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of <h1>Section 4A Cannot Be Applied for Excise Duty Assessment After Repeal of Central Excise Tariff Act</h1> <h3>M/s Trimurti Fragrances & Flavours Pvt. Ltd. Versus Commissioner, CGST & Central Excise, Kanpur</h3> M/s Trimurti Fragrances & Flavours Pvt. Ltd. Versus Commissioner, CGST & Central Excise, Kanpur - TMI 1. ISSUES PRESENTED and CONSIDERED Whether the valuation for Central Excise Duty (BED) and National Calamity Contingency Duty (NCCD) on tobacco products for the period 01.07.2017 to 03.03.2021 should be determined under Section 4 of the Central Excise Act, 1944 or under Section 4A read with Notification No.49/2008-CX(NT) dated 24.12.2008. Whether Notification No.49/2008-CX(NT), which provides for abatement based on MRP under Section 4A of the Central Excise Act, 1944, continued to have legal authority after the repeal of the Central Excise Tariff Act, 1985 w.e.f. 01.07.2017. Whether the omission to amend Notification No.49/2008-CX(NT) to replace references from the repealed Central Excise Tariff Act, 1985 to the Fourth Schedule of the Central Excise Act, 1944 affects its validity and applicability. Whether the extended period of limitation under proviso to sub-section 1 of Section 11A of the Central Excise Act, 1944 is invokable where duties were paid and returns filed on the basis of transaction value. Whether penalties and interest imposed on the appellant are justified in the circumstances of the case. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Appropriate Valuation Method for BED and NCCD (Section 4 vs. Section 4A of Central Excise Act, 1944) Legal Framework and Precedents: Section 4 of the Central Excise Act, 1944 provides for valuation of excisable goods based on transaction value. Section 4A, introduced to provide for valuation based on MRP with prescribed abatements, was operationalized through Notification No.49/2008-CX(NT) dated 24.12.2008. The Finance Act, 2001 and related provisions govern levy of NCCD. The GST Act, 2017 repealed the Central Excise Tariff Act, 1985 w.e.f. 01.07.2017. Court's Interpretation and Reasoning: The Tribunal noted that the appellant paid BED and NCCD at specified ad-valorem rates based on transaction value and filed returns accordingly. The Revenue contended that valuation should be based on Section 4A with abatement under Notification No.49/2008-CX(NT). The appellant argued that since the Central Excise Tariff Act, 1985 was repealed and Notification No.49/2008-CX(NT) was not amended to reflect this repeal, the notification lost legal authority, and valuation should be under Section 4. Key Evidence and Findings: The Tribunal examined the statutory amendments, particularly the repeal of the Central Excise Tariff Act, 1985 by Section 174 of the CGST Act, 2017, and the failure to amend Notification No.49/2008-CX(NT) accordingly. It also considered the Department of Revenue's clarifications and the appellant's payment records. Application of Law to Facts: The Tribunal held that since Notification No.49/2008-CX(NT) continued to reference the repealed Central Excise Tariff Act, 1985 without amendment, it lacked authority post 01.07.2017. Consequently, Section 4A and the associated abatement notification were inoperative during the relevant period. Therefore, valuation under Section 4 was appropriate. Treatment of Competing Arguments: The Revenue's reliance on the continued applicability of Section 4A and the notification was rejected due to lack of legal basis after repeal. The appellant's argument on the non-amendment of the notification and consequent loss of authority was accepted. Conclusions: Valuation for BED and NCCD during the disputed period must be determined under Section 4 of the Central Excise Act, 1944 based on transaction value, not under Section 4A with abatement. Issue 2: Validity and Continuance of Notification No.49/2008-CX(NT) Post Repeal of Central Excise Tariff Act, 1985 Legal Framework and Precedents: Notification No.49/2008-CX(NT) was issued under Sections 1 and 2 of Section 4A of the Central Excise Act, 1944, with reference to the First Schedule of the Central Excise Tariff Act, 1985. The Taxation Laws (Amendment) Act, 2017 introduced the Fourth Schedule to the Central Excise Act, 1944 and repealed the Central Excise Tariff Act, 1985 w.e.f. 01.07.2017. Court's Interpretation and Reasoning: The Tribunal observed that while the Government amended approximately ten notifications to replace references from the Central Excise Tariff Act, 1985 to the Fourth Schedule of the Central Excise Act, 1944, no such amendment was made to Notification No.49/2008-CX(NT). This omission rendered the notification without legal effect after the repeal. Key Evidence and Findings: The Tribunal reviewed the statutory amendments, notifications issued by the Government, and the absence of any amendment to Notification No.49/2008-CX(NT) post repeal. Application of Law to Facts: The failure to amend the notification to reflect the repeal of the Central Excise Tariff Act, 1985 meant the notification could not operate legally after 01.07.2017. The Tribunal found no evidence that the notification was operative or saved by any other provision. Treatment of Competing Arguments: The Revenue's contention that Section 38B of the Central Excise Act, 1944 saved the notification was rejected because Section 38B applies only to notifications under the Central Excise Tariff Act, 1985, whereas Notification No.49/2008-CX(NT) was issued under Section 4A of the Central Excise Act, 1944. Conclusions: Notification No.49/2008-CX(NT) ceased to have legal authority after 01.07.2017 due to non-amendment following repeal of the Central Excise Tariff Act, 1985. Issue 3: Applicability of Extended Period of Limitation and Imposition of Penalties Legal Framework and Precedents: Proviso to sub-section 1 of Section 11A of the Central Excise Act, 1944 allows extended period of limitation for demand recovery in cases of fraud, suppression, or willful misstatement. Penalties and interest are generally imposed where there is non-payment or short payment of duty. Court's Interpretation and Reasoning: The Tribunal noted that the appellant had paid both BED and NCCD at the applicable rates based on transaction value and had filed returns for the disputed period. The dispute was solely on the valuation method applied, not on non-payment. Key Evidence and Findings: Payment records and returns filed by the appellant showed no default in payment of duty at the rates claimed. The demand was raised on valuation grounds. Application of Law to Facts: Since duty was paid and returns filed, the extended period for limitation was not invokable. Consequently, imposition of penalties and interest was not justified. Treatment of Competing Arguments: The Revenue's reliance on extended limitation and penalties was not supported by the facts of payment and filing of returns. The appellant's submissions on good faith payment were accepted. Conclusions: Extended period of limitation and penalties are not applicable where duty was paid and returns filed, and dispute relates only to valuation method. Issue 4: Interpretation of Department of Revenue Clarifications and Notifications Post GST Implementation Legal Framework and Precedents: Department of Revenue's FAQs and clarifications, including F.No.332/2/2017-TRU dated December 2017, provide interpretative guidance on applicability of duties and valuation post GST implementation. Court's Interpretation and Reasoning: The Tribunal considered the clarification that NCCD on tobacco products continued at pre-GST rates and valuation shall be as per Central Excise Law read with Valuation Rules. The appellant relied on this to argue that Section 4 valuation was applicable. Key Evidence and Findings: The clarification referred to valuation rules under Section 4 of the Central Excise Act, 1944, supporting the appellant's position that valuation under Section 4 was appropriate. Application of Law to Facts: The Tribunal found that the clarification supported the appellant's contention that valuation should be on transaction value under Section 4, not on MRP with abatement under Section 4A. Treatment of Competing Arguments: The Revenue's reliance on the clarification to support valuation under Section 4A was not persuasive given the legal status of Notification No.49/2008-CX(NT). Conclusions: Department of Revenue's clarifications support valuation under Section 4 of the Central Excise Act, 1944 for BED and NCCD post 01.07.2017.
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