TMI Blog2014 (3) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... B.E.C. On perusal of the assessment orders brought on record, it is quite clear that in pursuance of the Scheme 75% of the sales tax amount was credited to the account of the State Government as payment towards sales tax by the manufacturer. On a studied scrutiny of the scheme we have no scintilla of doubt that it is a pure and simple incentive scheme, regard being had to the language employed therein. In fact, by no stretch of imagination, it can be construed as a Scheme pertaining to exemption. Thus, analysed, though 25% of sales tax is paid to the State Government, the State Government instead of giving certain amount towards industrial incentive, grants incentive in the form of retention of 75% sales tax amount by the assessee. In a case of exemption, sales tax is neither collectable nor payable and if still an assessee collects any amount on the head of sales tax, that would become the price of the goods. Therefore, an incentive scheme of the present nature has to be treated on a different footing because the sales tax is collected and a part of it is retained by the assessee towards incentive which is subject to assessment under the local sales tax law and, as a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e granted in Special Leave Petition (C) No. 16248 of 2009. 2. This batch of appeals preferred under Section 35L of the Central Excise Act, 1944 (for brevity, the Act) being interconnected 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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. 6. Being grieved by the order passed by the Commissioner of Central Excise, Jaipur, the assessee preferred three appeals, namely, Appeal NO. E/2279-2281 of 2002. The Tribunal posed the question whether the assessee was entitled to claim deduction under Section 4(4)(d)(ii) of the Act in respect of full amount of sales tax payable at the rate of 2%. The Tribunal took note of the fact that the assessee, being entitled for the benefit under the Sales Tax New Incentive Scheme for Industries, 1989 (for short the Scheme ), had availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Learned counsel appearing for the assessee submitted that the order passed by the tribunal is absolutely inexceptionable inasmuch as it has correctly applied the circular issued by the CBEC and the respondent being exempted under the incentive scheme issued by the State Government is entitled to avail the benefit. He has commended us to the Scheme issued by the State Government and brought on record the assessment orders passed by the sales tax authorities. Learned counsel would further submit that as per the Scheme they are entitled to retain 75% of the sales tax collected and pay only balance 25% to the State Government and despite the same being the admitted position, the adjudicating authority has committed grave illegality by treating it as an exemption which has been appositely corrected by the tribunal and hence, the order impugned is impeccable. It is propounded that the amended provision that came on the statute book with effect from 1.7.2000 does not change the situation and, in fact, the earlier circular on principle has been reiterated by the subsequent circular dated 9.10.2002. 10. Having regard to rivalised submissions raised at the Bar, we deem it appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5% of the total turnover if the processed yarn was sold in the State of Gujarat. Thus, there was dual rate of 2% and .5% TOT in the State of Gujarat, with the lower rate being applicable to sales in backward area. Relying upon the word/expression payable used in Section 4(4)(d)(ii), it was submitted by the assessee that it refers to the duty payable in the tariff and not any concession or exemption. The contention was rejected by the Court observing that the word payable was descriptive and one has to see the context in which the said word finds place and accordingly proceeded to opine: - As can be seen from the abovequoted section, excise duty can be deducted if it had not been included in the invoice price. According to the Explanation, what is deductible is the effective rate of duty. Where any exemption has been granted, that exemption has to be deducted from the ad valorem duty. In other words, it is only the net duty liability of the assessee that can be deducted in computing the assessable value. The said principle stands incorporated in the Explanation. For example, if the assessee recovers duty at the tariff rate but pays duty at concessional rate, then excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, Section 47 of the Finance Act, 1982 which inserted the Explanation expressly sets out what is meant by the expression the amount of duty of excise payable on any excisable goods . By the amount of duty of excise what is meant is the effective duty of excise payable on such goods under the Act and, therefore, effective duty of excise is the duty calculated on the basis of the prescribed rate as reduced by the exemption notification. This alone is excluded from the normal price under Section 4(4)(d)(ii). After so stating the Court stated: - Therefore, the test to be applied is that of the actual value of the duty payable and, therefore, there is no merit in the argument advanced on behalf of the assessee that the Explanation is restricted to the duty of excise. This principle can therefore apply also to actual value of any other tax including TOT payable. Even without the Explanation, the scheme of Section 4(4)(d)(ii) shows that in computing the assessable value, one has to go by the actual value of the duty payable and, therefore, only the reduced duty was deductible from the value of the goods. 14. It is seemly to note that the Court approved the ratio laid down in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89 does not relate to exemption but incentive. To elaborate, the assessee, under the said Scheme, is permitted to retain 75% of the sales tax collected as incentive and is liable to pay 25% to the department. 75% of the amount retained has been treated as incentive by the State Government. It is pointed out that such retention of sales tax is a deemed payment of sales tax to the State exchequer and for the said purpose reliance is placed on Circular No. 378/11/98-CX dated 12.3.1998 issued by C.B.E.C. 17. In the aforesaid circular, three situations were envisaged, viz., (i) exemption from payment of sales tax for a particular period; (ii) deferment of payment of sales tax for a particular period; and (iii) grant of incentive equivalent to sales tax payable by the unit. The aforestated three situations had been examined by the Board in consultation with the Ministry of Law. As far as situation (iii) is concerned, the circular stated thus: - 6. Examination of the situation, mentioned above in para 2(ii) (iii), in the referring note give an indication that sales tax is payable by the assessee in both the situations. It is payable after a particular period in the second case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % sales tax amount by the assessee. In a case of exemption, sales tax is neither collectable nor payable and if still an assessee collects any amount on the head of sales tax, that would become the price of the goods. Therefore, an incentive scheme of the present nature has to be treated on a different footing because the sales tax is collected and a part of it is retained by the assessee towards incentive which is subject to assessment under the local sales tax law and, as a matter of fact, assessments have been accordingly framed. In this factual backdrop, it has to be held that circular entitles an assessee to claim deduction towards sales tax from the assessable value. The fact situation in Modipon Fibre Company (supra), as is manifest, was different. In our considered opinion what has been stated in Modipon Fibre Company (supra) cannot not be extended to include the situation (iii). We are inclined to think so as the definition of term value under Section 4(4)(d) was slightly differently worded and the CBEC had clarified the same in the circular dated 12.3.1998 and benefits were granted. 20. The question that would still remain alive is that what would be the effect of am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the net amount of sales tax after deducting set off/rebate admissible, either in full or in part, on the sales tax/purchase tax paid on the raw materials during the said month/quarter. The sales tax set off in such cases, therefore, does not work like the central excise set off notifications where one to one relationship is to be established between the finished product and the raw materials and the assessee is allowed to charge only the net central excise duty from the buyer in the invoice. The difference between the set off operating in respect of central excise duty and that for sales tax can be best illustrated through an example. If the sales tax on a product A of value ₹ 100/- is, say 5% and the set off available in respect of the purchase tax/ sales tax paid on inputs going into the manufacture of the product is, say, Re.1/-, then the sales tax law permits the assessee to recover sales tax of ₹ 5/-. But while paying to the sales tax deptt. be deposits an amount of ₹ 5-1 = ₹ 4 only. On the central excise duty payable would have been ₹ 5-1 = ₹ 4, in view of the set off notification, and the assessee would recover an amount of ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State Government for the sale transaction, i.e., transfer of title from the manufacturer to a third party. Accordingly, the amount paid to the State Government is only excludible from the transaction value. What is not payable or to be paid as sales tax/VAT, should not be charged from the third party/customer, but if it charged and is not payable or paid, it is a part and should not be excluded from the transaction value. This is the position after the amendment, for as per the amended provision the words transaction value mean payment made on actual basis or actually paid by the assessee. The words that gain signification are actually paid . The situation after 1.7.2000 does not cover a situation which was covered under the circular dated 12.3.1998. Be that as it may, the clear legislative intent, as it seems to us, is on actually paid . The question of actually payable does not arise in this case. 23. In view of the aforesaid legal position, unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of transaction value under Section 4(4)(d), for it is not excludible. As i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. 25. The legal position has been reiterated in the State of Tamil Nadu and Anr. v. India Cement Ltd. (2011) 13 SCC 247 Therefore, reliance placed on the circular dated 9.10.2002 by the tribunal is legally impermissible for two reasons, namely, the circular does not so lay down, and had it so stated that would have been contrary to the legislative intention. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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