CESTAT Rules in Favor of BILT Graphics in Deferred Sales Tax Case

Tribunal Determines NPV Scheme Not to Affect Excise Duty Transaction Value

In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Mumbai West Zonal Bench has delivered a verdict in favor of BILT Graphics Paper Products Ltd. The tribunal has set aside the demand for recovery of central excise duty amounting to Rs. 3,06,33,666 by the Commissioner of Central Excise, Customs & Service Tax, Wardha. The core issue revolved around the inclusion of deferred sales tax, paid at Net Present Value (NPV) under a Maharashtra Government scheme, in the transaction value for excise duty computation.

The case stemmed from BILT Graphics opting for an incentive package from the Maharashtra Government, allowing deferred payment of sales tax. This scheme was later amended to enable premature payment at NPV. The revenue authorities argued that the difference between the original sales tax liability and the NPV paid should be included in the transaction value, citing it as unpaid sales tax.

However, the tribunal, led by Mr. C J Mathew and Mr. Ajay Sharma, clarified that the NPV payment is a financial adjustment rather than unpaid sales tax. Relying on precedents and circulars from the Central Board of Excise and Customs (CBEC), the tribunal emphasized that such financial schemes do not alter the transaction value for excise duty purposes.

The tribunal's decision aligns with multiple judicial precedents and CBEC circulars, reinforcing that sales tax adjustments and incentives under state laws do not affect the admissibility of deductions for excise duty. This ruling is expected to have significant implications for businesses availing similar sales tax deferral schemes.

Bottom Line:

Sales tax liability deferred or paid at Net Present Value (NPV) under a government incentive scheme cannot be treated as unpaid sales tax for inclusion in the transaction value for excise duty computation.

Statutory provision(s): Central Excise Act, 1944 Section 4(3)(d), Section 11A, Section 11AB, Section 11AC

BILT Graphics Paper Products Ltd. v. Commissioner of Central Excise, Customs & Service Tax, (CESTAT)(Mumbai West Zonal Bench) : Law Finder Doc Id # 2813971