Sales Tax Discharged At NPV Under State Incentive Scheme Not Addable To Transaction Value For Excise Duty: CESTAT Mumbai

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai has held that sales tax deferred under a State incentive scheme and later discharged at Net Present Value (NPV) cannot be treated as “sales tax not paid” for the purpose of including it in the transaction value for levy of Central Excise duty. A Division Bench of C.J. Mathew (Technical Member) and Ajay Sharma (Judicial Member) allowed the appeal filed by the assessee and set aside the demand raised under Section 11A of the Central Excise Act, 1944, along with equal penalty under Section 11AC. The assessee, BILT Graphics Paper Products Ltd., had availed the Deferred Sales Tax Incentive Scheme of the Government of Maharashtra, under which eligible manufacturers were allowed to collect sales tax and retain it for a specified period before later depositing it with the State. In 2002, the scheme was amended to allow premature discharge of the deferred liability by paying only the Net Present Value (NPV) of the total deferred sales tax. The assessee had opted for early payment through NPV. The Adjudicating Authority ordered demand duty showing that the difference between the original deferred sales tax liability and the lower NPV amount retained by the assessee represented “sales tax not paid”, and therefore, should form part of the transaction value for excise duty purposes. The CESTAT observed that the NPV mechanism did not allow the assessee to retain sales tax permanently, unlike a set-off scheme where part of sales tax collected is never paid to the State. The prior payment of NPV is only a financial settlement for time value of money, not a tax waiver. The Bench remarked “abatement of sales tax” must be decided at the time of clearance of the goods, and not based on any change in tax liability or statutes occurring later. The Bench observed that the Department's approach was contrary to the earlier rulings of the Tribunal in Uttam Galva Steels Ltd., Kinetic Engineering Ltd., wherein it was held that no extra excise duty can be demanded simply because the assessee paid the deferred sales tax at NPV. The Bench reaffirmed that once excisable goods are cleared, transaction value cannot be recomputed later due to subsequent changes in law, incentives, or financial arrangements relating to sales tax. Accordingly, the Bench set aside the excise demand, interest, and penalty, and allowed the appeal in favour of the assessee. Case Title: BILT Graphics Paper Products Ltd. Vs. Commissioner of Central Excise, Customs & Service Tax Case No: Excise Appeal No. 85636 of 2016 Appearance for Appellant/Assessee: Shri Rajesh Ostwal Appearance for Respondent/Department: Shri Mahesh Patil Additional Commissioner (AR) Click Here To Read/Download Order

Sales Tax Discharged At NPV Under State Incentive Scheme Not Addable To Transaction Value For Excise Duty: CESTAT Mumbai

Rajnandini Dutta

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