Custom, Excise & Service Tax Tribunal
M/S Emsons Organics Private Limited vs Cce, Chandigarh Ii on 30 October, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 30/10/2015. DATE OF DECISION: 30/10/2015. Excise Appeal No. 1131 of 2010 [Arising out of the Order-in-Original No. 15-18/CE/CHD-II/2010/ 7096 dated 19/02/2010 passed by The Commissioner of Central Excise, Chandigarh II.] For Approval and signature : Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Emsons Organics Private Limited Appellant Versus CCE, Chandigarh II Respondent
Appearance Shri K.K. Anand, Advocate for the appellant.
Shri S. Nanthuk, Authorized Representative (Jt. CDR) for the Respondent.
CORAM: Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order No. 53425/2015 Dated : 30/10/2015 Per. B. Ravichandran :-
The appeal is against order-in-original dated 19/02/2010 passed by the Commissioner of Central Excise, Chandigarh II. The appellant are engaged in the manufacture of Step II of 7ACCA Organic Compound liable to Central Excise duty.
2. After a scrutiny of records by Audit, the Revenue initiated proceedings against the appellant for recovery of Central Excise duty short paid during the period April, 2003 to October, 2008. The first show cause notice dated 04/11/2008 was issued covering period from April 2005 to December 2007; the second show cause notice dated 03/12/2008 was issued covering period from January 2008 to October 2008. The issue in brief is that the appellant have not paid full amount of VAT received on sale of finished goods from the buyer to the sales tax department. They retained certain amount as per the scheme announced by the Punjab Government. The proceedings initiated against the appellant to demand differential central excise duty is on the ground that the retained amount is not actually paid as VAT to Government and hence will be additional consideration to be added in value for central excise levy. The impugned order confirmed the demands and imposed equal penalty. The present appeal is against this order.
3. The learned Counsel for the appellant Shri K.K. Anand submitted that on merits the case has been held against the appellant in view of Honble Supreme Courts decision in CCE, Jaipur II vs. Super Synotex (India) Ltd. reported in 2014 (301) E.L.T. 273 (S.C.). Hence, they are not contesting on the merits of the valuation and consequent demand. The only point of submission made by the learned Counsel is on the time bar aspect of first demand dated 04/11/2008. This demand covered the period from 01/04/2005 to 31/12/2007. The learned Counsel pleaded that there is no question of fraud, collusion or suppression on their part. The whole issue involved different interpretations even by the Board and Tribunals before the Honble Supreme Court ruled on the correct interpretation regarding VAT amount retained by the assessee as per various incentive scheme implemented by the State Governments.
4. The learned AR Shri S. Nanthuk, reiterated the findings of the Original Authority and stated that the demand for the full period is rightly confirmed alongwith penalties.
5. We have heard both the sides and examined appeal records. On the merits of the case, regarding quantum of sales tax permissible for deduction for valuation under Central Excise Law, has been settled by the Honble Supreme Court in the case of CCE, Jaipur II vs. Super Synotex (India) Ltd. (supra) and in Maruti Suzuki India Ltd. 2014 (307) E.L.T. 625 (S.C.). The appellants have no case on merits. This has been admitted by the learned Counsel by the appellant. However, the appellants are contesting a part of the demand confirmed, on the question of time bar. The first show cause notice dated 04/11/2008 was issued invoking extended period of limitation in terms of proviso to Section 11A of the Central Excise Act, 1944. The appellants main plea is that the whole issue regarding the quantum of deduction of sales tax in respect of incentive schemes announced by the State Government/credit set off, is a subject matter of interpretation and decision by the Tribunal in various cases. In fact, the Board also clarified on this issue vide Circulars dated 12/03/1998 and 09/10/2002. In the case of Maruti Udyog Limited vs. CCE, Delhi III reported in 2004 (166) E.L.T. 360 (Tri. Del), the Tribunal held that deduction is permissible of the full sales tax chargeable and the fact that there is an adjustment between the assessee and the State Government on payment of sales tax does not change the legal position. In Super Synotex (India) Ltd. vs. CCE, Jaipur reported in 2003 (160) E.L.T. 859 (Tri. Del.), the Tribunal held that assessee is eligible for deduction of sales tax charged from the buyers and not restricted to the amount paid to the Government. Similar view was taken by the Tribunal in Pratap Rajasthan Spl. Steel Limited vs. CCE, Jaipur reported in 2006 (205) E.L.T. 361 (Tri. Del.). The issue regarding treatment of sales tax for deduction for valuation of goods for Central Excise duty has been dealt with by the Tribunal. The Board vide Circulars dated 11/01/1994, 01/07/2002 and 09/10/2002 also issued clarifications. These clarifications were issued after representations from the trade and on due consultation with Ministry of Law etc.
6. The above discussion will show that the deduction of sales tax amount in Central Excise value has been a subject matter of dispute and interpretation during the relevant time. The Honble Apex court settled the matter in the decisions mentioned above. The Honble Supreme Court in the case of Super Synotex (India) Ltd. observed as below :-
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 01/07/2000 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.
7. Hence, considering the above position, we are of the view that the appellants plea of bonafide belief and non-existence of elements of fraud, collusion, suppression etc. on their part merits consideration. We find the show cause notice dated 04/11/2008 did not elaborate the reason for invoking the extended period. The impugned order confirms the demand for longer period. We find the conclusion and the analysis made in the original order on this issue as unsustainable. The Honble Supreme Court in the case of Jaiprakash Industries Ltd. vs. CCE, Chandigarh reported in 2002 (146) E.L.T. 481 (S.C.) held that if there were divergent views there could be bonafide doubt on the part of the assessee. In the case of CCE, Chandigarh vs. Punjab Laminates Pvt. Ltd. reported in 2006 (202) E.L.T. 578 (S.C.), the Honble Supreme Court held that the proviso clause of Section 11A provides for an exception. It is not the rule. A case, therefore, has to be made out for attracting the same. In the present case, we find the whole issue cropped up during the course of scrutiny of purchase invoices by the audit party and certain ledger accounts maintained by the appellants. It is not disputed that the present demand arose because of the difference between the sales tax amount collected by the appellant from the buyer and actually paid to the State Government. This is as per a incentive scheme announced by the State. All these transactions are duly accounted for and maintained. As already stated there is a clear possibility of bonafide doubt regarding the quantum of deduction of sales tax in view of different interpretations prevalent during the time. The Tribunal in the case of Indian Oil Corporation Ltd. vs. CCE, Ahmedabad reported in 2013 (291) E.L.T. 449 (Tri. Ahmd.), in a matter involving Central Excise duty consequent on re-calculation of sales tax, held that the issue involved bonafide dispute as requires interpretation of valuation provisions and no extended period can be invoked.
8. Considering the above discussion, we are of the opinion that while the appellants are liable to pay the Central Excise duty as per the valuation determined in the impugned order the demand for extended period cannot be sustained. Accordingly, the penalty on the appellants is also set aside. As such, the appeal is partly allowed in the above terms.
(Operative part of the order pronounced in the open court.) (Sulekha Beevi C.S.) Member (Judicial) (B. Ravichandran) Member (Technical) PK ??
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