TIOL-DDT 26 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#0000FF" size="3">TIOL-DDT
26</font><br>
6 1 2005<br>
Thursday</b></font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cum
duty price – Board finally bows down to judicial opinion</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
valuation disputes it often happens that the department feels that there was
undervaluation and the assessee is slapped with a demand for differential duty.
The assessee finds himself in a difficult situation as he would not in most
cases be able to realise the differential duty from his customers. There has
always been a demand that the price already realized should be treated as cum
duty price. The formula explained in the MRF case does not come to rescue as
the dispute is mostly when additional consideration is received or to be assessed,
whether the extra consideration is to be added to the assessable value or the
sale price and whether abatement of additional duty payable or paid is allowed.
This needs a little elaboration.<br>
<br>
Suppose the value assessed was Rs. 1000/- on which the assessee paid excise
duty of Rs. 160/-. So here the cum-duty price is Rs. 1160/-. (for convenience
sake, other taxes and expenses are not considered). Later the assessee realises
or the department alleges that there is an extra money consideration of Rs.
200/-. The department would work out the differential duty like this :-</font></p>
<p align="center"><o:p></o:p></p>
<div align="center">
<table border=1 cellspacing=0 cellpadding=0 style='margin-left:5.4pt;
border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt;
mso-padding-alt:0in 5.4pt 0in 5.4pt'>
<tr>
<td width=171 valign=top style='width:171.45pt;border:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assessable
value<o:p></o:p></font></p></td>
<td width=189 valign=top style='width:188.55pt;border:solid windowtext .5pt;
border-left:none;mso-border-left-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1000<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=171 valign=top style='width:171.45pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Duty
@16%<o:p></o:p></font></p></td>
<td width=189 valign=top style='width:188.55pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style="mso-spacerun: yes">
</span>160<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=171 valign=top style='width:171.45pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Additional
receipt<o:p></o:p></font></p></td>
<td width=189 valign=top style='width:188.55pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style="mso-spacerun: yes">
</span>200<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=171 valign=top style='width:171.45pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revised
assessable value<o:p></o:p></font></p></td>
<td width=189 valign=top style='width:188.55pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1200
<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=171 valign=top style='width:171.45pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Excise
duty<o:p></o:p></font></p></td>
<td width=189 valign=top style='width:188.55pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style="mso-spacerun: yes">
</span>192<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=171 valign=top style='width:171.45pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Differential
duty<o:p></o:p></font></p></td>
<td width=189 valign=top style='width:188.55pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><span style="mso-spacerun: yes">
</span>32</b><span style='font-weight:normal'><span style="mso-spacerun:
yes"> </span>=
192 - 160</span><o:p></o:p></font></p></td>
</tr>
</table>
</div>
<p align="center" class=6PT><o:p></o:p></p>
<p align="center" class=MsoBodyText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whereas
the assessee would like (if at all he is liable to pay) to pay Rs. 27/- as follows
:-<o:p></o:p><o:p></o:p></font></p>
<div align="center">
<table border=1 cellspacing=0 cellpadding=0 style='margin-left:5.4pt;
border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt;
mso-padding-alt:0in 5.4pt 0in 5.4pt'>
<tr>
<td width=172 valign=top style='width:171.8pt;border:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assessable
value<o:p></o:p></font></p></td>
<td width=188 valign=top style='width:188.2pt;border:solid windowtext .5pt;
border-left:none;mso-border-left-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1000<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=172 valign=top style='width:171.8pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Duty
@16%<o:p></o:p></font></p></td>
<td width=188 valign=top style='width:188.2pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style="mso-spacerun: yes">
</span>160<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=172 valign=top style='width:171.8pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Additional
receipt <o:p></o:p></font></p></td>
<td width=188 valign=top style='width:188.2pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style="mso-spacerun: yes">
</span>200<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=172 valign=top style='width:171.8pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total
cum duty value<o:p></o:p></font></p></td>
<td width=188 valign=top style='width:188.2pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1360<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=172 valign=top style='width:171.8pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revised
assessable value<o:p></o:p></font></p></td>
<td width=188 valign=top style='width:188.2pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1173<span style="mso-spacerun:
yes">
</span>= 1360 ÷ (1+0.16) <o:p></o:p></font></p></td>
</tr>
<tr>
<td width=172 valign=top style='width:171.8pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Excise
duty<o:p></o:p></font></p></td>
<td width=188 valign=top style='width:188.2pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style="mso-spacerun: yes">
</span>187<o:p></o:p></font></p></td>
</tr>
<tr>
<td width=172 valign=top style='width:171.8pt;border:solid windowtext .5pt;
border-top:none;mso-border-top-alt:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Differential
duty<o:p></o:p></font></p></td>
<td width=188 valign=top style='width:188.2pt;border-top:none;border-left:
none;border-bottom:solid windowtext .5pt;border-right:solid windowtext .5pt;
mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt;
padding:0in 5.4pt 0in 5.4pt'> <p class=TableText><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><span style="mso-spacerun: yes"> </span>27<span
style="mso-spacerun: yes"> </span></b><span
style='font-weight:normal'><span style="mso-spacerun:
yes"> </span>=
187 - 160</span><o:p></o:p></font></p></td>
</tr>
</table>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
The department’s argument is that had the duty been properly assessed
in the first place, the assessee would have realised the duty for the additional
Rs. 200/- and in fact many buyers would gladly pay the duty when charged separately.
For the lapse of the assessee, the Government should not lose and the defaulter
should not get any benefit. This as often happens is a case where the heart
rules over the head. Case law as it stands now is in support of the assessee.
In a famous decision in, <i>Srichakra Tyres Ltd. v. Collector of Central Excise,
Madras</i> </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2002/2002-TIOL-140-CESTAT-DEL-LB.htm">2002-TIOL-140-CESTAT-DEL-LB</a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">,
the Larger Bench of the CEGAT to which the question,<br>
<br>
<i>“whether in the case of the goods which have been sold at a particular
price and where duty is subsequently demanded in respect of the same in terms
of Section 4(1) read with Section 4(4)(d)(ii) the amount of duty which became
payable later and which has been demanded can be abated from the sale price
or not”<br>
<br>
was referred, by a majority held that it was abatable.<br>
<br>
However the Honourable Member (T) Mr. Lajja Ram in his contra view asserted,
“in the case of the excisable goods which had been sold without approval
at a particular non-declared higher price, while central excise duty was paid
on the declared lower price and the matter of evasion of central excise duty
is subsequently detected and central excise duty is subsequently demanded in
respect of the differential price in terms of the Section 4(1) read with Section
4(4)(d)(ii) of the Central Excises Act, 1944, the amount of duty demanded could
not be abated from the sale price.”</i><br>
<br>
The issue was referred to the Larger Bench as different benches of the CEGAT
had taken opposite views. However Srichakra like any other case was not the
end of the story. The issue has been taken to the Supreme Court and the Apex
Court in Collector v. Srichakra Tyres Ltd. (</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-51-SC-CX.htm">2002-TIOL-51-SC-CX</a></font>)<font size="2" face="Verdana, Arial, Helvetica, sans-serif">
dismissed the departmental appeal. And the Supreme Court in a landmark judgement
in Commissioner of Central Excise, Delhi v. Maruti Udyog Ltd (</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-34-SC-CX.htm">2002-TIOL-34-SC-CX</a></font><font color="#000000" size="1" face="Verdana, Arial, Helvetica, sans-serif"> </font>)<font size="2" face="Verdana, Arial, Helvetica, sans-serif">
held that duty had to be abated from the cum-duty price. Even the government
realized this and admitted this position legislatively. The Finance Act, 2003
added an explanation to Section 4(1).<br>
<br>
<i>“Explanation. - For the removal of doubts, it is hereby declared that
the price-cum-duty of the excisable goods sold by the assessee shall be the
price actually paid to him for the goods sold and the money value of the additional
consideration, if any, flowing directly or indirectly from the buyer to the
assessee in connection with the sale of such goods, and such price-cum-duty,
excluding sales tax and other taxes, if any, actually paid, shall be deemed
to include the duty payable on such goods.” </i><br>
<br>
This explanation came into existence from 14-5-2003. And so the Board was prepared
to accept this position only from that date. The Board in Circular No. 749/65/2003-CX.,
dated 26-9-2003, informed that review petitions have been filed against the
above orders. Board felt that the effect of amendment to Section 4 by Finance
Act, 2003 has only prospective effect and litigation can continue merrily for
the past period. The Board circular explained that</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<i>in the judgment dated 26-02-2002 of the Hon’ble Supreme Court in the
case of CCE, Madurai v. T.V.S. Srichakra Ltd. and the judgment dated 27-2-2002
in the case of CCE, Delhi v. Maruti Udyog Ltd. [2002 (141) E.L.T. 3 (S.C.)].,
appeals filed by the Department were dismissed by the Hon’ble Supreme
Court, upholding that the sale price realised by the assessee is to be regarded
as inclusive of excise duty and therefore, in arriving at the excisable value
of the goods, the element of duty which is payable is to be excluded.<br>
<br>
Though vide section 136 of the Finance Act, 2003, Section 4 of the Central Excise
Act has been amended by insertion of an Explanation to Section 4(I) to the effect
that the price-cum-duty shall be deemed to include the duty payable on the goods,
Board has taken a view that the amended provision will apply only prospectively
and the old cases will have to be pursued as per the provisions of law prevailing
at the relevant time. </i><br>
<br>
So the Board had taken up the matter in review in Supreme Court and wanted the
field to keep all the old cases in <b>call book</b> till the Supreme Court decides
on the review petition. For those not well initiated into the strange ways of
the department, <b>“call book”</b> is where they dump all cases
which cannot be decided. They are not shown as pending. Problem is they are
rarely recalled. Board seems to be the main cause and reason for all the trivial
Show Cause Notices which clog our appellate system. All the consultants in the
Country should send nice packets of sweets to the Board for keeping them in
business. Here was a classic case of the apex court ruling that duty should
be deducted from cum duty price and the Government amending section 4 of the
Central excise Act in tune with the judgement. But the Board should have the
final word. It accepted the Supreme Court’s wisdom but from the date of
its acceptance! Consultants had the last laugh all the way to the bank!<br>
<br>
Now the Board’s review petition has been dismissed by the Supreme Court
and as the Board has no other place to appeal to, it has gracefully accepted
the Supreme Court order. The latest circular of the Board informs that circular
No. 749/2003 is withdrawn. Hopefully all the pending cases at all levels will
be closed. Recall the <b>Call Book.</b> End of a long battle! <b>Hopefully</b>.
–see <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2004/excircular803.htm">Board’s
Circular 803/36/2004-CX</a>, Dated : December 27, 2004 </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006633">Board
tries to solve some of the problems arising out of withdrawal of warehousing
scheme for petroleum products</font></b><br>
<br>
The Government had withdrawn warehousing facilities for petroleum products by
a weekend notification on 4th September 2004 and created several problems for
the oil sector by circular No. 796/2004. The circular wanted the duty on stocks
held in the warehouses to be paid immediately on 6th September. Taxindiaonline
had then pointed out that legally they can pay that duty by the 5th of October
2004 and it seems that nobody paid the duty on 6th September. This is what happens
when Board goes round giving patently illegal directions. Now after three months,
wisdom has dawned on the portals of the mighty Board and it clarifies that duty
can indeed be paid by 5th October 2004. May be there are several Show Cause
Notices pending against the oil companies for not paying the duty on 6th September
as the Board wanted. Though late, the nation is grateful to the Board for coming
out with a clarification that would perhaps put an end to some unwanted litigation.
Regarding end-use exemptions, Board clarifies that if the refineries do not
know the end users at the time of clearances from the refinery, they should
go for provisional assessment. – See <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2004/excircular804.htm">Board
circular 804/1/2004-CX, Dated : January, 4, 2005</a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Unemployed
Commissioner finally gets work :</b> It seems Chanakya first found a king and
then searched for a kingdom to put the king in. Board being related to Chanakya,
first posted a Commissioner and then went on to search for a commissionerate
for him! In the recent promotion to the cadre of Commissioners, the CBEC posted
an officer as Commissioner (Appeals) III, Hyderabad. There was a small hitch.
There is no post of Commissioner (Appeals) III, at Hyderabad. So the promoted
officer was holding a non existent post. It took the Board more than two months
to notify a post for the officer. Finally Hyderabad III Commissioner (Appeals)
is now officially notified – <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2005/ent001_2005.htm">Notification
No. 1/2005 – CENT dated 4.1.2005.</a> <br>
<br>
<font color="#FF0000"><b>Until tomorrow with more of DDT<br>
<br>
Have a Nice Day </b></font></font></p>
<p align="justify"></p>
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