Custom, Excise & Service Tax Tribunal
Kinetic Engineering Ltd vs Commissioner Of Central Excise on 28 July, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/1983/06, E/149/07, E/79/08, E/628/08, E/324/09, E/414/09, E/1028/09, E/1278/09, E/873/10 (Arising out of Order-in-Original/Appeal No.08/CEX/2008 dated 11/03/2008, 36/CEX/07 dated 24/10/2007, P-III/BKS/CEX/25/2005-06 dated 15/02/2006, 28/CEX/2009 dated 15/09/2009,18/CEX/2009 dated 07/07/2009, IPL/236/NSK/2008 dated 24/12/2008, 01/CEX/2009 dated 27/01/2009, 04/CEX/2010 dated 19/02/2010, 12/2006/C dated 06/11/2006 passed by Commissioner of Central Excise & CCE (Appeals) Nashik, Pune, Nagpur) For approval and signature: Honble Mr. P.G.Chacko, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the :No CESTAT (Procedure) Rules, 1982? 2. Whether it should 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? Seen 4. Whether Order is to be circulated to the Departmental authorities? Yes ======================================================
Kinetic Engineering Ltd., Ballarpur Industries Ltd., EPCOS India Pvt Ltd., Ace Glass Containers Ltd., EPCOS India Ltd., Appellants Automative Stampings and Assemblies Ltd., Tetra Pak India Pvt. Ltd., DGP Hinoday Industries Ltd., Prima Paper & Engineering Pvt Ltd., Vs. Commissioner of Central Excise, Pune, Nagpur, Nashik, Respondent Appearance:
Shri. Bharat Raichandani, Prakash Shah, Ms.Padmavati Patil, J.H. Motwani, Advocate for appellant Shri.K.M.Mondal, Consultant & P.K.Agarwal, JCDR, for respondent CORAM:
Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 28/07/2011 Date of Decision : /09/2011 ORDER NO Per: P.R.Chandrasekharan
1. There are nine appeals, which are under consideration in this case. As all these appeals involve the same issue they are taken up together for disposal. The details of the appeals, parties involved, period of dispute, amount of duty involved, and other relevant particulars are given in the table below:-
S.No. Appeal No. Name of the appellant Period of dispute Date of Show cause notice Amount of sales tax deferred (in Rs.) Sales tax pre-paid at Net Present Value (Rs.) and date of payment Sales tax abatement on which duty 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 7-9-2007 2,43,50,711/-
69,08,526/-
Pre-paid in Oct.04 and Jan.06 1,40,19,000/-
22,87,900/-
24-12-2008 CCE (Appeals), Nashik 1993 Package Incentive Scheme 6 E/414/09 Automotive Stampings and Assemblies Ltd., Pune 1-11-1999 to March, 2003 27-4-06 17,73,48,164/-
5,69,30,322/-
Pre-paid in March to August,03 12,04,17,842 1,92,66,855/-
27-01-09 CCE,Pune 1993 Package Incentive Scheme 2003-04 to 2004-05 31-3-2008 20,93,56,045/-
6,83,34,153/-
Pre-paid in July, 06 10,18,15,767/-
1,64,69,815/-
27-01-09 CCE, Pune
-do-
7. E/1028/09 Tetra Pak India Ltd.
1998-99 to 2003-04 Nov. 06 12,36,47,755/-
4,36,77,308/-
7,99,70,453/-
67,73,810/-
7-7-09 CCE, Pune Though duty demanded in the SCN was Rs. 1,30,51,178/-, demand for the period of March, 98 to Oct.2001 amounting to Rs. 62,77,368/- was held as time barred.
8. E/1278/09 DGP Hinoday Industries Ltd., Pune 2004-05 to 2005-06 28-2-2007 9,79,54,328/-
2,63,13,511/-
7,17,40,817/-
1,17,08,101/-
15-9-09 CCE, Pune
9. E/873/10 Prima Paper s & Engg. P Ltd., Puneer April 02 to March 07 & 2007-08 22-8-07 & 12-9-08 8,84,96,134/-
2,90,86,689/-
5,94,09,445/-
96,81,420/-
(82,74,501 + 14,06,919) 17-2-2010 CCE, Pune 1998 Power Generation Promotion Policy Sales tax deferral scheme
2. The common issue involved in these appeals is that all the appellants mentioned in the Table above applied for eligibility certificates for new units for sales tax incentive under Sales Tax Incentive 1988 Scheme or Part-I of 1993 packages scheme as notified by the Government of Maharashtra Resolution dated 30/09/88 or 1998 Power Generation Promotion Policy Sales Tax Deferral Scheme. The appellants were also issued with the eligibility certificates by SICOM Ltd./ MEDA, Pune (implementing agencies under the Schemes). As per the scheme which related to deferment of sales tax, the appellants were permitted to charge sales tax for the sale of goods and the amount of sales tax collected were permitted to be retained by the appellants and the same were required to be paid by the appellants to the State Government in five equal yearly installments on expiry of the 10th year as computed from the last date of filing returns.
2.1 Sub-section (4) 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, to prematurely pay in place of the deferred tax amount, an amount equal to the net present value (NPV) of the deferred tax. On making payment of the NPV, the deferred tax shall be deemed to have been paid. Rules were also framed for calculating the NPV of deferred tax for the purpose of making payment by the eligible unit who opted to make the premature payment.
2.3 The appellants opted to pay the amount equal to NPV and the same was verified by the sales tax department and the sales tax department based on the premature payment scheme issued assessment certificates discharging the appellants from payment of any further amount towards deferred tax.
2.4 The department carried out investigation on the matter and scrutinized the records of the assessee. They found that the appellants made payment of sales tax at NPV, which was lower than the deferred sales tax and which was collected from the customers. The difference between the actual sales tax collected from the customers and the payment made at NPV was shown as gain on extinguishment of deferment liability by the appellants. It was also noticed that the appellants suo motu did not disclose these facts to the department. Since the transaction value as defined under Section 4 (3) (d) of the Central Excise Act, 1944, excludes only the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods, the department was of the view that the difference between the sales tax collected from the customers and the sales tax paid to the state authorities at NPV should be treated as an additional consideration received from the buyers of the goods and, therefore, they should form part of the transaction value. Accordingly, the department issued show-cause notices as detailed in the table above alleging suppression of facts and demanding differential duty invoking the extended period of time under the proviso to Section 11A (1) of the Central Excise Act, 1944. All the above notices were adjudicated upon by the jurisdictional Commissioners of Central Excise/Commissioner (Appeals), who vide orders-in-original/order-in-appeal cited supra confirmed the duty demands under the proviso to Section 11A (1) of the Central Excise Act, 1944. The orders also demanded interest on the duty short paid under Section 11AB of the said Central Excise 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 did not vary for the reason that the appellants have availed the deferment scheme. Therefore, the sales tax actually payable is at the rates specified in the invoice and this amount of sales tax indicated in the invoice is not includable in the transaction value. The amount of sales tax shown in the invoices issued to the customers indicate the amount actually payable under the Bombay Sales Tax Act and, therefore, this amount of sales tax actually indicated in the invoice is a permissible deduction for the purpose of determining the transaction value under Section 4 of the Act. In terms of the proviso to Section 38 (4) of the Bombay Sales Tax Act, which provided an option to the appellants, the appellants were allowed to prematurely pay, at a discounted value, the sales tax amount collected from the customers instead of paying the same in deferred installments. Thus, there was no exemption from payment of sales tax granted by the Government of Maharashtra.
3.2 Further, as is clear from the proviso to said section 38 (4), by immediately paying the NPV, the appellants were deemed to have paid the entire amount of sales tax collected by them. The deeming provision under the proviso to Section 38 of the BST Act is a legal fiction accorded by law and the same cannot be ignored for the purpose of determining the assessable value under Section 4 of the Central Excise Act, and there are any number of judicial pronouncements, which lay down that statutory fiction accorded by a legal provision have to be given full effect and they rely on the following judgements in support of their contention:
a) PEK Kalliani Amma Vs. K. Devi (1996) 4 SCC 76
b) State of Bombay Vs. Pandurang, Vinayak AIR 1953 SC 244
c) CIT Vs Bai Vina 1965 (58) ITR 100 (Guj)
d) UOI Vs. Jalyan Udyog 1993 (68) ELT 9 (SC) In the light of these judgements, they contend that the department can not raise an argument saying that though payment of NPV would discharge the appellants from their sales tax liability, but the same payments can not discharge them from central excise duty while arriving at the assessable value under section 4 of the Central Excise Act by restricting the deductions towards sales tax only to the extent of NPV paid. If that is done, what is given by one hand is taken away by the other and the intention of 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 amount paid was by the assessee to the State authorities or not.
3.4 The Ld. Advocate also points out that even for the purposes of Income Tax Act, which allows deduction towards taxes paid for determination of income under Section 43B of the Income Tax Act, 1961, the Central Board of Direct Taxes vide Circular No.496 dated 25/09/1987 has clarified that the sales tax deferred under the sales tax deferral scheme shall be treated as actually paid and the same position was reiterated in Circular No.674 dated 29/12/93.
3.5 The Ld. Counsel further submits that this Tribunal in a number of judicial pronouncements have upheld the above proposition and relies on a number of judicial pronouncements, namely, (1) Super Syncotex (India) Ltd., Vs CCE, Jaipur, reported in 2003 (160) ELT 859 (Tri-Delhi); (2) Maruti Udyog Ltd., Vs. CCE, Delhi, reported in 2004 (166) ELT 360 (Tri-Delhi); (3) Pratap Rajasthan Spl. Steel Ltd., Vs. CCE, Jaipur, reported in 2006 (205) ELT 361 (Tri-Delhi); (4) CCE, Jaipur-II Vs. Shruti Synthetics Ltd., reported in 2005 (180) ELT 275 (Tri-Delhi); and (5) CCE, Haldia Vs. Eastern Setcrete Pvt. Ltd., reported in 2008 (223) ELT 646 (Tri-Kolkata). It is further submitted that the judgement of the Tribunal has been upheld by the Kolkata High Court in the case of Eastern Setcrete Pvt Ltd. In the light of the submissions, it is their contention that deferred sales tax payable by them at the time of removal of the goods ought to be permitted as a deduction while determining the transaction value. notwithstanding the fact that subsequently under a scheme provided by the Government they have discharged the sales tax liability at NPV.
3.6 The Ld. Counsel also points out that in many cases the demands are also time barred and demands have been issued far beyond the extended period of five years and such demands are unsustainable in law.
4. The Ld. Special Consultant for the department on the other hand would contend as follows:
4.1 As regards the reliance placed by the appellants in the case of Super Syncotex (India) Ltd., Maruti Udyog Ltd., Pratap Rajasthan Special Steel Ltd., and Shruti Synthetics Ltd., the department had filed appeals against the orders of the Tribunal and they have been admitted by the honble apex Court as civil appeals. Therefore, in terms of the judgment of the honble 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 submitted that in Board circular No.643/34/2002-CX dated 01/07/2002 the Board had clarified that as per definition of transaction value, taxes are deductible only on actual basis either paid or payable by the assessee.
4.3 The Ld. Consultant for the department further points out that as regards the contention of the appellants that part of the demand is time barred, in CCE Vs. Mehta & Co., 2011-TIOL-17-SC-CX, the honble apex Court had held that the cause of action i.e., the date of knowledge by the department of the frauds committed by the assessee is relevant for computing the period of limitation of five years and in the instant cases, if that date is taken into account, the demands are within time. The Jt. CDR appearing for the department also points out that in Adhunik Detergents Ltd., Vs. CCE, Allahabad, 2000 (119) ELT 342 (Tri) this Tribunal had held that if the goods manufactured by the appellants is exempted from sales tax during the relevant period and, therefore, no sales tax is payable on goods, deduction as contemplated in Section 4 (4) (d) (ii) would not be permissible. Similarly, in the case of Mewar Textile Mills Vs. CCE, Jaipur, 2000 (117) ELT 622 (Tri.) this Tribunal had held that when exemption has been granted from sales tax, the amount so collected as sales tax is includable in assessable value because in such a situation sales tax is not payable. In the case of Asst. Collector of Central Excise Vs. Bata India Ltd., 1996 (84) ELT 164 (SC), the honble apex Court had held that there cannot be any question of deduction of duty payable on the goods from the wholesale price when no duty has been actually been included in the wholesale price. In the light of the above submissions, the department contends that the appellants are not entitled for the deduction towards the sales tax amount, which they have not actually paid to the sales tax authorities under the sales tax deferral scheme. In other words, it is the departments contention that the differential amount of sales tax i.e., sales tax payable under the deferral scheme minus the NPV value paid by the appellants, has to be treated as an additional consideration for sale of goods and therefore, ought to be included in the assessable value and accordingly they plead for sustaining the orders 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 Boards Circular No. 4/85 (F.No. 6/ 15/85-CX.I), dated 14-3-1985 regarding addition and exclusion of Sales-tax in the assessable value. The trade has raised a doubt about the deductions given in respect of sales tax leviable by State Government, while determining the Assessable value. The following three situations arise as a result of incentive schemes formulated by some of the State Governments for ensuring rapid industrialisation in the backward areas of the States :-
i) Exemption from payment of sales tax for a particular period;
ii) Deferment of payment of sales tax for a particular?period;
iii) Grant of incentive equivalent to sales tax payable by the? units.
2. The?matter regarding the above three situations has been examined by the Board in consultation with Ministry of Law.
3. In category of cases mentioned in Para 1(i) sales tax is not deductible as no sales tax is payable by the assessee in accordance with the Law.
4. In situation (ii), Sales tax is payable by the assessee after a particular period. In situation (iii), the manufacturer collects the sales tax from the buyers and retains the same with him instead of paying it to the State Govt. The State Govt. on the other hand grants a cash incentive equivalent to the amount of sales tax payable and instead of the cash incentive being paid to the manufacturer, is credited to State Govt. account as payment towards sales tax by the manufacturer. In such a situation sales tax is also considered payable by the assessee within the meaning of the provisions of Section 4(4) (d)(ii) of the Central Excise Act, 1944. Therefore, sales tax is deductible from the wholesale price for determination of assessable value for levy of Central Excise Duty in category of cases mentioned in Para 1(ii) & (iii) above.
5. The?advice of Ministry of Law in the matter has been accepted by the Board and is enclosed for information.
From the above circular, it is clear that where sales tax is paid on a deferment basis or where an incentive equivalent to sales tax payable is granted, in both the situations, the sales tax payable is deductable from the wholesale price for determination of assessable value for levy of Central excise duty within the meaning of the provisions of Section 4 (4) (d) (ii) of the Central Excise Act, 1944 as it stood at the relevant time.
5.2 Similarly, the issue of abatement in respect of set-off on sales tax was again considered by the CBEC and the Board vide Circular 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 30/06/2000 explaining the provisions of new Section 4 which would come into force from 01/07/2000. In the said instructions in paras 10 & 11, it was clarified as follows:
10. As regards exclusion of taxes while working out? assessable value, the definition of transaction value itself mentions that whatever amount is actually paid or actually payable to the Government or the relevant statutory authority by way of excise, sale tax and other taxes, such amount shall be excluded from the transaction value. In other words, if any excise duty or other tax is paid at a concessional rate for a particular transaction, the amount of excise duty or tax actually paid at the concessional rate shall only be allowed to be deducted from price. The assessee cannot claim that the excise duty or tax payable at the "normal rate" should be allowed to be deducted. The words "actually paid" have, therefore, been used to the definition of transaction value to reflect the legislative intention as explained above.
11. The words "actually payable" in the context of the? amount of duty of excise, sales tax and other taxes would normally come into play only in those situations where the amount of excise, sales tax or other taxes is not paid at the time of transaction but paid subsequently, for example, sales tax payable under a deferment scheme. .
5.5 A combined and harmonious reading of the above instructions make it more than abundantly clear that the consistent stand and understanding of the revenue has always been that the amount of sales tax paid or payable is permissible to be deducted irrespective of the fact whether the sales tax was paid immediately or on a deferred basis and irrespective of the fact whether incentives were provided by the State Government towards sales tax in any manner.
5.6 The provisions of Section 4 as they stood during the disputed period i.e. both prior to 01/07/2000 and after 01/07/2000 read as follows:
Prior to 1-7-2000 SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall subject to the other provisions of this section, be deemed to be
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the 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) assessee means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) place of removal means
(i) a factory o any other place or premises of production or manufacture of the excisable goods; [* * *]
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory and, ] from where such goods are removed;
(ba) time or removal, in respect of goods removed from the place of removal referred to in sub-clause (iii) of clause (b), shall be deemed to be the time at which such goods are cleared from the factory:]
(c) .
(d) value, in relation to any excisable goods, -
(i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee.
Explanation, -
(ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale.
Explanation, -
(e) .
Rule 4 of the Central Excise (Valuation) Rules, 1975 further provided that ,-
The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of the removal of the goods, subject, to such adjustment on account of the difference in the dates of delivery of such goods and of the excisable goods under assessment as may appear reasonable to the proper officer..
With effect from 1-7-2000 SECTION [4. Valuation of excisable goods for purposes of charging of duty of excise. - (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.
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 excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;] [(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed;
(cc) time of removal, in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory;
(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, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
Rule 7 of the Central Excise (Valuation) Rules, 2000 provides that ,-
Where the excisable goods are not sold by the assesse3e at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises (hereinafter referred to as such other place) from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment..
5.7 A careful reading of the above legal provisions clearly indicates that much emphasis has been placed in the central excise law with regard to the concept of time and place of removal. The law very clearly provides that the value for the purposes of levy of excise duty has to be determined at the time and place of removal for 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 enforced or implemented in a fair and reasonable way. That is the reason why in all the provisions relating to determination of value, right from 1944 onwards, it has been provided in the law that the value has to be determined at the time and place of removal of the goods. In the instant case, the appellants claimed deduction towards sales tax as per the liability at the time of removal of the goods. Subsequently if that liability got altered due to changes in law or for any other reason, such alteration cannot have any impact or effect on the assessable value of the goods, which were cleared much earlier. A perusal of the table listed in the opening paragraph of this order clearly shows that the period of dispute involved was from 1992 to 2007-2008. In other words, the goods were cleared during this period. In all these cases, the sales tax liability applicable at the time of removal of the goods was deferred and the said liability was allowed to be discharged at the net present value of the deferred tax in terms of the changes in sales tax law introduced in November, 2002 in public interest This change in the liability has nothing to do with the abatement towards sales tax permissible under the central excise law at the time of removal of the goods. All the boards instructions cited supra also clearly points to this fact. The provision for payment of NPV towards discharge of deferred sales tax liability was introduced in the Bombay Sales Tax Act only in 2002 subject to certain terms and conditions. The said provisions as can be seen in para 2.1 above clearly states that the premature payment in place of tax deferred by an amount equal to NPV of the deferred tax can be availed by the sales tax assessee at his option and such payment shall be deemed to be in discharge of the total sales tax liability under the sales tax deferral scheme and the provisions has been introduced in the law in public interest. It would be also relevant to note that the changes in sales tax law made in November 2002, did not alter the rate of sales tax payable nor provided any exemption from payment of sales tax. The only consequence was that it provided an option to the eligible assessee to discharge the deferred sales tax liability by paying its Net Present Value (NPV). It is relevant to note that the said provision 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 setting up industries in backward areas. Under these schemes, eligible units are permitted to collect sales tax and retain such tax for a prescribed period. After this period, the sales tax is to be paid to the Government either in lump sum or in installments.
2. Section 43B of the Income-tax Act, 1961, introduced by the Finance Act, 1983, with effect from 1-4-1984 provides inter alia, that a deduction in respect of any sum payable by the assessee by way of tax or duty under any law for the time being in force shall be allowed from the income of the previous year in which such sum is actually paid irrespective of the previous year in which the liability to pay such sum was incurred. Since the introduction of this provision, assesses who collect sales tax, but do not pay the amounts to the Government during the previous year, under the deferral schemes provided by the State Governments are not entitled to the benefit of deduction from their income.
3. Representations have been received from various State Governments and others that cases of deferred sales tax payments should be excluded from the purview of section 43B as the operation of this provision has the effect of diluting the incentive offered by the deferral schemes.
4. The matter has been examined in consultation with the Ministry of Law and the various State Governments. The Ministry of Law has opined that if the State Governments make an amendment in the Sales Tax Act to the effect that the sales tax deferred under the scheme shall be treated as actually paid, such a deeming provision will meet the requirements of section 43B.
5. The Government of Maharashtra have by the Bombay Sales Tax (Amendment) Act, 1987, made the amendment accordingly. The Board have decided that where amendments are made in the sales tax laws on these lines, the statutory liability shall be treated to have been discharged for the purposes of section 43B of the Act.
6. The Commissioners of Income-tax may bring the contents of this circular to the notice of all the officers working under them..
As per the circular, if the sales tax laws contain a deeming provision to treat the payment of NPV as discharge of liability towards deferred sales tax, deduction under Section 43B will be allowed for the full amount of sales tax and NOT for the amount of NPV paid. The issue was also a subject matter of consideration in the case of Sulzer (India) Ltd. Vs. Jt. CIT reported in 2010-TIOL-670-ITAT-MUM (SB) 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 honble apex Court, these judgments are in jeopardy till the matter is finally decided by the honble apex court and hence they may not have any precedential value. However, it would be relevant to note that the honble apex Court did not stay any of these orders, which implies the law as interpreted in these orders are still valid and enforceable. In all these judgements (cited in para 3.5 supra), the consistent view taken is that abatement of sales tax granted under the state laws or grant of sales tax incentives does not, in any way, affect the admissibility of deduction towards sales tax while determining the value for the purposes of Central Excise levy. We are in respectful agreement with the interpretation of law made in these judgements. On the other hand, the citations relied upon by the Revenue also do not support the Revenues case. In the Adhunik Detergents Ltd., case relied upon by the Revenue there was a sales tax exemption available and no sales tax was payable on the goods and, therefore, it was held that deduction as contemplated in Section 4 (4) (d) (ii) would not be permissible. The Mewar Textile Mills case relied upon by the Revenue also deals with a case where sales tax exemption was granted. The Bata (India) case referred to by the Revenue dealt with a situation were the tax was not part of the price and, therefore, exclusion of tax was not permitted. In the case under consideration before us, there is no exemption from sales tax. Sales tax is liable to be paid on a deferred basis. An option has been given to the assessee to discharge the entire liability by paying a sum/amount equal to NPV of the deferred tax liability and on such payment the entire deferred tax liability is deemed to be discharged. Since the facts are totally distinct and distinguishable, the judgements relied upon by the Revenue has no relevance to the facts in hand and, therefore, the ratio of these judgements do not apply.
5.10 There are a few judicial pronouncements, which considered the issue of impact on the assessable value on account of changes which take place subsequent to the clearance of the goods and the ratio of these judgments has a bearing on the issues involved in the present case. In Indo Hacks Ltd., Vs. CCE, Hyderabad, reported in 1986 (25) ELT 69 (Tribunal), a three member Bench of this Tribunal considered the question whether subsequent reduction in prices after the clearance of the goods from 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 honble 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 Tribunals view that the duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date is unexceptionable. Besides as rightly observed by the Tribunal the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned. That being so, even if we assume that the roll back in the price of tyres manufactured by the appellant-company was occasioned on account of the directive issued by the Central Government, that by itself, without anything more, would not entitle the appellant to claim a refund on the price differential unless it is shown that there was some agreement in this behalf with the Government and the latter had agreed to refund the excise duty to the extent of the reduced price.
Again in the case of Shri Bhagwati SSK Ltd. Vs. CCE, Pune, reported in 2000 (115) ELT 120 (Tri) this Tribunal held that fluctuations in price of excisable goods subsequent to clearance of goods would not affect assessable value and liability of excise duty already accrued. In the case of Triveni Engineering & Industries Vs. CCE, Meerut, reported in 2002 (148) ELT 1041 (Tri-Del), this Tribunal considered a case where sugar was cleared at prices fixed by the Government for levy quota sugar and the prices were subsequently revised by the Government. In that case it was held that assessable value of sugar would be the price at which the sugar was cleared and subsequent revision of price by the Government was held as not an additional consideration so as to form a part of the price. An appeal by the Revenue before the honble apex Court against the said decision was dismissed by the honble apex Court in CCE Vs. Triveni Engineering & Industries, reported in 2009 (236) ELT A58 (SC). A perusal of the all the above judgments clearly indicate that the assessable value and the duty liability have to be determined at the time of the clearances of the goods. Once the assessable value is determined taking into account the various abatements permissible as provided for in the law, the question of re-determination of assessable value on account of changes that happened subsequent to the clearances, whether on account of changes in the law or otherwise will not be a cause for re-determination of assessable value. In the instant case, a certain amount of sales tax was payable 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 abatement towards sales tax under various situations. These have been discussed in paragraphs 5.1 to 5.4 supra. From these clarifications, it is very evident that the deduction towards sales tax is permissible based on the amount billed or charged from the customers in accordance with the law irrespective of the fact whether the amount is retained by the assessee or incentives are given by the State Government to the assessee in respect of the sales tax so collected. The present stand of the Revenue goes directly against the instructions contained in the circulars issued by the board. The honble apex Court in Paper Products Ltd., Vs. CCE reported in 1999(112) ELT 765 (SC) held that the circulars issued by the CBEC are binding on the department and the department is precluded from challenging the correctness of the circulars even on the basis that the same is inconsistent with the statutory provision. A similar view was held by the honble apex Court in CCE Vs. Dhiren Chemicals 2002(143) ELT 19 (SC). Similarly in the case of Commissioner of Customs, Calcutta & Others Vs. Indian Oil Corporation Ltd. & Anr.5., reported in 4 (2002) 2 SCC 1275, it was held that the circulars issued by the Board will be binding on the departmental authorities to maintain uniformity in the levy of tax/duty throughout the country. The stand adopted by the Revenue before us is in complete disregard of the clarifications given by the CBEC. Neither is the Revenue able to show to us any contrary interpretation of the statute either by this Tribunal or by any higher Court. In view of this position, the arguments put forth by the Revenue have to be negated and rejected.
5.12 Since we have considered the issue on merits, we do not consider it necessary to deal with the aspect of time bar raised by the appellants.
6. In the light of the foregoing discussion, we set aside the impugned orders and allow the appeals, with consequential reliefs, if any.
(Pronounced in Court on .) (P.G.Chacko) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 2