Grindwell Norton Ltd. Wins Appeal Against Central Excise Duty Demand

CESTAT Mumbai Bench Rules in Favor of Grindwell Norton Ltd., Setting Aside a Rs. 26.58 Lakh Excise Duty Demand on Deferred Sales Tax Liability 

In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Mumbai West Zonal Bench, has ruled in favor of Grindwell Norton Ltd., setting aside a central excise duty demand amounting to Rs. 26,58,838. The Tribunal, comprising Mr. C J Mathew, Member (Technical), and Mr. Ajay Sharma, Member (Judicial), delivered the judgment on November 27, 2025, in the case titled Grindwell Norton Ltd. v. Commissioner of Central Excise.

Grindwell Norton Ltd. had challenged the order of the Commissioner of Central Excise & Customs (Appeals), Nagpur, which confirmed the demand for central excise duty under Section 11A of the Central Excise Act, 1944, along with applicable interest and a penalty of an equivalent amount under Section 11AC of the same Act. The dispute arose from the company's exercise of an option under the deferred payment scheme by the Government of Maharashtra, allowing the retention of applicable sales tax for a specified period before remittance.

The crux of the matter was the company's remittance of Rs. 63,42,160 as sales tax under the Net Present Value (NPV) scheme, against a liability of Rs. 2,26,34,059, which left an amount of Rs. 1,62,91,800 unremitted. The original authority included this unremitted amount in the transaction value for excise duty assessment, which was upheld by the first appellate authority, prompting the appeal.

The Tribunal considered multiple precedents, notably distinguishing the present case from the Supreme Court's decision in Commissioner of Commissioner of Central Excise, Jaipur-II v. Super Synotex (India) Ltd. The Tribunal observed that while the Super Synotex case dealt with a 'set off' scheme, the current case involved a 'deferment' scheme, monetized through NPV payment, which does not constitute retention of sales tax or tax not paid.

The Tribunal emphasized that the NPV scheme merely provided a financial accommodation to the State Government by offering premature access to deferred sales tax, rather than altering the original sales tax liability or transaction value of goods at the time of removal. As such, any changes in sales tax liability due to subsequent amendments do not impact the assessable value initially determined.

The decision reinforces the principle of consistency in taxation, ensuring that the assessable value of goods remains unaffected by subsequent changes in tax liability. The Tribunal's ruling aligns with previous decisions in similar cases, affirming that the deduction of sales tax in transaction value assessment should be based on the liability at the time of removal of goods.

This ruling provides clarity on the treatment of deferred sales tax liabilities under NPV schemes and underscores the necessity of considering the nature and intent of such schemes in excise duty assessments.

Bottom Line:

Central Excise - Treatment of deferred sales tax liability under 'Net Present Value' (NPV) scheme - Liability to excise duty on sales tax deferred and subsequently monetized - Clarified that deferred sales tax liability discharged through NPV payment does not alter the assessable value of goods at the time of their removal, and any subsequent changes in the law or liability do not impact the original assessment.

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

Grindwell Norton Ltd. v. Commissioner of Central Excise, (CESTAT)(Mumbai West Zonal Bench) : Law Finder Doc Id # 2813970