TaxTMI 
TaxTMI 
2011 (7) TMI 860
X X X X Extracts X X X X
X X X X Extracts X X X X
....uty is demanded (in Rs.) Amount of duty confirmed (in Rs.) Date of adjudication /appellate order and the authority Remarks, if any. 1 E/1983/06 Kinetic Engineering Ltd., Pune 1-7-1997 to 31-12-2000 14-10-2005 10,12,48,116/- 4,04,52,370/- Pre-paid in March - July, 2003 6,07,95,746/- 97,27,319/- 15-2-2006, CCE (Adjn.), Pune III Sales Tax Incentive 1988 Scheme 2 E/149/07 Ballarpur Industries Ltd., Ballarpur April 02 to March 05 24-5-06 3914.40 lakhs 444.70 lakhs Pre-paid in 2004-05 3469.69 lakhs 559.34 lakhs 31-10-2006, CCE, Nagpur 1993 Package Incentive Scheme 3 E/79/08 EPCOS India Pvt. Ltd., Satpur, Nashik 1992 to September, 2003 18-1-2006 - - 2,04,85,452 32,77,672/- 26-10-2007, CCE, Nashik 1993 Package Incentive Scheme 4. E/628/08 Ace Glass Containers Ltd., Malegaon, Nashik 1-4-2001 to 31-10-2005 21-3-2006 16,85,34,751/- 4,66,28,628/-Pre-paid during March 03, 2003-04, 2004-05 & Apr.to Nov.05 12,19,06,123/- 1,95,80,334/- 11-3-2008, CCE, Nashik 1993 Package Incentive Scheme 5. E/324/09 EPCOS India Pvt. Ltd., Satpur, Nashik 2004-05 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) of Section 38 of Bombay Sales Tax Act, 1959 was amended in November, 2002 by substituting the fourth proviso which provided for payment of Net Present Value (NPV) of deferred taxes under the Package Scheme of Incentives. The said proviso read as under:- "Provided also that notwithstanding anything to the contrary contained in the Act or in the rules or in any of the Package Scheme of Incentives or in the Power Generation Promotion Policy, 1998 the Eligible Unit to whom an Entitlement Certificate has been granted for availing of the incentives by way of deferment of sales tax, purchase tax, additional tax, turnover tax or surcharge, as the case may be, may in respect of any of the periods during which the said certificate is valid, at its option, prematurely pay in place of the amount of tax deferred by it an amount, equal to the net present value of the deferred tax as may be prescribed, and on making such payments, in the public interest, the deferred tax shall be deemed to have been paid". 2.2 Thus, an option was given to the eligible unit to whom the entitlement certificate was issued for availing of the inventive by way of deferment of sales tax, etc, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act and also imposed equivalent penalties (equal to duty confirmed) on the appellants under the provisions of Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the said Act. The appellants are before us against the impugned orders. 3. The Ld. Counsel for the appellants submit that in the cases under consideration, the goods in question were sold at the factory gate at the time of removal to the buyers, who are not related persons and the prices were the sole consideration for sale. The only question that needs to be decided is whether for the purpose of 'transaction value', the amount of sales tax collected but abated under the deferment scheme should be included in the assessable value for the purpose of payment of central excise duty or not. 3.1 The definition of transaction value under Section 4 (3) (d) of the Central Excise Act, 1944 specifically provides that the transaction value does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. The advocate points out that the appellants have been availing the sales tax deferment scheme and rates of sales tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....giving benefits on premature payment would be completely defeated. 3.3 They further submit that Circular No.378/11/98-CX dated 12/03/1998 issued by the Central Board of Excise & Customs ( Board in short) in consultation with the Ministry of Law clearly shows that abatement towards sales tax has to be permitted even if sales taxes allowed to be deferred for payment over a period of time or grant of incentive equivalent to sales tax payable has been granted by the State Government to the sales tax assesses. In a subsequent Circular No.671/62/2002-CX dated 09/10/2002 a similar issue was considered and the Board had clarified that 'only that amount of sales tax is permissible as deduction under Section 4 as is equal to the amount legally permissible under the local sales tax laws to be charged/billed from the customer/buyer'.This circular was issued in context of the valuation provisions which came into effect from 01/07/2000 and makes it abundantly clear that if under the laws of the State Government sales tax is allowed to be charged or billed from the customer, the said amount should be allowed as a deduction irrespective of the fact whether the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he judgment of the hon'ble apex Court in the case of UOI Vs. West Coast Paper Mills Ltd., reported in 2004 (164) ELT 375 (SC), these judgments are in jeopardy and the subject matter, unless determined by the last Court, cannot be said to have attained finality. Therefore, they have no precedential value. 4.2 As regards the reliance placed by the appellants on the circulars issued by the CBEC, when the circulars are not in accordance with the provisions of law, such circulars are not binding as has been held by this Tribunal in the case of Uniworth Textiles Ltd., Vs. CCE, Nagpur, 2009 (244) ELT 401 (T). Further, it has been held by this Tribunal in CCE, Indore Vs. Panchsheel Organics, 2002 (139) ELT 319 (T) that when the Supreme Court had given a interpretation to the statutory provisions, such interpretation cannot be ignored on the basis of a contrary interpretation given in the circular issued by the Board. In Ratan Melting & Wire Industries, a constitution of Bench of the apex Court held that a circular which is contrary to the statutory provisions has no existence in law. The learned Special Counsel has further subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed by the departmental authorities. 5. We have carefully considered the rival submissions. 5.1 It is seen from the records that the question of determination of assessable value for levy of excise duty where an incentive is provided by the State Government in the form of retention of sales tax by the manufacturers was considered by the CBEC in consultation with the Ministry of Law and a circular No.378/11/98-CX dated 12/03/98 was issued by the board. The said circular is reproduced below: Valuation where an incentive is provided by the State Government in the form of retention of sales tax by the manufacturers Circular No. 378/11/98-CX, dated 12-3-1998 [From F. No. 6/17/94-CX.1] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject : Determination of assessable value for levy of excise? duty where an incentive is provided by the State Govt. in the form of retention of Sales-tax by the manufacturers - Regarding. The undersigned is directed to refer to Board's Circular No. 4/85 (F.No. 6/ 15/85-CX.I), dated 14-3-1985 regarding addition and exclusion of Sales-tax i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar No.671/62/2002-CX dated 09/10/2002, inter alia, clarified as follows: "6. Therefore, since the set-off scheme of sales tax does not?change the rate of sales tax payable/chargeable on the finished goods, the set-off is not to be taken into account for calculating the amount of sales tax permissible as abatement for arriving at the assessable value u/s. 4. In other words only that amount of sales tax will be permissible as deduction under section 4 as is equal to the amount legally permissible under the local sales tax laws to be charged/billed from the customer/buyer." Thus, the Board has clarified that what is permissible to be deducted from the price for determination of value under Section 4 is the amount of sales tax allowed to be charged/billed from the customer/buyer. 5.3 As early as 1955, Government of India General Order (CE No4/55) had, inter alia, clarified that 'all local taxes such as sales tax, octroi, etc. should be excluded in determining the value for assessment'. 5.4 When the provisions of new Section 4 was brought into force with effect from 01/07/2000, the Board had issued instructions vide Circular No.354/81/00-TRU dated 30/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale: Provided that - (i) ............................. (ia) ............................ (ii) ............................ (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail; (b) where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. (2) ........................... (3)............................. (4) For the purposes of this section, - (a) 'assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.] (2)........................... (3) For the purpose of this section,- (a) 'assessee' means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) .................... (c) 'place of removal' means'. (i) a factory or any other place or premises of production or manufacture of the excisab....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... delivery. So, while determining the value at the time and place of removal, the permissible deductions in arriving at the value are also required to be determined at that point of time. In other words, if sales tax is permitted to be abated while determining the assessable value, the deduction towards sales tax will be in respect of sales tax actually paid or actually payable at the time and place of removal of the goods. The word 'payable' means 'to be paid' or 'liable to be paid' as per ordinary dictionary meaning. 'Liable to be paid' means, liability in accordance with the law. Therefore, what is permissible to be abated in respect of sales tax is the sales tax, actually paid or actually payable in accordance with the law at the time of removal of the goods. If that liability under goes any change subsequently, such alterations/modifications should not have any impact on the determination of the assessable value. This is for the reason that 'certainty in taxation' is a fundamental cannon of taxation; if that cannon is not followed, there will be confusion and chaos in the tax administration.If tax liability is made dependent on a future event, such a law can not be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovision did not, in any way, reduce the deferred sales tax liability or amount. What the law provided was that it gave an option to the assessee to discharge the deferred/future liability paying its present value immediately. An assessee who has cleared the goods from 1992-1993 onwards could not have anticipated that ten years later the Government will introduce a law providing for discharge of duty liability on NPV basis. Therefore, in our view the appellant cannot be saddled with a tax liability on account of changes in law, which took place several years after the clearance of the goods. 5.8 It will also be of relevance at this juncture to consider how the sales tax liability is treated in respect of other taxes where deduction is permissible in respect of sales tax. CBDT issued a circular No.496 dated 25/09/1987 clarifying the position in respect of sales tax deferral scheme for the purpose of Section 43B of the Income Tax Act, 1961. The said circular reads as under: "Several State Governments have introduced sales tax deferral schemes as a part of the incentives offered to entrepreneurs settin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation in the case of Sulzer (India) Ltd. Vs. Jt. CIT, wherein a special bench of the ITAT ruled that, where a liability payable in the future is settled at NPV, no benefit or remission arises since the NPV represents the equivalent value of the future liability. Thus, in respect of Income Tax Law, if the liability is discharged at NPV at a lower amount, deduction for the full amount of sales tax payable under the sales tax deferral scheme is permissible. Even though the provisions of Income Tax Act 1961 has no direct application to Central Excise, the principle adopted has relevance in interpretation of central excise law. 5.9 The appellants have relied on a number of judicial pronouncements of this Tribunal in support of their contention that sales tax collected and retained by the manufacturer as an incentive does not change the character of amount collected and they remain as sales tax payable, which is eligible for deduction. However, as Civil appeals filed by the department in all these cases have been admitted by the hon'ble apex Court, these judgments are in jeopardy till the matter is finally decided by the hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the factory could impact the assessable value already determined. It was held that once the correct assessable value has been declared by the assessee and the goods cleared from the factory, any subsequent reduction in prices cannot be a matter of concern for the Central Excise in determining the correct assessable value or even for determining the valuation for the purpose of claiming exemption. In the case of MRF Ltd. Vs. CCE, Madras, reported in 1997 (92) ELT 309 (SC), the hon'ble apex Court held as follows: "Once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatever reason cannot be a matter of concern to the Central Excise Department insofar as the liability to payment of excise duty was concerned. This is the view which was taken by the Tribunal in the case of Indo Hacks Ltd. v. Collector of Central Excise, Hyderabad - 1986 (25) E.L.T. 69 (Tribunal) and it seems to us that the Tribunal's view that the duty is chargeable at the rate and price when the commodity....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under the sales tax laws when the goods was cleared from the factory and the same was a permissible reduction under the excise law. Much after the clearance of the goods, the sales tax laws were amended to provide for payment of net present value of the sales tax deferred in complete discharge of the sales tax liability. Such changes in sales tax liability on account of changes in sales tax law cannot be a cause for re-determination of the assessable value determined in accordance with the law of central excise as it stood at the time of removal of the goods. Applying the ratio of these judgments to the facts of the present case, we hold 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. In other words, there is no cause for re-determination of assessable value on account of changes which arose in the sales tax law much after the clearance of the goods. 5.11 The CBEC has issued a number of circulars clarifying the aba....