2013 (9) TMI 310 - AT - Central Excise

Appeal allowed, excess tax not assessable, demand time-barred, no evasion intent.

The appeal was allowed, setting aside the impugned order. The majority opinion concluded that the excess recovery of sales tax did not form part of the ... Valuation - inclusion of excess amount of sales tax recovered - Duty Demand Confirmed or Not - The appellant paid 21.6% towards sales tax and collected additional amount because of adoption of cum sales tax value of the petroleum products received by them to calculate sales tax amount recoverable under heading “other charges” -Held that:- it is seen that said definition, the exclusion of duty of Excise and other taxes actually paid or actually payable, would be applicable only in the cases where the taxes collected are payable but not paid. That is not the issue in the case before me. In view of the above, reliance placed by ld. SDR on the definition of transaction value will not carry the case of Revenue any further. Relying upon M/s. Baroda Electric Meters Ltd. v. Collector of Central Excise [1997 (7) TMI 126 - SUPREME COURT OF INDIA] and M/s. Gujarat Guardian Ltd. v. CCE, Surat [2005 (4) TMI 428 - CESTAT, MUMBAI]- Excess recovery of freight or of insurance amount collected from the buyers than the amount actually incurred was not required to be added in the assessable value - Even if the appellants have recovered excess amount from buyers by calculating the Sales Tax liability on the assessable value, they were not liable to pay any amount on that ground to Revenue, as such excess recovery was on account of non-manufacturing activities and have no nexus to the price of the manufactured goods - Any amount recovered/attributable to other expenses i.e. sales tax was not includible in the transaction value and excess recovery had to be considered as profit on non-manufacturing activities. Bar of Limitation - The issue was capable of two different interpretations and if the appellant have re-calculated the Sales Tax on the total which value including the value of Sales Tax, which calculations have come on higher side - the appellant cannot be held guilty of any suppression - The issue was definitely a bona fide dispute as regards interpretation of the relevant valuation provisions - Following M/s. Padmini Products v. CCE [1989 (8) TMI 80 - SUPREME COURT OF INDIA] and COLLECTOR OF CENTRAL EXCISE Versus CHEMPHAR DRUGS & LINIMENTS [1989 (2) TMI 116 - SUPREME COURT OF INDIA] - the demand was barred by limitation - The confirmation was required to be set aside along with setting aside of confirmation of demand. Intention of the Appellant - the appellants were showing the amount which has been collected by them in form of sales tax on the Invoice. - The appellant was a Public Sector Undertaking and cannot be said to have any mala fide intention to evade duty - This stand held in the case of M/s. Hindustan Petroleum Corpn. Ltd. v. CC, Kolkata [2000 (12) TMI 191 - CEGAT, KOLKATA] was fully applicable to them - The imposition of penalty upon them in any case was not justified. Difference of Opinion - Member (Technical) was not in consonance with the Member (Judicial) Therefore he delivered the separate Judgement with his Reasoning – As majority was into the favour of Assessee the relief was granted - Decided in favour of Assessee. Issues Involved:1. Confirmation and appropriation of duty demand.2. Inclusion of excess sales tax in the assessable value.3. Allegation of suppression or mis-statement with intent to evade duty.4. Invocation of the extended period of limitation.5. Imposition of interest and penalty.Issue-wise Detailed Analysis:1. Confirmation and Appropriation of Duty Demand:The core issue was whether the show cause notice (SCN) pertained solely to interest and penalty or also included the confirmation and appropriation of the duty already deposited by the appellant. The Member (Judicial) asserted that the SCN demanded the confirmation of duty, while the Member (Technical) believed it was limited to interest and penalty. Upon review, it was concluded that the SCN indeed proposed the confirmation and appropriation of the duty demand, necessitating an order on duty confirmation.2. Inclusion of Excess Sales Tax in the Assessable Value:The appellant collected more sales tax from its clients than what was paid to Reliance Industries Ltd. The Member (Judicial) held that such excess recovery was not part of the assessable value, drawing on precedents like Baroda Electric Meters Ltd., which stated that excess amounts collected for non-manufacturing activities (like freight or insurance) should not be included in the assessable value. The Member (Technical) disagreed, suggesting that the appellant's actions indicated an intention to evade duty. The majority opinion, however, concluded that the excess sales tax recovery was a profit on non-manufacturing activities and not part of the assessable value.3. Allegation of Suppression or Mis-Statement with Intent to Evade Duty:The Member (Technical) found the appellant guilty of suppression, arguing that a company like IOCL should be aware of legal requirements and had not disclosed the collection of other charges. Conversely, the Member (Judicial) and the third member found no evidence of suppression or mis-statement, noting that the excess charges were shown on the Central Excise invoices and the issue was discovered during routine audits. The majority opinion held that the appellant, being a Public Sector Undertaking, did not have the intent to evade duty.4. Invocation of the Extended Period of Limitation:The extended period of limitation was invoked by the Commissioner, citing suppression of facts. The Member (Judicial) argued that the demand was time-barred since the excess sales tax recovery was disclosed in invoices and the issue was discovered during audits. The majority opinion agreed, stating that there was no suppression or mis-statement with intent to evade duty, thus the extended period could not be invoked.5. Imposition of Interest and Penalty:The Member (Technical) upheld the imposition of interest and penalty, while the Member (Judicial) argued against it, citing the absence of mala fide intent. The third member concurred with the Member (Judicial), noting that the appellant, being a Public Sector Undertaking, could not be presumed to have the intent to evade duty. Consequently, the majority opinion held that the imposition of interest and penalty was unjustified.Conclusion:The appeal was allowed, setting aside the impugned order. The majority opinion concluded that the excess recovery of sales tax did not form part of the assessable value, the demand was time-barred, and there was no suppression or mis-statement with intent to evade duty. Therefore, the appellant was not liable for the duty demand, interest, or penalty.