2009 (4) TMI 739 - AT - Central Excise

Valuation - eligibility for deduction - additional sales tax and octroi - Held that - the said expenses have to be segregated exclusively in respect of excisable goods cleared by the respondent for the respective year. Therefore to enable the same we set aside the orders of the Commissioner (Appeals) and those of the original authority and remand the matter to the original authority to allow the deduction on the lines indicated above after granting reasonable opportunity of hearing to the party - appeal allowed by way of remand.

Summary

Issues:
Deduction of additional sales tax and octroi for goods cleared from different units on a weighted average basis.

Analysis:
The case involved ten appeals by the Department against a common respondent, M/s. Dabur-India Limited, concerning the deduction of additional sales tax and octroi for goods cleared from their Baddi units using a weighted average method. The original authority disallowed the deduction claimed by the respondent on three main grounds. Firstly, the respondent included additional sales tax and octroi liabilities from other units while claiming deductions for clearances from the Baddi unit. Secondly, the deduction was initially based on the previous year's figures, not the current year. Thirdly, the liabilities were calculated on an average basis, including those related to exempted excisable goods. Consequently, the original authority disallowed the deduction, confirmed differential duties, and imposed penalties based on various show cause notices.

On appeal, the Commissioner (Appeals) allowed the appeals, stating that the financial accounts represented consolidated figures of the company, including expenses from the Baddi unit. The Commissioner held that the deduction for octroi and additional tax was calculated based on settled accounting principles, and a one-to-one correlation of clearances was not required by law. The Department argued that the taxes deducted should be directly related to the concerned year and not based on the previous year's figures. They contended that expenses related to exempted products should not be considered for the deduction and that the respondent should separate these expenses for each unit's clearances. The Department also relied on specific Board circulars to support their position.

The respondent's advocate argued that for a multi-locational and multi-product company, additional sales tax and octroi should be determined on an average basis, not for each consignment. They agreed that the deduction should not exceed the actual liability for the year and should only be based on taxes related to excisable goods. The advocate cited a Tribunal decision and a Board circular supporting the equalized deduction method. After considering both sides' submissions, the Tribunal agreed that the deduction for additional sales tax and octroi could be allowed on an equalized basis, as done in a previous case. However, they directed that the expenses must be exclusively segregated for excisable goods cleared by the respondent in the respective year. Therefore, the Tribunal set aside the previous orders and remanded the matter to the original authority for reevaluation based on the new guidelines, with a specific timeframe for resolution. The Tribunal also noted that no penalties would be imposed in this case, and the appeals were disposed of accordingly.