Central excise valuation excludes only sales tax or VAT actually paid or payable; deeming fictions do not widen the deduction.

For central excise valuation, only sales tax or VAT actually paid or actually payable to the State is excludible from transaction value under Section 4 of the Central Excise Act, and a State-law deeming fiction cannot by itself expand that exclusion. On the facts discussed, retained tax under a deferment scheme was therefore includible in assessable value. The text also notes that extended limitation and penalty require specific findings of suppression or wilful evasion; where the issue is one of legal interpretation and invoices disclose the tax components, those consequences may not survive. It further states that differential duty may be reworked on a cum-duty basis where duty was not separately collected.

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Issues: (i) Whether the amount of sales tax or VAT retained by the assessee under the State deferment scheme was excludible from the assessable value under Section 4 of the Central Excise Act, 1944; (ii) Whether the demand for the extended period and the penalty were sustainable; (iii) Whether the differential duty was to be computed on a cum-duty basis.

Issue (i): Whether the amount of sales tax or VAT retained by the assessee under the State deferment scheme was excludible from the assessable value under Section 4 of the Central Excise Act, 1944.

Analysis: The dispute turned on the meaning of transaction value after the 2003 amendment and on whether the deeming fiction in the Haryana Value Added Tax Act, 2003 could control central excise valuation. The retained portion of tax was collected from buyers but was not actually paid to the State exchequer, and the Court applied the principle that only sales tax or VAT actually paid or actually payable to the State is deductible from transaction value. The State law deeming full discharge on payment of half the deferred tax could not be automatically extended to the excise valuation provision.

Conclusion: The retained sales tax or VAT was includible in the assessable value and the assessee failed on the merits of valuation.

Issue (ii): Whether the demand for the extended period and the penalty were sustainable.

Analysis: The demand for the extended period was not supported by adequate findings of suppression or wilful intent to evade duty. The disputed valuation issue was one of legal interpretation, the tax components were reflected in invoices, and there was no positive evidence of deliberate suppression. In the absence of the requisite ingredients for invoking the extended period, the penalty also could not survive.

Conclusion: The extended-period demand and the penalty were set aside.

Issue (iii): Whether the differential duty was to be computed on a cum-duty basis.

Analysis: Since no excise duty had been separately collected on the disputed component, the duty computation had to proceed on the basis that the amount formed part of the price charged to buyers. The assessee was therefore entitled to have the differential duty worked out on a cum-duty basis.

Conclusion: Cum-duty computation was allowed for determining the differential duty liability.

Final Conclusion: The valuation demand was upheld on merits, but the larger-period demand and penalty were invalidated, and the duty was directed to be reworked on a cum-duty basis.

Ratio Decidendi: For central excise valuation, only sales tax or VAT actually paid or actually payable to the State is excludible from transaction value, and a State-law deeming fiction cannot by itself enlarge that exclusion under the Central Excise Act.

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