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CX - CENVAT - Inclusion of cess in consideration for sale price of imported goods is commercially sound -describing such transaction as 'passing on of cess' is not contemplated in law: CESTAT

By TIOL News Service

MUMBAI, FEB 12, 2018: PROCEEDINGS were initiated against the appellant for recovery of Rs.2,03,406/- allegedly being the "cess which they passed on" to their customers who bought goods that were imported by them for trading.

It is alleged that, by inclusion of cess amount along with the description in the dealer invoices issued by them, the appellants had enabled their customers to avail CENVAT credit of this amount which they were not entitled to.

The original authority confirmed the recovery of the amount along with the interest thereon and also imposed penalty of like amount.

On the findings that invoices had not been produced by the appellant, that the assertion in the audit report and order-in-original was sufficient to establish that the cess had been passed on and that by payment of the amount in dispute during the pendency of proceedings their erroneous action was apparent, the Commissioner (Appeals) upheld the o-in-o.

The appellant is before the CESTAT and produces a few of the impugned invoices issued for sale of these imported goods and which bear the levies in separate detail including cess.

After considering the submissions made by both sides, the Member (Technical) observed -

++ No evidence is available on record that the customers of the appellant had availed of credit of cess on the basis of invoices issued by them.

++ It does not appear logical that the printing of the breakup of various levies suffered on the goods at the time of import is not permitted by law. Nor does it confer a license to the customer to avail of credit beyond that permitted in CENVAT Credit Rules, 2004.

++ Inclusion of the cess in the consideration for sale price of imported goods is commercially sound and it is not the place of the tax authorities to intervene in determining the composition of such consideration.

++ Law does not require the cess to be a charge on the profits of the appellant. It is also strange that this transaction has been described as ‘passing on of cess' and, compounding of such misdescription with penal consequences, is not contemplated in law.

Hoping that the above proceedings were an isolated episode, the impugned order was set aside.

The appeal was allowed by setting aside the order of the lower authorities with consequential relief.

(See 2018-TIOL-517-CESTAT-MUM)


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