2024 (7) TMI 1732 - AT - Central Excise

Deferred sales tax prepayment at NPV: whether retention incentives raise excise assessable value; demand set aside, appeal allowed.

The dominant issue was whether incentives retained on opting for premature payment of deferred sales tax at NPV form part of 'transaction value/assessable ... Calculation of Excise duty - incentives received for opting out for premature payment at NPV, should be added to the assessable value for the purpose of discharge of Central Excise duty liability on the final products manufactured, or not - HELD THAT:- The issue arising out of the present dispute is no more res integra in view of the decision by this Tribunal, in the case of Hardoli Paper Mills Ltd. Vs. Commissioner of Central Excise, Nagpur [2024 (5) TMI 1128 - CESTAT MUMBAI] - By relying upon the earlier order passed in the case of Commissioner of Central Excise, Raigad Vs. Uttam Galva Steels Ltd. [2015 (10) TMI 1727 - CESTAT MUMBAI], the Tribunal in the case of Hardoli Paper Mills Ltd. has allowed the appeal by holding that 'in the present case, the amount payable has not been varied by the Sales Tax Authorities. Under the facts of the present cases, in our view, the Explanation may not be of any help to the Revenue as at the time of clearance, the term ‘actually payable’ was relevant and not ‘actually paid’. Further, the amount of actually payable sales tax has not been varied by the Sales Tax Authorities.' In view of the fact that the issue arising out of the present dispute is no more open for any debate in view of the order passed by this Bench of this Tribunal, the present appeal should be allowed in favour of the appellant - the impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the differential amount arising when deferred sales tax/VAT liability is discharged through premature payment at Net Present Value (NPV)-treated by the State as full discharge-can be treated as an 'incentive' and added to the assessable value/transaction value for levy of Central Excise duty on the manufactured goods. (ii) Whether, for purposes of excluding sales tax/VAT from transaction value, the relevant yardstick is the tax actually paid later under an NPV-based premature payment option, or the tax actually payable at the time of removal/clearance of goods. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i) & (ii): Addability of NPV differential to assessable value; meaning of 'actually paid/actually payable' for exclusion of sales tax Legal framework (as discussed by the Tribunal): The Tribunal considered the concept of 'transaction value' under the Central Excise valuation provisions, specifically the statutory formulation that transaction value excludes sales tax and other taxes actually paid or actually payable on the goods. The Tribunal also took note of the State sales tax/VAT provisions under which, where deferred tax is paid prematurely at NPV under the notified scheme, it is deemed that the full sales tax/VAT liability has been discharged. Interpretation and reasoning: The Tribunal rejected the Revenue's approach that only the amount of sales tax actually paid (i.e., the lower NPV amount) can be excluded, and that the differential between the deferred liability and the NPV payment constitutes an 'incentive' requiring addition to assessable value. The Tribunal's reasoning proceeded on the basis that valuation/exclusion is to be tested with reference to the time of removal of the excisable goods; at that stage, the relevant concept is the tax actually payable on such clearance. The premature repayment at NPV does not alter the tax payable on the clearance; it merely changes the timing and mode of discharge of that liability by allowing earlier payment at an NPV-determined amount. Since the State mechanism deems such NPV payment as discharge of the full liability and the sales tax authority has not varied the tax payable on the goods, the Tribunal held that the differential cannot be re-characterized as an additional consideration inflating transaction value for Central Excise purposes. Conclusions: The Tribunal held that the alleged 'incentive' represented by the difference between the deferred sales tax/VAT liability and the NPV premature payment is not includible in assessable value/transaction value for Central Excise valuation. The Tribunal set aside the demand premised on such inclusion and allowed the appeal, holding that the issue is covered and not open for further debate on these facts.