The Mumbai bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) held that the abatement towards sales tax has to be allowed in terms of sales tax liability at time of clearance of goods.It was viewed that there is no cause for redetermination of assessable value on account of changes which arose in the sales tax law much after the clearance of the goods.
The Commissioner of Central Excise filed appeal against order of Commissioner of Central Excise & Customs, Raigad which dropped proceedings for recovery of ₹ 1,21,71,658 for the year 200304 and 2004-05 by accepting the plea of the respondent, M/s Clariant Chemical India Ltd, of bar of limitation becoming operative insofar as show cause notice dated 7th February 2007 under section 11A of Central Excise Act, 1944 is concerned, contests the detriments thereto on facts.
The issue pertains to clearance of goods, registered under the Package Incentive Scheme of the Government of Maharashtra for deferred payment of sales tax collected till elapse of ten years on sales effected to customers, in which amendment od 2002 provided for premature repayment of such accumulated amount at ‘net present value (NPV)’ on such amount. The notice proposed recovery of duties on the ‘amount foregone’ by the Government of Maharashtra as additional consideration received by the assessee. The impugned order, while upholding the liability on such amount as proposed in the show cause notice, dropped the proceedings on the ground of limitation. The competent reviewing authority has furnished grounds of appeal to counter restricting liability to the normal period of limitation under section 11A of Central Excise Act, 1944.
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The issue of taxability on such amount had come up for consideration before the Tribunal in the case of Shri Bhagwati SSK Ltd. v. CCE, 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.
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 redetermination 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 redetermination of the assessable value determined in accordance with the law of central excise as it stood at the time of removal of the goods.
The Tribunal held 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 redetermination of assessable value on account of changes which arose in the sales tax law much after the clearance of the goods.
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It was observed that the Apex Court in Paper Products Ltd. v. CCE held that the circulars issued by the C.B.E. & C. 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. In view of the lack of merit on proposal to recover such duties, the two member bench of C J Mathew, Member (Technical) and Ajay Sharma, Member (Judicial) viewed that the appeal of the Commissioner of Central Excise on limitation not coming into play does not survive and dismissed the appeal.
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