2019 (4) TMI 1536 - AT - Central Excise

Tribunal Upholds Duty Demand with Sales Tax Inclusion, Penalties Overturned

The Tribunal upheld the demand for a differential duty based on the inclusion of Sales Tax retained by the appellants in the assessable value of goods ... Valuation - inclusion of amount of Sales Tax retained by the appellants in assessable value - HELD THAT:- The amount of Service Tax retained by the appellants in a particular financial year is required to be included in the total aggregated value of clearances made in the said financial year. Duty is payable on the value of clearances, in excess of ₹ 1 crore limit specified in Notification No. 08/2003. For the clearances made after crossing the said limit, duty becomes payable at specific rates to be determined on the basis of the quantum of clearances made - reliance placed in the decision in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II VERSUS M/S. SUPER SYNOTEX (INDIA) LTD. AND OTHERS [2014 (3) TMI 42 - SUPREME COURT]. CBEC has issued a circular No. 1063/2/2018-CX dated 16/02/2018, in which, among others, the issue regarding inclusion of sale tax incentive amount in the value has been clarified. The Circular further clarified that the demand in such cases is to be restricted to the normal period. The differential duty, if any, is to be held as payable only for the period falling within the normal time limit. The extended time limit will not be available to Revenue to raise such demand. We direct the Original Adjudicating Authority to re-quantify the demand within the normal time limit - penalty set aside. Appeal allowed in part. Issues:Challenge to demand for differential duty based on inclusion of Sales Tax amount in assessable value of goods manufactured and cleared.Analysis:The appellants, manufacturers of Portland cement, availed the benefit of Small Scale Industry Exemption under Notification No. 08/2003 during the period 2004 to 2006-07. The dispute arose as the Revenue contended that the Sales Tax retained by the appellants should be considered as a component of value, leading to a demand for differential duty. The Commissioner (Appeals) upheld this demand, resulting in the present appeals challenging the differential duty. The appellants argued that since the duty on cement is specific in nature, the retention of sales tax should not affect the duty calculation. However, in absence of representation from the appellants, the Revenue relied on Supreme Court judgments in similar cases to support their stance.The Tribunal noted the Supreme Court's decisions in cases like Super Synotex India Ltd. and Maruti Suzuki India Ltd., which established the inclusion of Sales Tax retained by manufacturers in the assessable value of goods cleared. Following this legal position, the Tribunal concluded that the Sales Tax amount retained by the appellants must be included in the total aggregated value of clearances for the financial year. Duty becomes payable on clearances exceeding the exemption limit, and the specific duty rates apply accordingly. Additionally, a circular issued by the CBEC clarified the inclusion of sales tax incentive amount in the value, referencing relevant court decisions and limiting the demand to the normal time period.Based on the legal precedents and circular guidance, the Tribunal held that any differential duty payable should be restricted to the normal time limit, barring the Revenue from raising demands beyond that period. The Original Adjudicating Authority was directed to re-quantify the demand within this time frame. Notably, in the absence of justification, the Tribunal set aside the imposition of penalties in these cases. Consequently, the appeals were partly allowed, providing relief to the appellants in terms of the penalty imposition.