State government tax waiver schemes allowing NPV discharge of deferred sales tax constitute post-sale exemption deductible from transaction value under section 4

CESTAT Mumbai held that state government tax waiver schemes allowing immediate discharge of deferred sales tax liability at net present value constituted post-sale exemption deductible from transaction value under Central Excise Act, 1944. The tribunal distinguished this from Supreme Court precedent in Super Synotex case, finding the Goa government's modified deferment scheme effectively provided temporary cash flow accommodation rather than additional consideration. The appellant's retention of sales tax with NPV discharge option did not warrant inclusion in assessable value for excise duty computation, as such amounts were excludable under section 4. Appeal allowed, impugned order set aside.

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Issues Involved:
1. Tax waiver by the state government and its effect on additional consideration.
2. Inclusion of retained sales tax in the assessable value.
3. Applicability of the Supreme Court decisions to the present case.

Summary:

1. Tax Waiver by the State Government and its Effect on Additional Consideration:

The issue in these appeals is the effect of the tax waiver by the state government as to warrant deeming of such amount as additional consideration received by the appellants for clearances effected during the respective periods. The demands were raised on the ground that the appellants, in terms of notification no. 4/5/2005-Fin(R&C)(13) dated 31st March 2005 of Government of Goa, which modified an earlier scheme for deferment of sales tax, were liable to duties of excise on such amount. The original authority confirmed the demand for the entire period of dispute in each of the notices, along with interest thereon, besides imposing a penalty u/s 11AC of Central Excise Act, 1944. The first appellate authority upheld the detriment but restricted the recovery demand to the normal period in each case, setting aside the demand for the extended period and interest thereon.

2. Inclusion of Retained Sales Tax in the Assessable Value:

The learned Authorised Representative argued that the amounts retained by the appellant were tantamount to additional consideration as these had been collected from the buyers of the excisable goods as invoiced price, and not liable to duty owing to temporary custodianship for Government of Goa, but now to be added back. The scheme of the Government of Goa allowed the deferment of sales tax to be accumulated by the 'dealer' and paid to the exchequer at the end of the specified period, which was modified to permit immediate discharge thereof to the extent of 'net present value (NPV)' of the accumulated amount. This was considered as a 'post-sale' exemption, hence deductible in full at the time and place of removal to conform with 'transaction value' as defined in section 4 of Central Excise Act, 1944.

3. Applicability of the Supreme Court Decisions to the Present Case:

Learned Counsel for the appellant contended that the decision of the Hon'ble Supreme Court in Commissioner of Central Excise, Delhi-III v. Maruti Suzuki India Ltd and in Commissioner of Central Excise, Jaipur-II v. Super Synotex (India) Ltd pertained to materially different schemes. The Tribunal, in Commissioner of Central Excise, Raigad v. Uttam Galva Steels Ltd and in Rational Engineers Pvt Ltd v. Commissioner of Central Excise, Thane - I, had distinguished these decisions to set aside the demand. The Tribunal noted that the scheme of the Government of Maharashtra, which was the cause of a similar dispute, differed from that dealt with in re Super Synotex (India) Ltd and in re Maruti Suzuki India Ltd by the Hon'ble Supreme Court. The Tribunal in re Rational Engineers Pvt Ltd and in re Kinetic Engineering Ltd held that the principles laid down by the Hon'ble Supreme Court in the case of Super Synotex have to be taken into account while deciding the present set of appeals.

In conclusion, the Tribunal set aside the impugned orders and allowed all the appeals, noting the peculiarities of the scheme which differed substantially from that in which taxability was upheld by the Hon'ble Supreme Court in re Super Synotex (India) Ltd and in re Maruti Suzuki India Ltd.

(Order pronounced in the open court on 05/06/2024)

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