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TMI Blog2011 (7) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... OF INDIA) held that the circulars issued by the CBEC are binding on the department and the department is precluded from challenging the correctness of the circulars even on the basis that the same is inconsistent with the statutory provision - Decided against the revenue - E/1983/06, E/149/07, E/79/08, E/628/08, E/324/09, E/414/09, E/1028/09, E/1278/09, E/873/10 - - - Dated:- 28-7-2011 - Mr. P.G.Chacko, Mr. P.R. Chandrasekharan, JJ. Appearance: Shri. Bharat Raichandani, Prakash Shah, Ms.Padmavati Patil, J.H. Motwani, Advocate for appellant Shri.K.M.Mondal, Consultant P.K.Agarwal, JCDR, for respondent Per: P.R.Chandrasekharan 1. There are nine appeals, which are under consideration in this case. As all these appeals involve the same issue they are taken up together for disposal. The details of the appeals, parties involved, period of dispute, amount of duty involved, and other relevant particulars are given in the table below:- S.No. Appeal No. Name of the appellant Period of dispute Date of Show cause notice Amount of sales tax deferred (in Rs.) Sales tax pre-paid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was Rs. 1,30,51,178/-, demand for the period of March, 98 to Oct.2001 amounting to Rs. 62,77,368/- was held as time barred. 8. E/1278/09 DGP Hinoday Industries Ltd., Pune 2004-05 to 2005-06 28-2-2007 9,79,54,328/- 2,63,13,511/- 7,17,40,817/- 1,17,08,101/- 15-9-09 CCE, Pune 9. E/873/10 Prima Paper s Engg. P Ltd., Puneer April 02 to March 07 2007-08 22-8-07 12-9-08 8,84,96,134/- 2,90,86,689/- 5,94,09,445/- 96,81,420/- (82,74,501 +14,06,919) 17-2-2010 CCE, Pune 1998 Power Generation Promotion Policy - Sales tax deferral scheme 2. The common issue involved in these appeals is that all the appellants mentioned in the Table above applied for eligibility certificates for new units for sales tax incentive under Sales Tax Incentive 1988 Scheme or Part-I of 1993 packages scheme as notified by the Government of Maharashtra Resolution dated 30/09/88 or 1998 Power Generation Promotion Policy - Sales Tax Deferral Scheme. The appellants were also issued with the eligibility certificates by SICOM Ltd./ MEDA, Pune (implementing agencies unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They found that the appellants made payment of sales tax at NPV, which was lower than the deferred sales tax and which was collected from the customers. The difference between the actual sales tax collected from the customers and the payment made at NPV was shown as 'gain on extinguishment of deferment liability' by the appellants. It was also noticed that the appellants suo motu did not disclose these facts to the department. Since the transaction value as defined under Section 4 (3) (d) of the Central Excise Act, 1944, excludes only the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods, the department was of the view that the difference between the sales tax collected from the customers and the sales tax paid to the state authorities at NPV should be treated as an additional consideration received from the buyers of the goods and, therefore, they should form part of the transaction value. Accordingly, the department issued show-cause notices as detailed in the table above alleging suppression of facts and demanding differential duty invoking the extended period of time under the proviso to Section 11A (1) of the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstead of paying the same in deferred installments. Thus, there was no exemption from payment of sales tax granted by the Government of Maharashtra. 3.2 Further, as is clear from the proviso to said section 38 (4), by immediately paying the NPV, the appellants were deemed to have paid the entire amount of sales tax collected by them. The deeming provision under the proviso to Section 38 of the BST Act is a legal fiction accorded by law and the same cannot be ignored for the purpose of determining the assessable value under Section 4 of the Central Excise Act, and there are any number of judicial pronouncements, which lay down that statutory fiction accorded by a legal provision have to be given full effect and they rely on the following judgements in support of their contention: a) PEK Kalliani Amma Vs. K. Devi (1996) 4 SCC 76 b) State of Bombay Vs. Pandurang, Vinayak AIR 1953 SC 244 c) CIT Vs Bai Vina 1965 (58) ITR 100 (Guj) d) UOI Vs. Jalyan Udyog 1993 (68) ELT 9 (SC) In the light of these judgements, they contend that the department can not raise an argument saying that though payment of NPV would discharge the appellants from their sales tax liability, but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spl. Steel Ltd., Vs. CCE, Jaipur, reported in 2006 (205) ELT 361 (Tri-Delhi); (4) CCE, Jaipur-II Vs. Shruti Synthetics Ltd., reported in 2005 (180) ELT 275 (Tri-Delhi); and (5) CCE, Haldia Vs. Eastern Setcrete Pvt. Ltd., reported in 2008 (223) ELT 646 (Tri-Kolkata). It is further submitted that the judgement of the Tribunal has been upheld by the Kolkata High Court in the case of Eastern Setcrete Pvt Ltd. In the light of the submissions, it is their contention that deferred sales tax payable by them at the time of removal of the goods ought to be permitted as a deduction while determining the transaction value. notwithstanding the fact that subsequently under a scheme provided by the Government they have discharged the sales tax liability at NPV. 3.6 The Ld. Counsel also points out that in many cases the demands are also time barred and demands have been issued far beyond the extended period of five years and such demands are unsustainable in law. 4. The Ld. Special Consultant for the department on the other hand would contend as follows: 4.1 As regards the reliance placed by the appellants in the case of Super Syncotex (India) Ltd., Maruti Udyog Ltd., Pratap Rajasth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Section 4 (4) (d) (ii) would not be permissible. Similarly, in the case of Mewar Textile Mills Vs. CCE, Jaipur, 2000 (117) ELT 622 (Tri.) this Tribunal had held that when exemption has been granted from sales tax, the amount so collected as sales tax is includable in assessable value because in such a situation sales tax is not payable. In the case of Asst. Collector of Central Excise Vs. Bata India Ltd., 1996 (84) ELT 164 (SC), the hon'ble apex Court had held that there cannot be any question of deduction of duty payable on the goods from the wholesale price when no duty has been actually been included in the wholesale price. In the light of the above submissions, the department contends that the appellants are not entitled for the deduction towards the sales tax amount, which they have not actually paid to the sales tax authorities under the sales tax deferral scheme. In other words, it is the department's contention that the differential amount of sales tax i.e., sales tax payable under the deferral scheme minus the NPV value paid by the appellants, has to be treated as an additional consideration for sale of goods and therefore, ought to be included in the assessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax payable and instead of the cash incentive being paid to the manufacturer, is credited to State Govt. account as payment towards sales tax by the manufacturer. In such a situation sales tax is also considered payable by the assessee within the meaning of the provisions of Section 4(4) (d)(ii) of the Central Excise Act, 1944. Therefore, sales tax is deductible from the wholesale price for determination of assessable value for levy of Central Excise Duty in category of cases mentioned in Para 1(ii) (iii) above. 5. The advice of Ministry of Law in the matter has been accepted by the Board and is enclosed for information. From the above circular, it is clear that where sales tax is paid on a deferment basis or where an incentive equivalent to sales tax payable is granted, in both the situations, the sales tax payable is deductable from the wholesale price for determination of assessable value for levy of Central excise duty within the meaning of the provisions of Section 4 (4) (d) (ii) of the Central Excise Act, 1944 as it stood at the relevant time. 5.2 Similarly, the issue of abatement in respect of set-off on sales tax was again considered by the CBEC and the Board vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes is not paid at the time of transaction but paid subsequently, for example, sales tax payable under a deferment scheme. '. 5.5 A combined and harmonious reading of the above instructions make it more than abundantly clear that the consistent stand and understanding of the revenue has always been that the amount of sales tax paid or payable is permissible to be deducted irrespective of the fact whether the sales tax was paid immediately or on a deferred basis and irrespective of the fact whether incentives were provided by the State Government towards sales tax in any manner. 5.6 The provisions of Section 4 as they stood during the disputed period i.e. both prior to 01/07/2000 and after 01/07/2000 read as follows: Prior to 1-7-2000 SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall subject to the other provisions of this section, be deemed to be ' (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale. Explanatio. ................................. (e)................................. Rule 4 of the Central Excise (Valuation) Rules, 1975 further provided that ,- "The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of the removal of the goods, subject, to such adjustment on account of the difference in the dates of delivery of such goods and of the excisable goods under assessment as may appear reasonable to the proper officer.". With effect from 1-7-2000 SECTION [4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on such goods. Rule 7 of the Central Excise (Valuation) Rules, 2000 provides that ,- "Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises (hereinafter referred to as 'such other place') from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.". 5.7 A careful reading of the above legal provisions clearly indicates that much emphasis has been placed in the central excise law with regard to the concept of time and place of removal. The law very clearly provides that the value for the purposes of levy of excise duty has to be determined at the time and place of removal for delivery. So, while determining the value at the time and place of remov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he board's instructions cited supra also clearly points to this fact. The provision for payment of NPV towards discharge of deferred sales tax liability was introduced in the Bombay Sales Tax Act only in 2002 subject to certain terms and conditions. The said provisions as can be seen in para 2.1 above clearly states that the premature payment in place of tax deferred by an amount equal to NPV of the deferred tax can be availed by the sales tax assessee at his option and such payment shall be deemed to be in discharge of the total sales tax liability under the sales tax deferral scheme and the provisions has been introduced in the law in public interest. It would be also relevant to note that the changes in sales tax law made in November 2002, did not alter the rate of sales tax payable nor provided any exemption from payment of sales tax. The only consequence was that it provided an option to the eligible assessee to discharge the deferred sales tax liability by paying its Net Present Value (NPV). It is relevant to note that the said provision did not, in any way, reduce the deferred sales tax liability or amount. What the law provided was that it gave an option to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts make an amendment in the Sales Tax Act to the effect that the sales tax deferred under the scheme shall be treated as actually paid, such a deeming provision will meet the requirements of section 43B. 5. The Government of Maharashtra have by the Bombay Sales Tax (Amendment) Act, 1987, made the amendment accordingly. The Board have decided that where amendments are made in the sales tax laws on these lines, the statutory liability shall be treated to have been discharged for the purposes of section 43B of the Act. 6. The Commissioners of Income-tax may bring the contents of this circular to the notice of all the officers working under them.". As per the circular, if the sales tax laws contain a deeming provision to treat the payment of NPV as discharge of liability towards deferred sales tax, deduction under Section 43B will be allowed for the full amount of sales tax and NOT for the amount of NPV paid. The issue was also a subject matter of consideration in the case of Sulzer (India) Ltd. Vs. Jt. CIT, wherein a special bench of the ITAT ruled that, where a liability payable in the future is settled at NPV, no benefit or remission arises since the NPV represents the eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discharge the entire liability by paying a sum/amount equal to NPV of the deferred tax liability and on such payment the entire deferred tax liability is deemed to be discharged. Since the facts are totally distinct and distinguishable, the judgements relied upon by the Revenue has no relevance to the facts in hand and, therefore, the ratio of these judgements do not apply. 5.10 There are a few judicial pronouncements, which considered the issue of impact on the assessable value on account of changes which take place subsequent to the clearance of the goods and the ratio of these judgments has a bearing on the issues involved in the present case. In Indo Hacks Ltd., Vs. CCE, Hyderabad, reported in 1986 (25) ELT 69 (Tribunal), a three member Bench of this Tribunal considered the question whether subsequent reduction in prices after the clearance of the goods from the factory could impact the assessable value already determined. It was held that once the correct assessable value has been declared by the assessee and the goods cleared from the factory, any subsequent reduction in prices cannot be a matter of concern for the Central Excise in determining the correct assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration so as to form a part of the price. An appeal by the Revenue before the hon'ble apex Court against the said decision was dismissed by the hon'ble apex Court in CCE Vs. Triveni Engineering Industries, reported in 2009 (236) ELT A58 (SC). A perusal of the all the above judgments clearly indicate that the assessable value and the duty liability have to be determined at the time of the clearances of the goods. Once the assessable value is determined taking into account the various abatements permissible as provided for in the law, the question of re-determination of assessable value on account of changes that happened subsequent to the clearances, whether on account of changes in the law or otherwise will not be a cause for re-determination of assessable value. In the instant case, a certain amount of sales tax was payable under the sales tax laws when the goods was cleared from the factory and the same was a permissible reduction under the excise law. Much after the clearance of the goods, the sales tax laws were amended to provide for payment of net present value of the sales tax deferred in complete discharge of the sales tax liability. Such changes in sales tax liability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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