legally unsustainable.

3. SIGNIFICANT HOLDINGS

• Core principles established: The Tribunal emphasized the importance of adhering to the prevailing legal interpretations by the Supreme Court, particularly regarding the classification of royalty.
• Final determinations on each issue:
  • The demand concerning the royalty component sustains, and the appeal fails in this regard.
  • The demands concerning Stowing Excise Duty and Assam Land Tax are set aside, with the appeal allowed for these components.
  • The extended period demand is set aside due to the absence of suppression, with the appeal allowed on this basis.
• Verbatim quotes of crucial legal reasoning: "When the penalty under Section 11AC is waived on the ground that no case of suppression has been made out, even the duty demand would not legally sustain."

The Tribunal directed the jurisdictional authority to verify and quantify the demand for the normal period, allowing the appellant to submit necessary documents for proper assessment.