TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 430
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.... located in the State of Madhya Pradesh and Chhattisgarh. Central excise duty at the rate of 5% ad-valorem was introduced on coal w.e.f. 01.03.2011 by the Finance Act, 2011 [the Finance Act] It was subsequently enhanced to 6% ad-valorem by the Finance Act, 2012. The various units/areas of the appellant were separately registered under Central Excise Act prior to 01.10.2013. The period in dispute in all the appeals pertains to periods prior to 01.10.2013. 2. The issue that arises for consideration in these thirty appeals is basically with respect to the deduction or otherwise from the 'transaction value' defined under section 4(3)(d) of the Central Excise Act, 1944 [the Central Excise Act] under the exclusion of 'other taxes' on the following amount received by the appellant in the sale cum excise invoices. a. Royalty b. Stowing Excise Duty, c. Forest Transit Fees d. Madhya Pradesh Rural Infrastructure and Road Tax, e. Entry Tax, f. Terminal Tax, g. CG Development and Environment Cess 3. One more issue that arises for consideration is whether excise duty is leviable on captive consumption of coal. 4. The thirty ....
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....3 05.04.2013 29.08.2013 14. Chirimiri 60692/2013 Feb 2012 to Jan 2013 05.04.2013 29.08.2013 15. Gevra 60693/2013 Mar 2012 to Jan 2013 05.04.2013 29.08.2013 16. Baikunthpur 60694/2013 Mar 2012 to Jan 2013 28.03.2013 29.08.2013 17. Bhatgaon 60695/2013 Mar 2012 to Jan 2013 28.03.2013 29.08.2013 18. Bisrampur 60696/2013 Mar 2012 to Jan 2013 28.03.2013 29.08.2013 19. Dipka 60697/2013 Mar 2012 to Jan 2013 28.03.2013 29.08.2013 20. HQ 50149/2015 Feb 2013 05.03.2014 29.09.2014 PART- B Duty demand on royalty & other levies Sl. No. SECL Unit/Area Excise Appeal No. Period SCN Date Order date Remarks 1. Sohagpur 56176/2013 Mar 2011 to Mar 2012 02.05.2012 14.12.2012 Time barred for March, 2011 2. Hasdeo 56544/2013 Mar 2011 to Mar 2012 04.05.2012 27.11.2012 Time barred for March, 2011 & Includes Duty Demand on Captive Consumption 3. Johilla 56550/2013 Mar 2011 to Mar 2012 02.05.2012 14.12.2012 Ti....
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....ve Hon'ble Judges in Kesoram Industries; (ii) The judgment of the Supreme Court in India Cement had not been stayed and, therefore, it was obligatory on the part of the Commissioner to have followed this decision of the Supreme Court in India Cement and by not doing so the Commissioner breached judicial discipline; (iii) The recovery provisions of section 11A of the Central Excise Act have been invoked on the allegation that the appellant had undervalued the excisable goods and, therefore, short paid duty. On the date of manufacture as well as the removal of goods there was no short payment of duty in view of the decision of the Supreme Court in India Cement and, therefore, proceedings could not have been initiated; (iv) The show cause notice is the foundation and if the show cause notice could not have been be issued, the entire confirmation of demand by the impugned order cannot be sustained; (v) The judgment of the Supreme Court in Mineral Area Development Authority vs. Steel Authority of India [(2024) 21 Centax 378 (S.C.)] rendered by nine Hon'ble Judges is not applicable to the facts of the present case. The issue under consideration before ....
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.... the learned authorized representative appearing for the department have been considered. 9. Section 4 of the Central Excise Act deals with valuation of excisable goods for purposes of charging of duty of excise. Sub-section (1) is as follow: "Section 4(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall- (a) in a case where the goods 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." 10. Section 4(3)(d) defines 'transaction value' in the following manner: "Section 4(3)(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 connection with the sale, whe....
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....nsaction value. 16. The law, as it stands today, is that royalty is not in the nature of tax in view of the Constitution Bench judgment of the Supreme Court rendered by nine Hon'ble Judges in Mineral Area Development Authority. The artificial distinction sought to be made by the learned counsel for the appellant that the Supreme Court was examining the provisions of the MMDR Act and not the Central Excise Act for the purpose of determining whether royalties in the nature of tax is not justified. It needs to be noted that royalty was paid by the appellant under the provisions of MMDR Act. This is the same Act which was considered by the Supreme Court in Mineral Area Development Authority to examine whether royalty is in the nature of tax or not. The Supreme Court in Mineral Area Development Authority took into consideration the earlier judgments rendered by the Supreme Court in Kesoram Industries and India Cement. The Supreme Court did not agree with the view earlier taken in India Cement and held that royalty is not a tax for it is a contractual consideration paid by the mining lessee to the lessor for the enjoyment of mineral rights. 17. It has, therefore, to be held that as....
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....11.03.2025] It was held that stowing excise duty is a duty of excise and, therefore, has to be excluded from the transaction value under the exclusion clause of 'other taxes' as contemplated under section 4(3)(d) of the Central Excise Act. The relevant portion of the decision is reproduced below: "38. We have seen the earlier paragraphs that the 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. Considering these provisions, we set aside the confirmed demand in respect of the Stowing Excise Duty and allow the Appeals." 24. It has, therefore, to be held, in view of the aforesaid decision of the Tribunal, that the amount received by the appellant towards the....
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....on behalf of the State. The impost, therefore, cannot be termed as a „fee' so as to deprive the respondents of the benefit of deduction of the tax for the purpose of Section 4(4)(d)(ii) of the Central Excise Act, 1944. (emphasis supplied) 27. In the present case, the burden of the regulatory forest transit fee is passed on to the buyers on actual basis. Such regulatory fee charged under the provisions of the Rules and Indian Forest Act, 1927 would, therefore, be in nature of a 'tax' and so cannot be included in the assessable value in terms of section 4(3)(1) of the Central Excise Act. Madhya Pradesh Rural Infrastructure and Road Tax 28. The Madhya Pradesh High Court in Neogy & Sons vs. The State of M.P. and Another[2006 SCC OnLine MP 912] examined the constitutional validity of the Madhya Pradesh Rural Infrastructure and Road Development Act, 2005. The petitioners had challenged the constitutional validity of the Act conferring power on the State Government to levy Rural Infrastructure and Road Development tax upto 20% of the annual value of the annual value of mineral bearing land leased for carrying out mining operation. 29. The annual value of mineral beari....
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....utilization of tax proceeds, Section 8 is quoted below:- 31. Section 8 of the said Act deals with utilization of the proceeds of tax and is reproduced below: "8. The proceeds of the tax shall be utilized by the State Government for improvement and development of infrastructure and roads in rural areas, with special emphasis to backward areas and mining areas, for which the State Government shall take appropriate measures by drawing up suitable infrastructure development programmes." 32. The Madhya Pradesh High Court, while examining the constitutional validity of the Act held as follows: "It is clear from the aforesaid provisions of the Act that tax has been imposed for the purpose of development of rural infrastructure and for road development. It. is clearly a tax on the land which bears mineral. Merely because of the definition of annual value of mineral bearing land in Section 2(a), there is reference to one half value of mineral produce during preceding two years which is made basis to realize tax in question in financial year, it cannot be said that it is a tax on the mineral. It remains essentially a tax on the land. Method of on mineral produced, met....
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....s but also the local authorities such as the Municipalities/Municipal Corporations. The amount paid by the appellant to the Municipalities/Municipal Corporations as Terminal Tax has been disputed on the ground that the same is not in the nature of a tax. 39. Terminal Tax is a tax imposed by the Municipality/Municipal Corporation under the Statute on goods or animal exported from the limits of the Corporation/Municipal Council. 40. The Madhya Pradesh High Court in South Eastern Coalfields Ltd. vs. State of Madhya Pradesh & Ors. [Writ Petition No. 1340 of 2005 decided on 21.02.2010] held that the Municipal Corporation has the authority to levy terminal tax under the Municipal Corporation Act and such power is derived from Entry 56 of List II of the Seventh Schedule of the Constitution. 41. The judgment of the Madhya Pradesh High Court was challenged before the Supreme Court and is reported in 2023 SCC Online SC 1238. The Supreme Court held that section 132 of the Madhya Pradesh Municipal Corporation Act, 1956 provides for 'taxes to be imposed under the Act' and that sub-section 6(n) of section 132 empowers the Corporation to levy a 'terminal tax' on goods and animals exporte....
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.... authority for public purposes enforceable by law. Further, the Rules provide for a complete machinery for collection, assessment and recovery of tax. 47. The infrastructure development Cess and environment Cess are, therefore, in nature of tax and, therefore, not liable to be included in the assessable value in terms of section 4(3)(d) of the Central Excise Act. Duty demand on captive consumption 48. In respect of three Excise Appeal No's. 52024 of 2014, 56544 of 2013 and 56550 of 2013, duty demand has been raised on the quantity of coal which has been captively consumed in boiler within the mining premises in the underground mines. The Commissioner, after noticing that coal was captively used in boiler, disallowed exemption under Notification No. 67/95-C.E. dated 16.03.1995. 49. This issue has been decided by the Tribunal in favour of the appellant in South Eastern Coalfields Ltd. vs. CCE, Raipur [2018 (364) E.L.T. 404 (Tri.- Del)] The entitlement of exemption under the Notification has been held to be justified in respect of coal captively consumed within the mines for use in further production of coal. The said decision has also been followed by the Commissioner (Ap....
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....nt specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice". 52. It would be seen from a perusal of sub-section (4) of section 11A of the Central Excise Act that where any excise duty has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice to the person chargeable with the duty requiring him to show cause why he should not pay the amount specify in the notice. Sub-section (4) of section 11A, however, provides that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, by reason for fraud; or collusion; or any wilful mis-statement; or suppression facts; or contravention of any of the provisions of the Act or Rules made thereunder with intent to evade payment of duty, the Central Excise Officer shall, within five years from the relevant date service notice on such person requiring into show cause why he should not pay the amount specified in notice with interest and penalty. 53. Learned counsel for the appellant submitted that appellant had not suppressed any material facts f....
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....t of duty. It is submitted that there has been no willful suppression, as explained hereinbefore, since SECL is with the bonafide belief that no Central Excise duty is payable on the aforesaid elements recovered from the buyers in as much as the said elements are in nature of statutory levies excludible from the assessable value. 6.2 Furthermore, it is submitted that it is a settled position of law that there is a presumption that PSUs do not have any intention to evade the payment of tax as held by the Hon'ble Tribunal in the case of Burn Standard Co. Ltd. vs. CCE [2007 (216) E.L.T. 77 (Tri.)] and earlier upheld by the Hon'ble Supreme Court in the case of CCE vs. Chennai Petroleum Corpn. Limited [2007 (211) E.L.T. 193 (SC)]. In view of the fact that SECL is a PSU, it is submitted that an allegation of evasion and suppression of fact may not be leveled against the same." 57. The Commissioner did not accept the contention advanced by the appellant and held that the extended period of limitation was correctly invoked. The relevant portion of the order of the Commissioner is reproduced below: "27. The Noticee has canvassed that demand is time barred as extended pe....
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.... an intent to evade payment of duty. 61. In Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay [1995 (78) E.L.T. 401 (SC)] the Supreme Court examined whether the department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Central Excise Act. The proviso to section 11A of the Central Excise Act which was considered by the Supreme Court carved out an exception to the provisions that permitted the department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since "suppression of facts' has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations of the Supreme Court are as follows: "4. Section 11A empowers the Department to reopen proceedings if the levy ....
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.... When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act." (emphasis supplied) 63. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I [2007 (216) E.L.T. 177 (SC)] also held: "10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means fa....
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....so to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL's contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return." (emphasis supplied) 65. Commissioner of C. Ex. & Customs vs. Reliance Industries Ltd [2023 (385) E.L.T. 481 (S.C.)] the Supreme Court held that if an assessee bonafide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it the responsibility of the assessee to determine the liability co....
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.... tax and, therefore, in terms of section 4(3)(d) of the Central Excise Act, the amount of royalty was not required to be included in the transaction value. It is subsequently that the judgment of the Supreme Court in India Cement was reversed by the Supreme Court in Mineral Area Development Authority and it was held that royalty is not in the nature of a tax. In respect of the amount collected from Serial No. 'b' to 'g' of the chart, it has been found that they are in the nature of 'other taxes' contemplated under section 4(3)(d) of the Central Excise Act. 67. It can, therefore, safely be said that the appellant, a Government of India undertaking, could have bonafide believed that it was not liable to pay central excise duty and, therefore, there cannot be any intent to evade payment of duty. 68. The extended period of limitation, therefore, could not have been invoked in the facts and circumstances of the case. 69. In respect four Excise Appeal No's. 56176 of 2013, 56544 of 2013, 56550 of 2013 and 56551 of 2013, the duty demand has been proposed by issuing show cause notice in May 2012 for the period March 2011 to March 2012. According to the appellant, the demand for the....
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....irmed. The amount received towards 'b' to 'g' of the chart has not been confirmed. 74. The Supreme Court examined the imposition of penalty in Mineral Area Development Authority vs. Steel Authority of India [(2024) 21 Centax 313 (S.C.)] in paragraph 22 of the judgment and held that taking into consideration the lapse of more than three decades since India Cement was decided and more than a decade since the matter was referred to a Larger Bench, equities will be balanced if the State Governments waive the outstanding interest accrued on the principal amount due from the assessee. The relevant paragraph is reproduced below: "22. The total amount, that is the principal plus the interest, due by the assesses in the pending matters may be substantial in comparison to their total net worth. Steel Authority of India has stated on affidavit that retrospective application of MADA (supra) will lead to revival of cumulative demands to the tune of approximately Rupees three thousand crores from different States. The delay in the court proceedings should not be to the detriment of the assesses (See K C Ninan v. Kerala State Electricity Board, 2023 SCC OnLine SC 663 [339]). Taking in....