2007 (10) TMI 6 - SC - Central Excise

Supreme Court Upholds Excise Duty Demand for Incorrect TOT Deduction

The Supreme Court dismissed both civil appeals, upholding the demand for differential excise duty due to the incorrect TOT deduction rate claimed by the ... Deduction - Department contended that respondent is wrongly availed larger percentage of TOT for the purpose of assessable value - Held that department contention was not correct and set aside Issues Involved:1. Deduction of Turnover Tax (TOT) at 2% vs. 0.5%.2. Interpretation of the term 'payable' in Section 4(4)(d)(ii) of the Central Excise Act, 1944.3. Alleged suppression of facts by the assessee.4. Applicability of extended period of limitation for demand.Detailed Analysis:1. Deduction of Turnover Tax (TOT) at 2% vs. 0.5%:The primary issue revolves around whether the assessee was entitled to deduct TOT at the rate of 2% or 0.5% when calculating the assessable value for excise duty purposes. The assessee claimed a deduction at 2% based on the general rate of TOT in Gujarat, while the Department contended that the correct rate should be 0.5% for sales in backward areas as per the Gujarat Government's Notification dated 19.10.1993.2. Interpretation of the term 'payable' in Section 4(4)(d)(ii) of the Central Excise Act, 1944:The court examined the meaning of the word 'payable' within the context of Section 4(4)(d)(ii). The term is descriptive and must be understood in the context of the actual duty or tax liability at the time of clearance. The court emphasized that only the effective rate of duty, which considers any applicable exemptions, should be deducted from the assessable value.3. Alleged suppression of facts by the assessee:The Department issued a show cause notice alleging that the assessee had suppressed the fact that there were two types of sales (backward area and normal area) with different TOT rates. The assessee claimed deductions at the higher rate of 2% across all sales, thereby lowering the assessable value and evading excise duty. The court found that the assessee was aware of the dual rates but did not disclose this in their price declaration, thus justifying the Department's demand for differential duty.4. Applicability of extended period of limitation for demand:The Tribunal had noted that after the assessee informed the Department of the dual TOT rates on 14.1.1997, there was no suppression of facts. Therefore, any demand for the period after this date was considered beyond the limitation period. The Supreme Court upheld this finding, agreeing that the Department could not claim suppression after being informed by the assessee.Conclusion:The Supreme Court dismissed both the civil appeals filed by the assessee and the cross appeals filed by the Department. The court confirmed the demand for differential excise duty due to the wrongful claim of TOT deduction at 2% instead of 0.5% and upheld the Tribunal's finding that there was no suppression of facts after 14.1.1997, thereby limiting the demand to the period before this date. The appeals were dismissed with no order as to costs.