Commnr. Of Central Excise, Jaipur vs M/S. Super Synotex (India) Ltd. & Ors

2. This batch of appeals preferred under Section 35L of the Central Excise Act, 1944 (for brevity, the Act) being inter-connected and inter-linked was heard together and is disposed of by a common judgment. It is necessary to clarify that the Revenue has preferred the appeals against the decisions rendered by the Customs, Excise & Gold (Control) Appellate Tribunal (for short “the Tribunal”) at various Benches whereby the assessee-manufacturers have been extended the benefit of deduction of excise duty in respect of sales tax imposed by the State Government but not entirely paid to the State exchequer while determining the assessable value for the purpose of central excise, and some of the assessee-manufacturers have preferred appeals being grieved by the rejection for grant of similar relief pertaining to the payment made under the Central Sales Tax Act. For the sake of convenience, the facts from Civil Appeal Nos. 9154-9156 of 2003 are adumbrated herein as far as appeals by the Revenue are concerned. In respect of the challenge made by the assessee-manufacturers we shall take the facts from Civil Appeal No. 4621 of 2008.

3. First we shall advert to the issue involving the appeals preferred by the Revenue. The respondent herein is engaged in the manufacture of yarn of manmade fibers falling under Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985, chargeable to duty. A show-cause notice was issued to the respondent-assessee on the ground that for certain period it had contravened the various provisions of the Act, and the Central Excise Rules, 1944 which had resulted in evasion of Central Excise Duty. The fulcrum of the show-cause notice was that the assessee had not paid the duty on the additional consideration collected towards the sales tax. The case of the Revenue was that though the assessee was availing exemption from payment of sales tax, it was showing sales tax in the invoices but assessable value was shown separately for payment of Central Excise Duty as a consequence of which the net yarn value was invariably higher than the assessable value and excise duty paid thereon. This led to the difference between the two amounts which was almost equal to the amount of sales tax applicable during the relevant time. The explanation of the assessee was that it was extended the benefit of the incentive scheme and not granted any exemption and, therefore, the sales tax collected was not includible in the assessable value and deduction was admissible under the Act.

4. The Commissioner of Excise repelled the stand of the assessee, interpreted the benefit granted to the assessee as partial exemption and, taking certain other facts into consideration, came to hold that the assessee had deliberately with an intent to evade payment of duty had suppressed the fact that though it was availing partial sales tax exemption under the Sales Tax Incentive Scheme of 1989 for the relevant period upto 75% of tax liability, yet it was paying only 25% of the tax leviable despite collecting additional consideration to the extent of the amount of sales tax and, therefore, the additional amount collected under the camouflage of incentive tax had to be taken note of and, accordingly, price was to be declared and formed as a part of the value for the levy of excise duty.

5. Be it noted, in its reply the assessee had placed reliance on C.B.E. & C Circular No. 378/11-98-CX dated 12.3.1998 and claimed that one of the situations as stipulated therein covered the likes of the assessee and hence, it was not liable to be fastened with any further liability. The Commissioner distinguished the said circular and came to hold that the assessee, with an intention to evade payment of duty, had wilfully suppressed the facts that it was availing partial exemption of sales tax and collecting additional consideration to the extent of the amount of sales tax not payable by it. In this backdrop, the Commissioner treated it as short payment by the assessee and directed for recovery of duty and imposed penalty under Sections 11A, 11AC and 11AB of the Act and further imposed penalty on the persons responsible for the said suppression and evasion.

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 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.

28. In the result, both sets of appeals stand disposed of accordingly. There shall be no order as to costs.

February 28, 2014.