2024 (1) TMI 35 - AT - Central Excise

Sales tax concessions retained by manufacturer must be included in assessable value for excise duty calculation

M/s Hills Cement Company Ltd. Versus Commissioner of CGST & Central Excise, Shillong

CESTAT Kolkata ruled on excise duty valuation and penalty matters. The tribunal held that sales tax concessions retained by the appellant must be included ... Valuation/calculation of Excise duty - includability of the sales tax concession retained by the Appellant in the assessable value - inclusion of value of goods cleared under Section 4A for computing the duty payable for the normal period of limitation, or not - extended period of limitation - penalty. Valuation/calculation of Excise duty - includability of the sales tax concession retained by the Appellant in the assessable value - HELD THAT:- The issue is no more res integra as the Hon’ble Supreme Court 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], has held that the sales tax concession retained by the assesses is required to be added in the assessable value for the purpose of levy of Central Excise duty. By relying on the above decision of the Hon’ble Supreme Court, the sales tax concession retained by the Appellant is required to be added in the assessable value for the purpose of levy of Central Excise duty. Invocation of extended period of limitation - It is also contended that the value of goods cleared under Section 4A should not be included for computing the duty payable for the normal period of limitation - HELD THAT:- There are merit in the argument of the Appellant. The VAT incentive scheme is applicable only in respect of the goods cleared under Transaction Value as provided under Section 4 of the CEA, 1944. It is not applicable to the goods cleared under Section 4A. Hence, the contention of the Appellant is agreed upon that value of goods cleared under Section 4A should not be included for computing the duty payable for the normal period of limitation. Levy of penalty - HELD THAT:- The adjudicating authority has not given any proper finding for imposing penalty under Section 11AC. Accordingly, the penalty imposed under Section 11AC not tenable. Appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether the sales tax concession retained by an assessee is includable in the assessable value for the purpose of levying Central Excise duty. 2. Whether value of goods cleared under the Section 4A valuation method is required to be included when re-quantifying duty payable for the normal period of limitation. 3. Whether the extended period of limitation is invocable where (a) earlier judicial decisions created uncertainty about includability of sales tax concessions and (b) details of VAT collected/retained were reflected in audited accounts. 4. Whether penalty under Section 11AC of the Central Excises Act, 1944 is sustainable where (a) extended period is not invoked and (b) there is no positive act of suppression by the assessee. ISSUE-WISE DETAILED ANALYSIS Issue 1: Includability of sales tax concession in assessable value for Central Excise Legal framework: Assessable value for Central Excise duty is to include amounts retained by the assessee that are relevant to transaction value; valuation provisions of the Central Excise law govern addition of sales tax concessions to assessable value. Precedent treatment: The Supreme Court has held that sales tax concession retained by the assessee must be added to assessable value for levy of Central Excise duty. Tribunal and High Court decisions have variably treated the issue, creating prior uncertainty. Interpretation and reasoning: Applying the Supreme Court's authoritative ruling, the Court holds that sales tax concession retained by the assessee is required to be added to the assessable value. The Tribunal relies on the higher court's decision as controlling law and applies it to the facts. Ratio vs. Obiter: Ratio - the holding that retained sales tax concession is includable in assessable value is treated as binding law for the present controversy. Any prior contrary Tribunal views are considered displaced by the Supreme Court decision. Conclusion: Sales tax concession retained by the assessee is includable in assessable value for levy of Central Excise duty; demand for duty must be computed accordingly (subject to other adjustments in these proceedings). Issue 2: Exclusion of Section 4A clearances when re-quantifying duty for the normal period Legal framework: Valuation under the Central Excise Act differentiates between Transaction Value (Section 4) and the alternative method (Section 4A); statutory scheme and applicable incentive schemes may apply only to goods valued under Section 4. Precedent treatment: The Tribunal's prior decisions and the statutory scheme recognize distinctions between valuation methods; incentives tied to Transaction Value cannot be applied to Section 4A clearances. Interpretation and reasoning: The Tribunal finds that the VAT incentive scheme applies only to goods cleared under Transaction Value (Section 4) and not to those cleared under Section 4A. Therefore, values of goods cleared under Section 4A should not be included when computing duty for the normal period of limitation. Ratio vs. Obiter: Ratio - exclusion of Section 4A clearances from computation of duty for the normal period is a necessary legal adjustment in the re-quantification of demand and is applied to the facts. Conclusion: When re-quantifying duty for the normal period of limitation, the value of goods cleared under Section 4A must be excluded from the assessable value computation. Issue 3: Invocability of extended period of limitation in light of prior uncertainty and disclosure Legal framework: Extended period of limitation for demand is available where there is suppression of facts or fraud; absence of suppression or existence of bona fide uncertainty on law negates invocation of extended period. Precedent treatment: Earlier Tribunal decisions, High Court rulings and Supreme Court judgments have been considered; administrative guidance (Board Circular) accepted some higher court orders and clarified that extended period shall not be invoked where assessee could not be said to be at fault due to legal uncertainty. Interpretation and reasoning: The Tribunal observes that (a) prior judicial decisions conflicted on the point of includability, creating bona fide uncertainty, and (b) the assessee's audited accounts disclosed VAT collected and retained. In these circumstances, there is no positive act of suppression. Following the Board Circular and the reasoning that where there was no clarity the assessee cannot be said to be at fault, the Tribunal holds extended period is not invocable. Ratio vs. Obiter: Ratio - extended period not invocable where the assessee acted under legally uncertain circumstances and where relevant particulars were disclosed in audited records; this finding is dispositive of limitation and affects demand period. Conclusion: Extended period of limitation cannot be invoked in the present facts; demand must be confined to the normal period of limitation. Issue 4: Sustainment of penalty under Section 11AC where extended period is not invoked and no suppression found Legal framework: Penalty under Section 11AC may be imposed for suppression or mis-declaration resulting in duty shortfall; imposition requires positive findings of suppression or culpable conduct. Precedent treatment: Administrative Circulars and judicial rulings suggest that penalty should not be imposed where there was bona fide reliance on uncertain legal position and where disclosures were made to the department. Interpretation and reasoning: The adjudicating authority imposed penalty equal to the confirmed duty but did not record any proper finding of positive suppression. The Tribunal notes the existence of divergent Tribunal decisions earlier and that all material (VAT receipts/retention) was visible in audited financial statements. Given the lack of a specific finding of suppression and the accepted legal uncertainty, the Tribunal finds the penalty unsustainable. The Board Circular corroborates that extended period/penalty are not appropriate where the assessee cannot be faulted for legal uncertainty. Ratio vs. Obiter: Ratio - penalty under Section 11AC is set aside because there is no evidence of suppression and the extended period (which might justify penalty) was not invocable; this is a binding remedial conclusion in the appeal. Conclusion: Penalty under Section 11AC is not tenable on the facts and is set aside; the adjudicating authority's imposition of penalty is vacated for lack of requisite findings of suppression or culpability. Disposition and consequential directions (applied reasoning) The Tribunal partially allows the appeal: duty is to be paid only for the normal period excluding Section 4A clearances; sales tax concession retained remains includable in assessable value (subject to exclusion in para above); penalty under Section 11AC is set aside; matter remanded for re-quantification of duty for the normal period with consequential reliefs as per law.