Case: Commissioner of Central Excise Vs. Maruti Suzuki India Ltd

Gurgaon" 21. A bare reading of the entitlement certificate also does not give any indication of deferment of tax or capital subsidy. On the contrary, it only refers to a "tax concession" for the period from 1st August, 2001 to 31st July, 2015 and the quantum of tax concession is mentioned as Rs. 564.35 crores. The entitlement certificate issued to the Assessee is clearly in line with the decision of the HPC and also does not support the case of the Assessee. 22. However, to buttress his case, learned Counsel for the Assessee referred to a representation made by the Assessee to the Commissioner, Commercial Sales Tax Department in the State Government on 15th September, 2001 and the response received by it on or about 22nd October, 2001. The response received by the Assessee clarified that the amount allowed to be retained by the Assessee on the basis of the entitlement certificate would be retainable as capital subsidy and not as an exemption from sales tax. This response was sent by the Joint Director (legal) from the office of the Prohibition, Excise & Taxation Commissioner of the State Government. 23. We are not able to appreciate the authority of the Joint Director to issue such a response which is clearly not supported by the decision of the HPC taken on 14th June, 2001 nor is it in consonance with the entitlement certificate issued to the Assessee nor is it in consonance with Rule 28-C(5)(b). As mentioned above there is nothing in the decision of the HPC or the entitlement certificate to indicate that 50% of the sales tax retained by the Assessee on the sale of its vehicles was liable to be adjusted against any capital subsidy entitlement of the Assessee. 24. Learned Additional Solicitor General contended that Section 13B of the Act which relates to the power to exempt certain class of industries from payment of tax is also relevant. We are not inclined to consider this submission since the very basis on which the Tribunal has proceeded namely the application of Rule 28-C(5)(a) is not only incorrect but the Tribunal has overlooked the decision of the HPC and the entitlement certificate apart from overlooking Rule 28-C(5)(b). 25. Finally, our attention was drawn to a circular dated 30th June, 2000 issued by the Central Board of Excise and Customs. This circular was issued in view of the coming into force of Section 4 of the Excise Act (as amended) from 1st July, 2000. 26. The circular brought to the notice of all concerned that in view of the amended Section 4 of the Excise Act, any amount actually paid or actually payable by way of excise, sales tax and other taxes shall be excluded from the transaction value. It was made clear that if tax is paid at a concessional rate, that amount may be deducted from the transaction value. But, where the tax is not paid at the time of the transaction, but is paid subsequently, as for example, sales tax payable under a deferment scheme, then too the benefit of exclusion would be allowed since the amount would be actually payable. The relevant paragraphs of the circular, namely, paragraphs 10 and 11 read 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." 27. Insofar as the present case is concerned, there is no doubt that 50% of the sales tax collected was retained by the Assessee and was not actually paid to the exchequer nor was it actually payable since the HPC permitted the Assessee to retain that amount. 28. Therefore, whichever way the issue is looked at, the fact remains that the Assessee retained with it 50% of the sales tax collected from its customers and it was neither actually paid to the exchequer nor was it actually payable to the exchequer. That being the position, the transaction value was required to be calculated by including the amount of about Rs. 22.44 crores retained by the Assessee. 29. In our opinion, the Tribunal misdirected itself in law on several counts and erroneously decided the appeal in favour of the Assessee and, therefore, the order of the Tribunal is set aside. 30. It was eventually submitted by learned Counsel for the Assessee that on the facts and in the circumstances of the case penalty ought not to be imposed upon the Assessee particularly since the Assessee bona fide believed on the basis of the correspondence entered into with the Revenue that the 50% sales tax retained by it was adjustable against capital subsidy and also that there was at least the decision of the Tribunal in its favour in regard to the entitlement of the Assessee. We agree with learned Counsel only to the extent that since the Assessee had succeeded before the Tribunal, it would not be appropriate to saddle it with any penalty. Conclusion 31.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]In our opinion, the question must be answered in the negative and in favour of the Revenue.A bare reading of Rule 28-C(5)(a) shows that it is clearly inapplicable in the case of the Assessee. That sub-rule ex facie excludes a prestigious unit from its ken ["(except a prestigious unit)"] There is no dispute that the Assessee is a prestigious unit and therefore Rule 28-C(5)(a) is not at all applicable and the Tribunal was completely in error in relying upon this sub-rule. What is applicable to the present case is Rule 28-C(5)(b) which mentions that the grant of a tax concession to a prestigious unit will be decided by the HPC.The HPC in its decision taken on 14th June, 2001 permitted the Assessee to retain 50% of the sales tax collected from the customers for a period of 14 years subject to a ceiling of Rs. 564.35 crores. There is no mention in the decision of the HPC about adjustment of this amount against any scheme or any capital subsidy. On the contrary, the decision of the HPC is relatable to Rule 28-C(5)(b) which refers to "grant of tax concession to prestigious units" and for the implementation of this decision, an entitlement certificate would be issued to the Assessee. The Revenue is right in its contention that the decision of the HPC clearly does not support the case of the Assessee.Pursuant to the decision of the HPC, the Assessee was issued an entitlement certificate in Form ST 72B of the Rules.A bare reading of the entitlement certificate also does not give any indication of deferment of tax or capital subsidy. On the contrary, it only refers to a "tax concession" for the period from 1st August, 2001 to 31st July, 2015 and the quantum of tax concession is mentioned as Rs. 564.35 crores. The entitlement certificate issued to the Assessee is clearly in line with the decision of the HPC and also does not support the case of the Assessee.We are not able to appreciate the authority of the Joint Director to issue such a response which is clearly not supported by the decision of the HPC taken on 14th June, 2001 nor is it in consonance with the entitlement certificate issued to the Assessee nor is it in consonance with Rule 28-C(5)(b). As mentioned above there is nothing in the decision of the HPC or the entitlement certificate to indicate that 50% of the sales tax retained by the Assessee on the sale of its vehicles was liable to be adjusted against any capital subsidy entitlement of theare not inclined to consider this submission since the very basis on which the Tribunal has proceeded namely the application of Rule 28-C(5)(a) is not only incorrect but the Tribunal has overlooked the decision of the HPC and the entitlement certificate apart from overlooking Rule 28-C(5)(b).The circular brought to the notice of all concerned that in view of the amended Section 4 of the Excise Act, any amount actually paid or actually payable by way of excise, sales tax and other taxes shall be excluded from the transaction value. It was made clear that if tax is paid at a concessional rate, that amount may be deducted from the transaction value. But, where the tax is not paid at the time of the transaction, but is paid subsequently, as for example, sales tax payable under a deferment scheme, then too the benefit of exclusion would be allowed since the amount would be actually payable.Insofar as the present case is concerned, there is no doubt that 50% of the sales tax collected was retained by the Assessee and was not actually paid to the exchequer nor was it actually payable since the HPC permitted the Assessee to retain that amount.Therefore, whichever way the issue is looked at, the fact remains that the Assessee retained with it 50% of the sales tax collected from its customers and it was neither actually paid to the exchequer nor was it actually payable to the exchequer. That being the position, the transaction value was required to be calculated by including the amount of about Rs. 22.44 crores retained by the Assessee.In our opinion, the Tribunal misdirected itself in law on several counts and erroneously decided the appeal in favour of the Assessee and, therefore, the order of the Tribunal is setagree with learned Counsel only to the extent that since the Assessee had succeeded before the Tribunal, it would not be appropriate to saddle it with any penalty.