TaxTMI 
TaxTMI 
2014 (3) TMI 42
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....t of sales tax imposed by the State Government but not entirely paid to the State exchequer while determining the assessable value for the purpose of central excise, and some of the assessee-manufacturers have preferred appeals being grieved by the rejection for grant of similar relief pertaining to the payment made under the Central Sales Tax Act. For the sake of convenience, the facts from Civil Appeal Nos. 9154-9156 of 2003 are adumbrated herein as far as appeals by the Revenue are concerned. In respect of the challenge made by the assessee-manufacturers we shall take the facts from Civil Appeal No. 4621 of 2008. 3. First we shall advert to the issue involving the appeals preferred by the Revenue. The respondent herein is engaged in the manufacture of yarn of manmade fibers falling under Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985, chargeable to duty. A show-cause notice was issued to the respondent-assessee on the ground that for certain period it had contravened the various provisions of the Act, and the Central Excise Rules, 1944 which had resulted in evasion of Central Excise Duty. The fulcrum of the show-cause notice was that the assessee had not pa....
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....her imposed penalty on the persons responsible for the said suppression and evasion. 6. Being grieved by the order passed by the Commissioner of Central Excise, Jaipur, the assessee preferred three appeals, namely, Appeal NO. E/2279-2281 of 2002. The Tribunal posed the question whether the assessee was entitled to claim deduction under Section 4(4)(d)(ii) of the Act in respect of full amount of sales tax payable at the rate of 2%. The Tribunal took note of the fact that the assessee, being entitled for the benefit under the Sales Tax New Incentive Scheme for Industries, 1989 (for short "the Scheme"), had availed the same with effect from 3.12.1996 and under the said Scheme it was entitled to retain with it 75% of the sales tax collected and pay only 25% to the Government and, accordingly claimed the deduction for the entire amount of sales tax payable at the rate of 2% and, accordingly, it did not approve the view adopted by the adjudicating authority that the benefit granted to the assessee in respect of the sales tax was in the nature of an exemption and not an incentive and, therefore, not deductible under Section 4(4)(d)(ii) of the Act. The Tribunal referred to the circular ....
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....llected and pay only balance 25% to the State Government and despite the same being the admitted position, the adjudicating authority has committed grave illegality by treating it as an exemption which has been appositely corrected by the tribunal and hence, the order impugned is impeccable. It is propounded that the amended provision that came on the statute book with effect from 1.7.2000 does not change the situation and, in fact, the earlier circular on principle has been reiterated by the subsequent circular dated 9.10.2002. 10. Having regard to rivalised submissions raised at the Bar, we deem it appropriate to first refer to the ratio and principle stated in Modipon Fibre Company (supra). In the said case, the show cause notice was dated 19th March, 1999 and related to the period March, 1994 to March, 1997. Section 4(4)(d)(ii) as applicable was as under:- "4. Valuation of excisable goods for purposes of charging of duty of excise.-(1) to (3) * * * (4) For the purposes of this section,- (a) to (c) * * * (d) 'value', in relation to any excisable goods,- (i) * * * (ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payab....
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....y proceeded to opine: - "As can be seen from the abovequoted section, excise duty can be deducted if it had not been included in the invoice price. According to the Explanation, what is deductible is the effective rate of duty. Where any exemption has been granted, that exemption has to be deducted from the ad valorem duty. In other words, it is only the net duty liability of the assessee that can be deducted in computing the assessable value. The said principle stands incorporated in the Explanation. For example, if the assessee recovers duty at the tariff rate but pays duty at concessional rate, then excise duty has to be a part of the assessable value. Similarly, refund of excise duty cannot be treated as net profit and added on to the value of clearances. There is no provision in Section 4 of the 1944 Act to treat refund as part of assessable value. If excise duty paid to the Government is collected at actuals from the customers and if, subsequently, exemption becomes available, such excise duty which is not passed on to the assessee (sic customer), would become part of assessable value under Section 4(4)(d)(ii)." 12. The aforesaid observations were made in the cont....
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....test to be applied is that of the "actual value of the duty payable" and, therefore, there is no merit in the argument advanced on behalf of the assessee that the Explanation is restricted to the duty of excise. This principle can therefore apply also to actual value of any other tax including TOT payable. Even without the Explanation, the scheme of Section 4(4)(d)(ii) shows that in computing the assessable value, one has to go by the actual value of the duty payable and, therefore, only the reduced duty was deductible from the value of the goods. 14. It is seemly to note that the Court approved the ratio laid down in the judgment of Bombay High Court in Central India Spinning Weaving and Manufacturing Co. Ltd. v. Union of India 1987 (30) ELT 217 (Bom) by reproducing the following observations: - "9. ... It is true that according to Section 4(4)(d)(ii) of the Central Excise Act, the value does not include the amount of duty of excise, if any payable on such goods, but in view of Explanation to Section 4(4)(d)(ii), the 'duty of excise' means the duty payable in terms of the Central Excise Tariff read with exemption notification issued under Rule 8 of the Central Excise Rules. ....
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....ed, viz., (i) exemption from payment of sales tax for a particular period; (ii) deferment of payment of sales tax for a particular period; and (iii) grant of incentive equivalent to sales tax payable by the unit. The aforestated three situations had been examined by the Board in consultation with the Ministry of Law. As far as situation (iii) is concerned, the circular stated thus: - "6. Examination of the situation, mentioned above in para 2(ii) & (iii), in the referring note give an indication that sales tax is payable by the assessee in both the situations. It is payable after a particular period in the second case. On the other hand, in the third situation, the sales tax is considered payable by the assessee even though it is paid by the State Government, the assessee keeping the said amount as cash incentive. In this situation sales tax would be considered as payable within the meaning of the provisions of Section 4(4)(d)(ii) of the Act. 7. We are therefore, of the opinion that in the category of cases mentioned in para 2(i), sales tax is not deductible whereas in the category of cases mentioned at (ii) and (iii) sales tax is deductible from the wholesale price for deter....
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....s to be held that circular entitles an assessee to claim deduction towards sales tax from the assessable value. The fact situation in Modipon Fibre Company (supra), as is manifest, was different. In our considered opinion what has been stated in Modipon Fibre Company (supra) cannot not be extended to include the situation (iii). We are inclined to think so as the definition of term "value" under Section 4(4)(d) was slightly differently worded and the CBEC had clarified the same in the circular dated 12.3.1998 and benefits were granted. 20. The question that would still remain alive is that what would be the effect of amendment of Section 4 which has come into force with effect from 1.7.2000. The Section 4(3)(d) which defines "transaction value", reads as follows: - "4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) & (2) * * (3) For the purposes of this section, - (a) to (cc) * * * (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in con....
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....al excise duty and that for sales tax can be best illustrated through an example. If the sales tax on a product 'A' of value Rs. 100/- is, say 5% and the set off available in respect of the purchase tax/ sales tax paid on inputs going into the manufacture of the product is, say, Re.1/-, then the sales tax law permits the assessee to recover sales tax of Rs. 5/-. But while paying to the sales tax deptt. be deposits an amount of Rs. 5-1 = Rs. 4 only. On the central excise duty payable would have been Rs. 5-1 = Rs. 4, in view of the set off notification, and the assessee would recover an amount of Rs. 4 only from the buyer as Central Excise duty. Thus, it is seen that the set off scheme in respect of sales tax operate in these cases somewhat like the CENVAT Scheme which does not have the effect of changing the rate of duty payable on the finished product. 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 w....
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....assessee. The words that gain signification are "actually paid". The situation after 1.7.2000 does not cover a situation which was covered under the circular dated 12.3.1998. Be that as it may, the clear legislative intent, as it seems to us, is on "actually paid". The question of "actually payable" does not arise in this case. 23. In view of the aforesaid legal position, unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of "transaction value" under Section 4(4)(d), for it is not excludible. As is seen from the facts, 25% of the sales tax collected has been paid to the State exchequer by way of deposit. The rest of the amount has been retained by the assessee. That has to be treated as the price of the goods under the basic fundamental conception of "transaction value" as substituted with effect from 1.7.2000. Therefore, the assessee is bound to pay the excise duty on the said sum after the amended provision had brought on the statute book. 24. What is urged by the learned counsel for the assessee is that paragraphs 5 and 6 of the circular dated 9.10.2002 do protect them, as....
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....circular does not so lay down, and had it so stated that would have been contrary to the legislative intention. 26. In view of the aforesaid analysis, we are of the considered opinion that the assessees in all the appeals are entitled to get the benefit of the circular dated 12.3.1998 which protects the industrial units availing incentive scheme as there is a conceptual book adjustment of the sales tax paid to the Department. But with effect from 1.7.2000 they shall only be entitled to the benefit of the amount "actually paid" to the Department, i.e., 25%. Needless to emphasise, the set off shall operate only in respect of the amount that has been paid on the raw material and inputs on which the sales tax/ purchase tax has been paid. That being the position the adjudication by the tribunal is not sustainable. Similarly the determination by the original adjudicating authority requiring the assessees to deposit or pay the whole amount and the consequential imposition of penalty also cannot be held to be defensible. Therefore, we allow the appeals in part, set aside the orders passed by the tribunal as well as by the original adjudicating authority and remit the matters to the resp....