Non-Manufacturer Must Deposit Excess Excise Duty Collected From Buyer: CESTAT Delhi

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi, has held that a non-manufacturer who collects an amount representing excise duty in excess of the actual duty paid on goods must deposit the excess amount with the Central Government.

A coram comprising Judicial Member Binu Tamta and Technical Member P.V. Subba Rao made the ruling while dismissing Vihaan Enterprises' appeal against a ₹4.00 crore demand under the Central Excise Act, 1944, along with interest.

The demand was confirmed under Section 11D(1A) of the Act. The provision requires a person who collects an amount representing excise duty in excess of the duty actually paid on excisable goods to pay that amount to the Central Government.

The court observed, “The appellant is certainly a person who has collected an amount as representing duty of excise on excisable goods in excess of the actual duty of excise. It has also been represented wrongly in its running bills that the amount has been deposited with the concerned authorities. Section 11D(1A) will squarely apply to the appellant and it was required to credit the amount to the central government but it had not done so.”

Vihaan was a non-manufacturer engaged in turnkey projects. It had received projects from various clients, including Madhya Pradesh Power Transmission Company Limited (MPPTCL), and procured equipment from manufacturers for supply to the project site.

The dispute concerned the first of four contracts under the MPPTCL award. The contract was for supplying equipment and materials required for substations and related works. Under the tender, manufacturers and non-manufacturers had to submit bids in different formats.

As a non-manufacturer, Vihaan was required to quote the total amount it would charge. Instead, it submitted its bids in the format prescribed for manufacturers, separately showing excise duty, CST, and other taxes. MPPTCL accepted the bids.

The manufacturers from whom Vihaan purchased the equipment paid the applicable excise duty and raised invoices in Vihaan's name. Vihaan then issued invoices to MPPTCL for the same goods. In some invoices, excise duty was shown separately. In others, only the total amount based on the accepted prices was mentioned.

An audit found that the amount represented as excise duty in Vihaan's accepted prices and invoices was substantially higher than the duty actually paid by the manufacturers. The difference formed the basis of the demand.

For instance, one invoice issued by Vihaan to MPPTCL showed excise duty of ₹30.23 lakh on a total value of ₹2.41 crore. The corresponding invoice issued by the manufacturer showed excise duty of ₹22.75 lakh on goods valued at ₹2.05 crore.

Vihaan argued that the contract had been awarded on a package-cost basis, with the price inclusive of taxes. It also contended that the documents relied upon by the department were internal documents and that it had not collected any amount representing excise duty.

The tribunal rejected the contention, finding from the bids, invoices and running bills that Vihaan had collected amounts representing excise duty from MPPTCL. In some invoices, the duty was shown separately. In others, it formed part of the accepted prices.

The tribunal also noted that Vihaan had given an undertaking in its running bills that statutory taxes and duties had been deposited with the concerned authorities. The actual excise duty paid by the manufacturers, however, was lower than the amount represented as excise duty by Vihaan.

The Bench drew a distinction between Sections 11D(1) and 11D(1A). Section 11D(1) applies to a person who is liable to pay excise duty and collects an amount exceeding the duty assessed or determined and paid. Since Vihaan was not a manufacturer, the tribunal held that this provision did not apply to it.

Section 11D(1A), however, applies to a person who collects an amount representing excise duty in excess of the duty actually paid. The tribunal held that Section 11D covers “any person” and not necessarily a manufacturer. On that basis, it held that Section 11D(1A) applied to Vihaan.

The tribunal rejected the reliance placed on earlier decisions, finding that they turned on different facts. In some of those cases, no amount had been collected from customers as representing excise duty.

The show-cause notice was issued under Section 11D(2), which allows the Central Excise Officer to require a person to show cause why an amount that should have been credited to the Central Government should not be paid. Interest was also imposed under Section 11DD

Finding the Principal Commissioner's order correct and proper, the tribunal upheld it and dismissed the appeal.

For Appellant: Sandeep Mukherjee, Chartered Accountant

For Respondent: Sanjeev Kumar Ray, Authorised Representative