CESTAT Allows Income Tax Deduction On Account Of Octroi And Additional Sales Tax

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has allowed the income tax deduction on account of octroi and additional sales tax.

The Bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the gist of the SCNs was to deny the deduction on account of Octroi and Additional Sales Tax for the reason that the same is claimed on an equal basis, even though paid on some non-excisable goods.

The appellant/assessee is in the business of manufacturing and clearing PP medicines. During the visit to the factory, officers of the Preventive Unit observed that the appellants were clearing the medicaments, claiming the deduction on the count of Octroi charges and Additional Sales Tax on an equalized basis rather than on an actual basis. The SCNs were issued and confirmed.

The appellants submit that they have a strong case on technical issues and on merits. On the technical issue, she takes the bench through the SCN and submits that the show cause notice was only in respect of the claim of deduction on the count of Octroi charges and Additional Sales Tax on an equalized basis. During the visit of the preventive party, the appellants inadvertently submitted figures including the amounts for secondary freight in addition to the figures pertaining to octroi charges and additional sales tax.

The department, while taking the figure, has taken the total amount, but the terms of the show cause were very clear that it was meant to deny the deduction on account of Octroi charges and additional sales tax on an equalized basis. The fact is very clear, as wherever deductions were mentioned, the SCN has amplified within the bracket of octroi charges and additional sales tax.

Since there is no ambiguity in the language of the SCN, the mere mention of figures will not empower the Department to collect excise duty on an item that was not even agitated in the SCN.

The appellant submitted that the CESTAT order was categorical in terms of remand. The remand was for the limited purpose of calculating the admissible deductions on an actual basis and permitting the deduction of Octroi charges and additional sales tax on excisable goods alone. It was not open to the original or appellate authorities to traverse beyond the terms of the SCN and beyond the terms of the remand order.

The tribunal held that the gist of the SCNs was to deny the deduction on account of Octroi and Additional Sales Tax for the reason that the same are claimed on an equalized basis, even though paid on some non-excisable goods. The SCN needs to be understood from that perspective alone. The term "etc." when used in conjunction with Octroi and Additional Sales Tax would, by any imagination, mean the statutory or government levies, if any, rather than other post-manufacturing expenses like secondary freight, as is claimed by the Department.

"We find that there was no whisper of seeking denial of deduction on secondary freight, and to that extent, there is no ambiguity in the SCN, and it is not open for the Department to claim confirmation of duty on account of secondary freight at this juncture", the ITAT said.

Case Title: M/s Fresenius Kabi Oncology Limited Versus The Commissioner of Central Excise

Case No.: Excise Appeal No. 1226 Of 2012

Date: 11.05.2023

Counsel For Appellant: Krati Singh, Aman Singh

Counsel For Respondent: Shivani

Click Here To Read The Order