TCS Collected Under Income Tax Act On Sale Of Goods Cannot Be Included In The Assessable Value For Charging Excise Duty: Ahmedabad CESTAT

The Bench, consisting of Mr. Ramesh Nair (Judicial Member) and Mr. Raju (Technical Member), held that since the TCS was collected by the assessee as a tax and not as an additional consideration, and since the said TCS was deposited to the income tax department, therefore, it could not be said that the amount of TCS collected by the assessee belonged to it.

The appellant/assessee Yashraj Containeurs Ltd. is engaged in the manufacture of Mild Steel Drums. The scrap that is generated during the manufacturing process is sold by the appellant. The appellant also collects TCS (Tax collected at source) from the buyer of the scrap.

The revenue department opined that the appellant was required to pay Central Excise Duty on the TCS collected by it from the buyer of the scrap. The revenue department held that the TCS collected by the appellant from the buyer, over and above the price of the goods, should be included in the transaction value and should be treated as money value of additional consideration. A show cause notice was issued to the appellant. The adjudicating authority confirmed the demand of Excise Duty on the TCS collected by the appellant. The Commissioner (Appeals) also upheld the demand of Excise Duty raised by the revenue authorities. Against this, the appellant filed an appeal before the CESTAT.

The appellant Yashraj Containeurs Ltd. submitted before the CESTAT that the TCS collected by it was not a part and parcel of the sale price of goods collected by it from the buyer of the scrap. The appellant added that the TCS collected by it was deposited to the income tax department and, therefore, the said amount was not earned by the appellant.

The appellant averred that the revenue authorities had invoked the provisions of Rule 6 of the Central Excise Valuation Rules, 2000 while raising the demand of Excise Duty on the TCS collected by the appellant. The appellant contended that under Rule 6 only an amount which is an additional consideration flowing from the buyer to the assessee can be included in the value of such goods.

The appellant submitted that the TCS collected by it was not flowing to the appellant since it was deposited by it in the income tax department. Therefore, the appellant averred that Rule 6 was not applicable.

Section 206 C (1) of the Income Tax Act, 1961 provides that every person who is a seller shall, at the time of receipt of an amount from the buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of the specified goods, a sum equal to the specified percentage as income tax.

Section 4 of the Central Excise Act, 1944 provides for the valuation of excisable goods for the purpose of charging Excise Duty. Section 4 (3) (d) provides that 'transaction value' does not include the amount of Excise Duty, Sales Tax and other taxes, if any, actually paid or payable on the given goods.

The CESTAT noted that the appellant had collected and deposited the said TCS in the income tax department in terms of Section 206 C of the Income Tax Act.

The CESTAT ruled that in view of Section 206 C of the Income Tax Act, it was clear that the amount collected as TCS had nothing to do with the price of the goods and that it was only a tax collected from the buyer of the scrap, which had to be deposited in the income tax department.

Therefore, the CESTAT held that the amount collected as TCS is a tax and thus, in view of Section 4 of the Central Excise Act, 1944, the said tax is not includable in the assessable value of goods.

The CESTAT observed that under Rule 6 of the Central Excise Valuation Rules, 2000, any additional amount flowing from the buyer to the assessee, directly or indirectly, is includable in the assessable value. Thus, the CESTAT held that any amount which is coming from the buyer and which is retained by the appellant alone would be includable in the assessable value. The CESTAT added that since the TCS was collected by the appellant as a tax and not as an additional consideration, and since the said TCS was deposited to the income tax department, therefore, it could not be said that the amount of TCS collected by the appellant belonged to it.

Thus, the CESTAT held that the amount of TCS collected by the appellant could not be considered as an additional consideration flowing from the buyer to the appellant, therefore, the amount of TCS cannot be included in the assessable value for the purpose of charging Excise Duty.

The CESTAT, therefore, allowed the appeal and set aside the order passed by the revenue authorities.

Case Title: Yashraj Containeurs Ltd. versus C.C.E. & S.T.-Daman

Dated: 07.06.2022 (CESTAT Ahmedabad)

Representative for the Appellant/Assessee: Mr. Prakash Shah, Advocate

Representative for the Respondent/ Revenue Department: Mr. G. Kirupanandan, Authorised Representative

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