2024 (8) TMI 1208 - AT - Central Excise

Excise duty refund under Notification 1/2002-CE requires full deduction from duty paid for value addition computation

M/s Kangaro Industries Ltd Versus Commissioner of CE, Jammu & Kashmir

CESTAT Chandigarh allowed the appeal, setting aside the impugned orders as unsustainable in law. The tribunal held that when duty is refunded under ... Requirement to deduct entire excise duty while computing the amount, if value addition is in terms of para 6.5 of the Notification - freight and transit are part of the sale price as appellant’s sales are for destination sales or not. Whether the entire excise duty is to be deducted while computing the amount, if value addition is in terms of para 6.5 of the Notification? - HELD THAT:- The issue decided in the case of KANGARO INDUSTRIES LIMITED VERSUS CCE, JAMMU [2017 (11) TMI 90 - CESTAT CHANDIGARH] where it was held that 'when an amount of duty is refunded to the assessee, under Notification No. 1/2002- C.E., the same has to be deducted from the excise duty paid by the appellant while arriving at actual value addition'. Whether freight and transit are part of the sale price as appellant’s sales are for destination sales? - HELD THAT:- The issue decided in the case of KANGARO INDUSTRIES LIMITED VERSUS CCE, JAMMU [2017 (11) TMI 90 - CESTAT CHANDIGARH] where it was held that 'the freight outward is includible in the sale value.' The impugned orders are not sustainable in law therefore, set aside - appeal allowed. Issues:- Interpretation of excise duty deduction under Notification- Inclusion of freight and transit insurance in sale valueAnalysis:Issue 1: Interpretation of excise duty deduction under NotificationThe case involved the interpretation of excise duty deduction under a Notification granting exemption to specified excisable goods manufactured in Jammu & Kashmir. The appellant, engaged in manufacturing staples, sought a special rate based on actual value addition exceeding 115% of the specified rate. The Commissioner fixed the value addition norms at 46.79%, denying benefits based on various grounds, including the deduction of entire excise duty while computing the amount. The appellant contested this, citing Circulars and previous tribunal decisions. The Tribunal, referring to its previous decision in the appellant's case, held that the mechanism of paying duty and subsequent refund was to implement the exemption notification and should be excluded from value addition calculation. The Tribunal emphasized that the refunded amount represented the exempted portion, not excess duty paid, and upheld the appellant's contentions regarding excise duty deduction.Issue 2: Inclusion of freight and transit insurance in sale valueThe second issue revolved around whether freight and transit insurance should be included in the sale value of goods cleared by the appellant. The appellant argued that all sales were FOR destination sales, with freight already paid and transit insurance undertaken by them. Citing previous tribunal decisions, the appellant contended that outward freight should be included in the sale value. The Tribunal, relying on its earlier judgment in the appellant's case, reiterated that when goods are sold on FOR destination basis and freight is paid by the seller, the seller cannot claim deduction of freight and insurance from the sale price. The Tribunal found the Commissioner's reasoning unsustainable and set aside the impugned orders, allowing the appeal of the appellant with consequential relief as per law.In conclusion, the Tribunal ruled in favor of the appellant on both issues, emphasizing the exclusion of excise duty refund and the inclusion of outward freight in the sale value. The judgment highlighted the importance of interpreting exemption notifications accurately and applying consistent principles in determining value addition for excisable goods.