Denying Abatement of Excise Duty without Adopting Reasonable Method of Valuation is Arbitrary & Unsustainable: CESTAT in Tanishq Jewellery’s Case [Read Order]

The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Chennai Bench, held that the denial of abatement without adopting any reasonable method of valuation of excise duty was arbitrary and unsustainable. The appellant, Titan Company, started Tanishq in 1994, India’s first Jewellery Retail Brand.

The facts state that the appellants, M/s. Titan Company Ltd., are engaged in the manufacture of branded jewellery under the brand name “Tanishq” and adopted provisional assessment under Rule 7 of the Central Excise Duty by determining value based on cost of gold and making charges and claiming abatement towards discounts and sales tax based on actual realization at the point of sale.

The appellants claimed abatement towards discounts and sales tax on actual realization at the point of sale, however, the Adjudicating Authority rejected it on the ground that transaction-wise correlation and documentary evidence for each clearance were not produced.

The Commissioner (Appeals) upheld such denial mainly on the reasoning that the entire stock transferred may not have been sold within the same year. The counsel for the appellant submitted before the CESTAT that the department has a flawed approach which is contrary to commercial realities of the jewellery trade.

It was further submitted that the appellants have produced Chartered Accountant certificates which have been issued after due verification of the books of account but the Department has neither disproved the correctness of such certificates nor referred to any other evidence which is contradictory to said certificates and data.

CESTAT observed that the rejection of CA certificates solely on the ground that they are not transaction-specific is arbitrary and untenable. For determination of Central Excise, the levy cannot be sustained when the method of valuation is impracticable as the Department fails to adopt any alternative reasonable method despite availability of evidence.

Further, since there is voluminous data running into lakhs of entries, the Tribunal held that imposing an impracticable and unreasonable condition cannot be sustained in law. The bench of Vasa Seshagiri Rao (Technical Member) and P. Dinesha (Judicial Member) allowed the appeals as remanding the matter would only prolong litigation.

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