Custom, Excise & Service Tax Tribunal
Jalshakti Plastics Industries vs Guwahati on 9 August, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Excise Appeal No. 77395 of 2018
(Arising out of Order-in-Appeal No. 29/GHY/CE(A)/GHY/2018 dated
26.03.2018 passed by Commissioner (Appeals), CGST, Central Excise and
Customs, Guwahati.)
M/s Jalshakti Plastics Industries,
Vill.-Dhupguri, P.O.- Singra, Dist.-Kamrup (Assam)-781135.
....Appellant (s)
VERSUS
Commissioner (Appeals), CGST & Central Excise, NER, Guwahati.
5th Floor, Customs House, Nilmoni Phukan Path, Christian Basti, Guwahati-781005.
....Respondent(s)
APPERANCE :
Shri M. P. Bagaria, Chartered Accountant for the Appellant Shri J. Chattopadhyay, Authorized Representative for the Respondent CORAM:
HON'BLE MR. ASHOK JINDAL MEMBER (JUDICIAL) HON'BLE MR. K. ANPAZHAKAN MEMBER (TECHNICAL) FINAL ORDER No. 76330/2023 DATE OF HEARING : 03.08.2023 DATE OF PRONOUNCEMENT: 09.08.2023 PER K. Anpazhakan:
M/s Jalshakti Plastics Industries, Assam are engaged in the manufacture of excisable goods, viz. Water Tank falling under tariff sub- heading 392159090, 39251000 of the First Schedule to the Central Excise Tariff Act, 1985. In terms of the Assam Industries (Tax Exemption) Scheme, 2009, the Appellant was authorized to avail remission of 99% of the AVAT collected/ charged in the invoices by the Assam Government in the form of fiscal incentives which otherwise goes 2 Excise Appeal No. 77395 of 2018 to state exchequer. The Appellant was allowed to charge AVAT in full in its tax invoices issued to its purchaser. The purchasers were entitled to take input tax credit of the full amount charged in the tax invoice. This mechanism was allowed to keep the VAT chain intact. Therefore, the Appellant did not remit 99% of the AVAT collected by them.
2. The Appellant was issued a Show cause Notice dated 28/07/2017 by the Assistant Commissioner of GST & Central Excise, demanding Central Excise duties, Education Cess and S&HE Cess amounting to Rs.7,76,384/- in terms of proviso to Section 11A(1) of the Central Excise Act, 1944, short paid during the period August 2012 to January 2016 by way of undervaluation of goods by non-inclusion of the VAT amount collected and retained under the Assam value Added Tax Rules, 2005, in violation of Section 4(3)(d)of the Central Excise Act, 1944. The Notice was adjudicated vide Order-in-Original dated 01.12.2017, confirming the demands of duties along with interest and equal amount of duty as penalty. On appeal, the Commissioner (Appeals) upheld the demands of duties, interest and penalty, vide his O-I-A dated 21.03.2018. Aggrieved against the impugned order, the Appellant has filed the present appeal.
3. In their grounds of appeal the Appellant stated that there was no unauthorized collection or retention of AVAT by them. They have only retained the amount of AVAT to the extent authorized by the Assam Government in the Form of fiscal incentive/subsidy under para 7.1 of Chapter 7 of Industrial Policy of Assam, 2008 and para 3(1) of the Assam Industries (Tax Exemption) Scheme, 2009 read with second proviso to section 54 of the AVAT Act 2003. The Appellant first charged 3 Excise Appeal No. 77395 of 2018 applicable Duty of Central Excise and, then charged applicable Assam VAT as per the provisions of AVAT Act 2003 in its invoices raised on its customers while removing the goods from its factory. Section 54 of AVAT Act 2003 is reproduced as under:-
3. "Exemptions o Certain Sales and Purchases : (1) Subject to such conditions as it may impose, the Government may, if it is necessary so to do in the public interest, by notification in the Official Gazette, exempt any sales by way of appropriate schemes or otherwise, in conformity with the provisions of this Act or purchases made to or by a class of dealers or persons specified in the said notification from payment of the whole or any part of any tax payable under the provisions of these Act and any notification issued under this section may be issued so as to be retrospective to any date not earlier than the date of commencement of the Act and such exemption shall take effect from the date of publication of the notification in the Official Gazette or such other earlier or later date as may be mentioned therein;
Provided that the Government may withdraw such exemption at any times as it may think fit and proper;
Provided further that when exemption is granted in the form of remission, the dealer shall be entitled to retain the part or whole of tax collected by way of subsidy from the Government subject to maximum permissible monetary limit and/or time limit and other conditions as may be prescribed I the appropriate scheme:"
4. The Appellant has established a new unit and they were entitled to the benefits of exemption of Central Excise Duty paid by it as per the provisions of Notification No. 20/2007-CE. dated 25.04.2007. They have 4 Excise Appeal No. 77395 of 2018 submitted refund application for eligible duty of Central for the period from July 2013 to December 2015. The Jurisdictional Division Office has granted the refund of eligible duty of Excise the for certain periods considering 26% of the value additions made. However, as per the judgment of the Hon'ble Guwahati High Court in WA 243/2009 dated 20.11.2014, the Appellant is entitled to 100% of the Central Excise Duty.
5. While enjoying the benefits of notification No. 20-/2007-CE, dated 25.04.2007, the Appellant's unit was audited for the period from January 2012 to March on 06.07.2014. During the course of audit, the total amount of VAT Remission retained by the Appellant was collected by the Audit team, from the documents submitted by them and the Central Excise duty payable thereon was worked out as Rs.7,57,346/-, Education Cess Rs.12,692/- and SHE Rs.6,346/- respectively and demand Notice dated 28.07.2017 was issued, which resulted in the confirmation of the demands in the impugned order. Thus, they have not suppressed any information from the department. Accordingly, extended period not invocable in this case and penalty is also not imposable. In view of the above, they prayed for setting aside the impugned order.
6. The Ld.A.R. submitted that the issue has already been decided by the Hon'ble Supreme Court in the case of Super Synotex (India) Ltd. Vs CCE, Jaipur reported in 2014 (301) ELT 273, wherein it has been held that the sales tax concession retained by the assesses is required to be added in the assessable value for the purpose of levy of Central Excise 5 Excise Appeal No. 77395 of 2018 duty. Accordingly, he prayed for dismissing the appeal filed by the Appellant.
7. Heard both sides and perused the appeal records.
8. We observe that the issue involved in the present appeal is regarding includability of the sales tax concession retained by the Appellant in the assessable value for the purpose of levy of Central Excise duty. The Appellant was granted eligibility certificate for availing the incentives under the Industrial Policy of Assam 2008 and for claiming the exemption of tax under Assam Industries (Tax Exemption) Scheme 2009. As per terms of the above remission scheme, the Appellant is entitled to retain with it 99% of the VAT collected and pay only 1% to the State government.
9. We observe that the issue is no more res integra as the Hon'ble Supreme Court in the case of Super Synotex (India) Ltd.Vs CCE, Jaipur reported in 2014 (301) ELT273, has held that the sales tax concession retained by the assesses is required to be added in the assessable value for the purpose of levy of Central Excise duty. The relevant portion of the decision is reproduced below:
21. After the substitution of the old Section 4 of the Act by Act,
10 of 2000 as reproduced hereinabove, the Central Board of Excise and Customs, New Delhi, issued certain circulars and vide Circular No. 671/62/2002-CX, dated 9-10-2002 clarified the circular issued on 1-7-2002. In the said circular reference was made to the earlier Circular No. 2/94-CX 1, dated 11-1-1994. It has been observed in the circular that after coming into force of new Section 4 with effect from 1-7-2000 wherein the concept of transaction value has been incorporated and the earlier explanation has been deleted, the circular had lost its relevance. However, after so stating the said circular addressed to the representations received from the 6 Excise Appeal No. 77395 of 2018 Chambers of Commerce, Associations, assessees as well as the field formations and in the context stated thus :-
The matter has been examined in the Board. It is observed "5. that assessees charge and collect sales tax from their buyers at rates notified by the State Government for different commodities. For manufacture of excisable goods assessees procure raw materials, in some State, by paying sales tax/purchase tax on them (in some States, like New Delhi), raw materials are purchased against forms ST-1/ST-35 without paying any tax). While depositing sales tax with the Sales Tax Deptt. (on a monthly or quarterly basis), the assessee deposits only the net amount of sales tax after deducting set off/rebate admissible, either in full or in part, on the sales tax/purchase tax paid on the raw materials during the said month/quarter. The sales tax set off in such cases, therefore, does not work like the central excise set off notifications where one to one relationship is to be established between the finished product and the raw materials and the assessee is allowed to charge only the net central excise duty from the buyer in the invoice. The difference between the set off operating in respect of central 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. Therefore, since the set off scheme of sales tax does not 6. 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 7 Excise Appeal No. 77395 of 2018 legally permissible under the local sales tax laws to be charged/billed from the customer/buyer."
[Emphasis added]
22.It is evincible from the language employed in the aforesaid circular that set off is to be taken into account for calculating the amount of sales tax permissible for arriving at the "transaction value" under Section 4 of the Act because the set off does not change the rate of sales tax payable/chargeable, but a lower amount is in fact paid due to set off of the sales tax paid on the input. Thus, if sales tax was not paid on the input, full amount is payable and has to be excluded for arriving at the "transaction value". That is not the factual matrix in the present case. The assessee in the present case has paid only 25% and retained 75% of the amount which was collected as sales tax. 75% of the amount collected was retained and became the profit or the effective cost paid to the assessee by the purchaser. The amount payable as sales tax was only 25% of the normal sales tax. Purpose and objective in defining "transaction value" or value in relation to excisable goods is obvious. The price or cost paid to the manufacturer constitutes the assessable value on which excise duty is payable. It is also obvious that the excise duty payable has to be excluded while calculating transaction value for levy of excise duty. Sales tax or VAT or turnover tax is payable or paid to the State Government on the transaction, which is regarded as sale, i.e., for transfer of title in the manufactured goods. The amount paid or payable to the State Government towards sales tax, VAT, etc. is excluded because it is not an amount paid to the manufacturer towards the price, but an amount paid or payable to the State Government for the sale transaction, i.e., transfer of title from the manufacturer to a third party. Accordingly, the amount paid to the State Government is only excludible from the transaction value. What is not payable or to be paid as sales tax/VAT, should not be charged from the third party/customer, but if it charged and is not payable or paid, it is a part and should not be excluded from the transaction value. This is the position after the amendment, for as per the amended provision the words "transaction value" mean payment made on actual basis or actually paid by the 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 8 Excise Appeal No. 77395 of 2018 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 has been more clearly stated in paragraph 5. To elaborate, sales tax having been paid on the inputs/raw materials, that is excluded from the excise duty when price is computed. Eventually, the amount of tax paid is less than the amount of tax payable and hence, the concept of "actually paid" gets satisfied. Judged on this anvil the submission of the learned counsel for the assessee that it would get benefit of paragraph 6 of the circular, is unacceptable. The assessee can only get the benefit on the amount that has actually been paid. The circular does not take note of any kind of book adjustment and correctly so, because the dictionary clause has been amended. We may, at this stage, also clarify the position relating to circulars. Binding nature of a circular was examined by the Constitution Bench in CCE v. Dhiren Chemical Industries - (2002) 2 SCC 127 = 2002 (139) E.L.T. 3 (S.C.), and it was held that if there are circulars issued by C.B.E. & C. which placed different interpretation upon a phrase in the statute, the interpretation suggested in the circular would be binding on the Revenue, regardless of the interpretation placed by this Court. In CCE v. Ratan Melting & Wire Industries - (2008) 13 SCC 1 = 2008 (231) E.L.T. 22 (S.C.) = 2008 (12) S.T.R. 416 (S.C.), the Constitution Bench clarifying paragraph 11 in Dhiren Chemical Industries (supra) has stated thus :-
9
Excise Appeal No. 77395 of 2018 Circulars and instructions issued by the Board are no doubt "7. binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law."
25.The legal position has been reiterated in the State of Tamil Nadu and Anr. v. India Cement Ltd. - (2011) 13 SCC 247. Therefore, reliance placed on the circular dated 9-10-2002 by the Tribunal is legally impermissible for two reasons, namely, the 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 respective Tribunals to adjudicate as far as excise duty is concerned in accordance with the principles set out hereinabove. We further clarify that as far as imposition of penalty is concerned, it shall be dealt with in 10 Excise Appeal No. 77395 of 2018 accordance with law governing the field. In any case, proceeding relating to the period prior to 1-7-2000 would stand closed and if any amount has been paid or deposited as per the direction of any authority in respect of the said period, shall be refunded. As far as the subsequent period is concerned, the Tribunal shall adjudicate as per the principles stated hereinbefore.
27.Coming to the appeals preferred by the assessees, the challenge pertains to denial of benefit of the Central Sales Tax Act, the aforesaid reasoning will equally apply. The submission that the concession of excise duty is granted by the Excise Department of the Central Government is not acceptable. On a perusal of the circulars dated 12-3-1998 and 1-7-2002 we do not find that they remotely relate to any exemption under the Central Sales Tax imposed on the goods. What is argued by the learned counsel for the assessees is that the benefit should be extended to the Central Sales Tax as the tax on sales has a broader concept. The aforesaid submission is noted to be rejected and we, accordingly, repel the same. In view of the aforesaid, the appeals preferred by the assessees stand dismissed.
10. By relying on the above decision of the Hon'ble Supreme Court, we hold that the sales tax concession retained by the Appellant is required to be added in the assessable value for the purpose of levy of Central Excise duty.
11. In their submissions, the Appellant stated that their unit was audited for the period from January 2012 to March 2014, on 06.07.2014. During the course of audit, the total amount of VAT Remission retained by them was collected by the auditnteam, from the documents submitted by them and the Central Excise duty payable thereon was worked out. Also, the entire issue was known to the department. They were granted eligibility certificate for availing the incentives under the Industrial Policy of Assam 2008 and for claiming 11 Excise Appeal No. 77395 of 2018 the exemption of tax under Assam Industries (Tax Exemption) Scheme 2009. As per terms of the above remission scheme they were entitled to retain with it 99% of the VAT collected and pay only 1% to the State government. Ther department was aware that they were availing the Scheme and retaining 99% of the VAT collected. Thus, they have not suppressed any information from the department. Accordingly, they contended that extended period not invocable in this case and penalty is also not imposable.
12. We find merit in the argument of the Appellant. The Appellant has not suppressed any information from the department. There were decisions of the Tribunals that the sales tax concession retained by the assesses is not required to be added in the assessable value for the purpose of levy of Central Excise duty. Thus, the appellant cannot be faulted for not including the same in the assessable value.
13. Further, we observe that Board has issued Circular No. 1063/2/2018-CX dated 16.02.2018, clarifying acceptance of some of the orders passed by the Hon'ble Supreme Court, High Courts etc, wherein no review petition has been filed. The para 12 of the said Circular relevant to this appeal is reproduced below:
"Decisionof the Hon'ble High Court of Punjab & Haryana dated 12.08.2016 in the case of Microtek Forgings CEANo. 32/2016 [2016- TIOL-1866-HC-P&H-CX].12.1 Department has accepted the order of the Hon'ble High Court where the Hon'ble Court replying on the judgment of the Apex Court in the matters of 'Maruti Suzuki India Ltd. vs. CCE Delhi, 2014(307) ELT 625(SC)and Super Synotex (India) Ltd. vs. CCE Jaipur, 2014 (301) ELT 273dismissed the departmental 12 Excise Appeal No. 77395 of 2018 appeal.12.2 In the case, CESTAT relying on Apex Court decision in the case of 'MarutiSuzuki India Ltd. vs. CCE Delhi, 2014(307) ELT 625(SC)and Super Synotex (India) Ltd. vs. CCE Jaipur, 2014 (301) ELT 273 had held that amount of sales tax concession retained by the respondent is required to be added in the assessable for levy of Central Excise Duty. However CESTAT held that extended period of limitation would not apply. Deciding the departmental appeal, High Court has held that CESTAT in its order has observed that under Circular dated 30.06.2000 CBEC had clarified that such amount retained by the assessee is not required to be added to the assessable value. This view was negated by Apex court in the above said orders. Since there was no clarity on the issue, the assessee cannot be said to be at fault, hence extended period would not be available to raise the demand."
14. In the said clarification, the order passes by the Hon'ble Supreme Court in the case of Super Synotex has also been included and it has been categorically stated that extended period not invocable in such cases.
15.In the present case, we observe that the Adjudicating Authority and the Appellate Authority has failed to show any positive act of suppression on the part of the Appellant . The remission of 99% of AVAT is after collection of AVAT in the Invoice. There is no tampering of invoices. The Appellant has to charge full amount of AVAT and it cannot charge 1% in the invoices as per the provision of AVAT Act, 2003. The same was reflected in the audited Profit & Loss account and balance sheet of the impugned periods. Therefore, we hold that extended period of limitation as provided under section 11A(4) of the Central Excise Act, 1944 cannot be invoked for recovery of the short paid duties. The Circular issued by the Board also supports this view. Following the 13 Excise Appeal No. 77395 of 2018 above Circular issued by the Board, we hold that extended period cannot be invoked in this case to demand duty. Accordingly, penalty also not imposable in this case.
14. In view of the above discussion, we hold that the demand, if any, is sustainable for the normal period, along with interest. The demand of duty along with interest and penalty by invoking the extended period is set aside.
15. In view of the above discussion. We dispose of the appeal on the above terms.
(Pronounced in the open court on...09.08.2023) Sd/-
(Ashok Jindal) Member (Judicial) Sd/-
(K. Anpazhakan) Member (Technical) Tushar Kr.