2018 (2) TMI 526 - AT - Central Excise

Tribunal overturns recovery of cess on imported goods, rejects penal consequences

The tribunal allowed the appeal by M/s Praveen Pharma Pvt Ltd, setting aside the recovery of cess passed on to customers through invoices for imported ... CENVAT credit on cess - Held that: - Law does not require the cess to be a charge on the profits of the appellant. It is also strange that this transaction has been described as passing on of cess and, compounding of such misdescription with penal consequences, is not contemplated in law - Inclusion of the cess in the consideration for sale price of imported goods is commercially sound and it is not the place of the tax authorities to intervene in determining the composition of such consideration - appeal allowed - decided in favor of appellant. Issues: Recovery of cess passed on to customers, inclusion of cess in invoices, availing CENVAT credit, intervention of tax authorities, passing on of cess, penal consequencesThe judgment involved a case where M/s Praveen Pharma Pvt Ltd was pursued for the recovery of a cess amount passed on to customers through invoices for imported goods. The proceedings were initiated based on the inclusion of the cess amount in the dealer invoices, enabling customers to avail CENVAT credit, which was deemed unauthorized. The original authority confirmed the recovery of the amount, interest, and imposed a penalty. The Commissioner of Central Excise (Appeals) upheld this decision, leading to the appeal.During the appeal, the appellant's consultant presented some invoices showing the levies, including cess, separately. However, no evidence was found that the customers availed credit based on these invoices. The tribunal noted that including cess in the sale price of imported goods is commercially sound and does not grant customers the right to avail credit beyond what is permitted by law. The tribunal emphasized that tax authorities should not interfere in determining the composition of the sale price, and the law does not mandate the cess to be a charge on the appellant's profits. The tribunal criticized the characterization of the transaction as 'passing on of cess' and highlighted that penal consequences for such misdescription are not supported by law.Ultimately, the tribunal found that the lower authorities' order was flawed and allowed the appeal, setting aside the previous decision and providing consequential relief to the appellant. The judgment concluded by stating the decision was pronounced in court, highlighting the resolution of the case in favor of the appellant.