important point
It is only the net duty liability of the assessee that can be deducted in computing the assessable value.

Headnote:(a)Central Excise Act, 1944 – Section 4(4)(d)(ii) – It is only the net duty liability of the assessee that can be deducted in computing the assessable value – If excise duty paid to the Government is collected at actuals from the customers and if, subsequently, exemption becomes available, such excise duty which is not passed on to the assessee, would become part of assessable value. (Para 7)
       (1997) 5 SCC 311; (1997) 5 SCC 104; (1994) 4 SCC 276; (1998) 5 SCC 1; (2004) 7 SCC 642 – Referred.
       (b)Central Excise Act, 1944 – Section 4(4)(d)(ii) – The exemption was not by way of a windfall for the manufacturer-assessee – Only the reduced rate of duty can be excluded from the value of the goods.(Para 11)
       1980 ELT 768 (Bom.); 1980 ELT 768 (Bom.) – Approved.
       (c)Central Excise Act, 1944 – Section 4(4)(d)(ii), Explanation – “Value” in relation to excisable goods does not include the amount of duty of excise, sales tax and other taxes if payable on such goods. The test to be applied is that of the “actual value of the duty payable” – This principle can apply also to actual value of any other tax including TOT payable. (Para 12)
       1987 (30) ELT 217 (Bom.) – Approved.
       (d)Central Excise Act, 1944 – Section 4(4)(d)(ii) – The assessee even being aware that the rate of TOT in respect of backward area sales was 0.5% whereas it was 2% for normal areas and yet the assessee by suppressing this data claimed the TOT deductions at the rate of 2% across the board for all clearances – Therefore, the Department was right not only in raising the demand for differential duty but also for invoking the extended period of limitation. (Para 14)
       Facts of the case :
       1.The appellant-assessee is engaged in the manufacture of Nylon and Polyester Yarn which is manufactured in its factory in U.P. and cleared to its various Depots situated all over India including Surat from where the Yarn is sold to dealers. The assessee used to pay duty during the relevant period, at the time of removal of yarn, on the basis of the depot sale price, after claiming permissible deductions under section 4 of the Central Excise Act, 1944. One such deduction was TOT in respect of yarn cleared and despatched to Surat depot from the factory of the assessee in U.P.. In respect of such despatch, the assessee claimed deduction at 2% on account of TOT. This was on the footing that the Government of Gujarat vide Notification dated 19.10.1993 had exempted sale of Yarn of all kinds by a registered dealer to a special manufacturer of processed Yarn or to an eligible unit to the extent to which the rate of TOT exceeded 0.5% of the total turnover.
       2.On 19.3.1999, a show cause notice was issued by the Department to the assessee. According to the show cause notice, since the assessee had deducted TOT at a higher rate to arrive at the assessable value, it had lowered the assessable value to the extent of 1.5% and, as such, a demand for difference was made on the assessee. Accordingly, the Department called upon the assessee to pay excise duty on the differential value. The demand has been confirmed by all the authorities.
       Findings of the Court:
       The Department was right not only in raising the demand for differential duty but also for invoking the extended period of limitation.
       Result : Appeals dismissed.

JUDGMENT

KAPADIA, J.—

1.Delay condoned.

2.These cross appeals are filed by M/s Modipon Fibre Company and the Department under Section 35L of Central Excise Act, 1944 against order dated 3.7.2001 passed by the Customs Excise & Gold (Control) Appellate Tribunal (“CEGAT”) holding that the assessee was entitled to deduction in respect of turnover tax (“TOT”) only at 0.5% and not at 2% as claimed.

Civil Appeal Nos. 8529-8531 of 2001

3.The appellant-assessee is engaged in the manufacture of Nylon and Polyester Yarn which is manufactured in its factory in U.P. and cleared to its various Depots situated all over India including Surat from where the Yarn is sold to dealers. The assessee used to pay duty during the relevant period, at the time of removal of yarn, on the basis of the depot sale price, after claiming permissible deductions under section 4 of the Central Excise Act, 1944 (“1944 Act”). One such deduction was TOT in respect of yarn cleared and despatched to Surat depot from the factory of the assessee in U.P.. In respect of such despatch, the assessee claimed deduction at 2% on account of TOT. This was on the footing that the Government of Gujarat vide Notification dated 19.10.1993 had exempted sale of Yarn of all kinds by a registered dealer to a special manufacturer of processed Yarn or to an eligible unit to the extent to which the rate of TOT exceeded 0.5% of the total turnover. This was provided the specified manufacturer furnished to the selling dealer a certificate in Form 26 and if the processed Yarn stood sold within the State of Gujarat.

4.On 19.3.1999, a show cause notice was issued by the Department to the assessee in which it was alleged that the assessee had filed its price declaration under Rule 173-C in regard to the goods transferred to its depot in Surat for sale therefrom; that in the said price declaration, the assessee had indicated variety-wise ex-depot sale price, amount of various deductions for sales tax, freight, discount, TOT, excise duty etc.; that in the price declaration, the assessee had also declared the assessable value arrived at by deducting the abovementioned elements from ex-depot sale price; that, however, in the price declaration, the assessee had suppressed from the Department the fact that there were two types of sales, one in the backward area as notified by the Gujarat Government and the other in areas other than the backward area; that the assessee had failed to declare that the TOT was leviable on sale of goods during the period March, 1994 to March, 1997 at the dual rate of 0.5% (for sales in backward areas) and at 2% (for sales in areas other than backward areas) respectively. According to the show cause notice, the assessee had claimed deduction for TOT at 2% from ex-depot sale price in order to arrive at the assessable value; that although sales stood effected from the depot at two different rates, the assessee claimed deduction for TOT at the full rate of 2% in respect of entire clearances of Nylon Yarn sent to its Surat depot without mentioning that in the State of Gujarat on account of Notification dated 19.10.1993 two rates of TOT existed and, therefore, according to the show cause notice, the assessee had claimed wrongfully the deduction at a higher rate of 2% as against the rate of 0.5%. According to the show cause notice, since the assessee had deducted TOT at a higher rate to arrive at the assessable value, it had lowered the assessable value to the extent of 1.5% and, as such, a demand for difference was made on the assessee. According to the show cause notice, in the peculiar facts of this case, there should have been different assessable values in respect of Normal Areas Sales and Backward Areas Sales, particularly when the rate of TOT was different for the two types of sales; that in the case of Normal Areas Sales, the assessable value should have been arrived at allowing a deduction of 2% on account of TOT and in the case of Backward Areas Sales, the assessable value sh

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2007 Supreme(SC) 1391

important pointIt is only the net duty liability of the assessee that can be deducted in computing the assessable value.

Cases Referred (5)

important point
It is only the net duty liability of the assessee that can be deducted in computing the assessable value.