2026 (3) TMI 1242 - AT - Central Excise

Extended limitation and transaction value deductions failed where invoice-based clearances and documented discounts supported the assessee.

Clearances made under invoices, with payments received through account payee cheques and sales to a Government undertaking, did not support any allegation ... Extended period of limitation - evasion of central excise duty - Suppression or clandestine removal - deductions towards pro rata recovery, cash discount, trading turnover, freight and sales tax - determining the assessable value. Extended period of limitation - HELD THAT:- The Tribunal found that the entire sales were made to KSRTC, a Government undertaking, under proper invoices and through banking channels. In the absence of any allegation or evidence that the goods had been cleared without invoices, the necessary basis for alleging suppression or mis-statement with intent to evade duty was absent. On that footing, the finding of clandestine removal and the demand founded on the extended period were held to be unsustainable. [Paras 16, 20] The invocation of the extended period and the allegation of clandestine removal were rejected. Transaction value - Permissible deductions from assessable value - HELD THAT: - The Tribunal held that the adjudicating authority had erred in disallowing the claimed deductions despite the contractual terms and supporting material. Pro-rata recovery could not be denied merely because the recovery was not linked invoice-wise when there was no dispute that the purchase terms provided for such recovery and no dispute as to failure of performance. Cash discount was supported by the letter of intent, purchase orders and payment details showing discount linked to prompt payment. The Tribunal further found that sufficient evidence had been furnished to substantiate deductions relating to trading activity and freight. On that basis, excise duty was held payable only on the transaction value representing the actual consideration received from KSRTC after such eligible deductions, including sales tax. [Paras 17, 18, 19, 20] The deductions claimed by the appellant were held admissible, and the demand, interest and penalty based on denial of those deductions were set aside. Final Conclusion: The Tribunal held that neither the extended period nor the allegation of clandestine removal was available to the Revenue on the facts recorded. It further held that duty had to be computed on the actual transaction value after allowing the eligible deductions, and accordingly set aside the demand, interest and penalty with consequential relief. Issues: (i) Whether the demand could be sustained by invoking the extended period of limitation on the basis of alleged suppression or clandestine removal. (ii) Whether deductions towards pro rata recovery, cash discount, trading turnover, freight and sales tax were allowable while determining the assessable value.Issue (i): Whether the demand could be sustained by invoking the extended period of limitation on the basis of alleged suppression or clandestine removal.Analysis: The clearances were made under invoices, payments were received through account payee cheques, and the sales were to a Government undertaking. In the absence of material showing clearance without invoices or any suppression or misstatement, invocation of the extended period could not be justified.Conclusion: The extended period of limitation was not available to the Revenue and the demand on that basis failed.Issue (ii): Whether deductions towards pro rata recovery, cash discount, trading turnover, freight and sales tax were allowable while determining the assessable value.Analysis: The purchase terms and payment records supported the prompt payment discount and the deductions on account of pro rata recovery. The evidence also established trading activity and freight-related deductions. The assessee had paid duty on the actual transaction value after allowing the eligible deductions, and the valuation had to be made in accordance with the transaction value principles under the central excise law.Conclusion: The claimed deductions were allowable and the confirmation of duty, interest and penalty was unsustainable.Final Conclusion: The impugned order confirming duty, interest and penalty was set aside and the appeal succeeded with consequential relief.Ratio Decidendi: Where clearances are made under invoices, payments are traceable through banking channels, and contractual deductions are supported by contemporaneous records, the extended period cannot be invoked and only the actual transaction value after permissible deductions can be assessed to duty.