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of <h1>Royalty included in assessable value but extended limitation period set aside for public sector unit</h1> <h3>M/s. North Eastern Coal Fields Versus Commr. of Central Excise and Service Tax, Dibrugarh</h3> CESTAT Kolkata partially allowed the appeal in a Central Excise valuation case. The tribunal held that royalty must be included in assessable value ... Valuation of Central Excise duty - inclusion of components like “Royalty”, “Stowing Excise Duty” (SED), and “Assam Land Tax” in the assessable value - invocation of extended period of limitation - penalty - HELD THAT:- As on date, the issue as to whether “Royalty” is tax of not, stands clearly held against the appellant in view of the 9 Member Supreme Court decision in the case of MINERAL AREA DEVELOPMENT AUTHORITY & ANR. VERSUS M/S STEEL AUTHORITY OF INDIA & ANR ETC. [2024 (7) TMI 1390 - SUPREME COURT (LB)]. Therefore, on merits the appellants do not have any case. Accordingly, we hold that the Royalty component is required to be added to arrive at the Assessable Value. We dismiss the appeal on merits to this extent in respect of Royalty component. he levy is being termed as “Duty of Excise” and also being treated as such. It is also not disputed that in the case of the goods in question, the Stowing Excise Duty is being paid by the appellant. The Revenue cannot take a contorted and narrow view that only when the Duty of Excise is paid as Central Excise Duty, such exclusion is available. It is to be noted that the word used is “duty of excise” along with “sales tax” and “other taxes”, which would clarify that if these are paid to State Govt or to any other agency also, the transaction value should exclude the same. Assam Land Tax - HELD THAT:- The very word used therein is Tax. As we have observed above, the Section 4 (3) (d), when speaking of Tax, speaks of Central Govt and State Govt Taxes. Hence, we hold that the Assam Land Tax is not required to be included while arriving at the Assessable Value. Accordingly, we set side the confirmed demand on account of the Assam Land Tax component. Time limitation - HELD THAT:- Admittedly the appellant is a reputed Public Sector Undertaking, having no necessity to indulge in any suppression with an intent to evade Excise Duty payment. They have been paying the Excise Duty on the AV arrived at by them as per their interpretation and filing their Returns. Hence, no case of suppression has been made out by the Revenue, so as to invoke the extended period provisions. Levy of penalty - HELD THAT:- When the penalty under Section 11AC is waived on the ground that no case of suppression has been made out, even the duty demand would not legally sustain. There cannot be a case where it is held that there is no suppression, but only the penalty is dropped, but the Duty is confirmed. Both the Duty as well as penalty are required to be dropped if the case of suppression is not made out. Conclusion - i) The demand on account of Royalty component sustains. ii) The demand on account of Stowing Excise Duty and Assam Land Tax components gets set aside. iii) The confirmed demand towards the extended period stands set aside and the demand stands allowed on account of time- bar to this extent. Appeal allowed in part. ISSUES: Whether 'Royalty' paid on coal is a tax excludible from the assessable value under Section 4(3)(d) of the Central Excise Act, 1944. Whether 'Stowing Excise Duty' paid under The Coal Mines (Conservation and Development) Act, 1974 qualifies as a 'duty of excise' excludible from assessable value under Section 4(3)(d) of the Central Excise Act, 1944. Whether 'Assam Land Tax' levied under The Assam Taxation (on specified lands) Act, 1990 is excludible from assessable value under Section 4(3)(d) of the Central Excise Act, 1944. Whether the demand raised for the extended period is sustainable in the absence of suppression, fraud, or intent to evade duty under Section 11AC of the Central Excise Act, 1944. Whether penalty under Section 11AC can be imposed where no suppression or intent to evade duty is found. RULINGS / HOLDINGS: 'Royalty' is not a tax and hence is not excludible from the assessable value; it must be included for excise duty calculation as per the retrospective 9 Member Supreme Court decision in Mineral Area Development Authority vs. Steel Authority of India (2024), which overruled earlier case law. 'Stowing Excise Duty' is a 'duty of excise' under The Coal Mines (Conservation and Development) Act, 1974 and therefore is excludible from the assessable value under Section 4(3)(d) of the Central Excise Act, 1944; the confirmed demand on this component is set aside. 'Assam Land Tax' is a tax levied by the State under a separate statute and falls within the exclusion under Section 4(3)(d); thus, it is excludible from assessable value and the demand on this component is set aside. The demand raised for the extended period is time-barred and unsustainable as no case of suppression, fraud, or intent to evade duty was established; the extended period provisions under Section 11AC cannot be invoked. Penalty under Section 11AC cannot be imposed where the adjudicating authority finds absence of suppression or intent to evade duty, and such penalty waiver implies that the duty demand for the extended period also cannot be sustained. RATIONALE: The Court applied Section 4(3)(d) of the Central Excise Act, 1944, which excludes 'duty of excise, sales tax and other taxes' actually paid or payable on goods from the transaction value for assessable value computation. Regarding Royalty, the Court relied on the Supreme Court's 9 Member Bench decision in Mineral Area Development Authority vs. Steel Authority of India (2024), which clarified that Royalty is not a tax, overruling the earlier India Cements decision (1990) and the Kesoram decision (2004), thus requiring inclusion of Royalty in assessable value. For Stowing Excise Duty, the Court interpreted the Coal Mines (Conservation and Development) Act, 1974 as creating a 'duty of excise' payable on coal, which qualifies for exclusion under Section 4(3)(d), regardless of whether the duty is paid to Central or State authorities. Assam Land Tax, being a tax levied under a distinct State legislation, falls within the scope of 'other taxes' excludible under Section 4(3)(d). On limitation and penalty, the Court referred to Section 11AC of the Central Excise Act, 1944, which permits extended period demands only where suppression, fraud, or intent to evade duty is established; absence of such ingredients results in disallowance of extended period demand and penalty, consistent with precedents including Lohia Paperboards Pvt Ltd and Mahanadi Coalfields decisions. The Court emphasized that dropping penalty for absence of suppression logically entails that the corresponding duty demand for the extended period cannot be sustained, as penalty and duty liability are interlinked under the statute.
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