2024 (9) TMI 1020 - AT - Central Excise

Excise duty recovery set aside as sales tax abatement must be based on liability at clearance time

CESTAT Mumbai allowed the appeal regarding recovery of excise duty with interest and penalty for the period April 2000 to March 2003. The Tribunal held ... Recovery of Excise duty with interest and penalty - difference between the actual collection from 1st April 200 to 31st March 2003 and the amount required to be deposited - appellant opted for pre-payment of the amount - HELD THAT:- The Tribunal, relying upon the decision of the Tribunal in COMMISSIONER OF CENTRAL EXCISE, RAIGAD, BALKRISHNA INDUSTRIES LTD., ESSEL PROPACK LTD. VERSUS UTTAM GALVA STEELS LTD., BHUSHAN STEEL LTD., JSW ISPAT STEEL LTD., COMMISSIONER OF CENTRAL EXCISE, AURANGABAD [2015 (10) TMI 1727 - CESTAT MUMBAI] has held, that 'the abatement towards sales tax has to be allowed in terms of the sales tax liability (as per law) at the time of clearance of the goods. Such abatement cannot be subsequently altered or restricted to the net present value of sales tax subsequently paid in complete discharge of such sales tax liability.' The impugned order is set aside - appeal allowed. Issues Involved:1. Whether the difference between the actual collection and the amount deposited under the deferred sales tax scheme constitutes additional consideration for goods sold.2. Applicability of the principles laid down in previous judgments by the Supreme Court and the Tribunal regarding the treatment of sales tax in determining the assessable value for excise duty.3. Interpretation of the scheme allowing pre-payment of deferred sales tax at net present value (NPV) and its impact on excise duty liability.Issue-Wise Detailed Analysis:1. Additional Consideration for Goods Sold:The central issue was whether the difference between the actual sales tax collected and the amount deposited under the deferred sales tax scheme should be considered additional consideration for goods sold, thereby attracting excise duty. The Commissioner of Central Excise adjudicated that this difference amounted to additional consideration, leading to a demand for duty recovery under section 11A of the Central Excise Act, 1944, along with interest and penalties.2. Applicability of Previous Judgments:The appellant's counsel argued that the issue was covered by the Tribunal's decision in Rational Engineers Pvt Ltd v. Commissioner of Central Excise, Thane - I, which relied on the principles established in Commissioner of Central Excise, Raigad v. Uttam Galva Steels Ltd. These cases distinguished the current issue from the Supreme Court's decision in Super Synotex (India) Ltd, where the retention of a portion of collected sales tax was considered part of the transaction value. The Tribunal noted that the scheme in question involved pre-payment at NPV, which did not equate to retention of any amount by the assessee but rather a discounting of future tax liabilities.3. Interpretation of the Deferred Sales Tax Scheme:The Tribunal examined the nature of the deferred sales tax scheme, which allowed manufacturers to pre-pay their deferred tax liabilities at NPV. This pre-payment was deemed a discharge of the total sales tax liability. The Tribunal found that the scheme did not alter the rate of sales tax or provide an exemption but merely allowed for an early discharge of liability. Therefore, the pre-payment at NPV did not constitute additional consideration.Conclusion:The Tribunal concluded that the principles laid down in the Super Synotex case were not directly applicable to the present case. The deferred sales tax scheme's provision for pre-payment at NPV did not change the character of the amount collected as sales tax. The Tribunal held that the assessable value for excise duty should be determined based on the sales tax liability at the time of removal of goods, not on subsequent changes in the law or payment terms. Consequently, the demand for duty and other penalties were set aside, and the appeal was allowed.Final Judgment:The appeal was allowed by setting aside the impugned order, following the Tribunal's decision in Rational Engineers Pvt Ltd and related cases, which clarified that pre-payment of deferred sales tax at NPV does not constitute additional consideration for goods sold. The order was pronounced in the open court on 10/09/2024.