Income Tax TCS on sale of Goods cannot be includable in assessable value for charging Excise Duty: CESTAT

Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in the matter of Yashraj Containers Ltd vs C.C.E. & S.T.-Daman has held that Income Tax, Tax Collected At Source (TCS) on sale of goods cannot be considered as additional consideration flowing from the buyer to the appellant accordingly, the same is not includable in the assessable value for charging Excise Duty.

The case of the department is that the TCS collected from the buyer over and above the price of the goods should be included in the transaction value as the same shall be treated as amount of money value of additional consideration and Central Excise duty is required to be paid. Accordingly, a show cause notice was issued which was adjudicated by the adjudicating authority by confirming the demand of duty on the said TCS amount. In appeal, the Learned Commissioner (Appeals) upheld the demand and dismissed the appeal therefore, the present appeal filed by the appellant.

Shri. Prakash Shah, Learned Counsel appearing on behalf of the appellant submits that the TCS is not a part and parcel of sale price of the goods which is collected from the buyer of scrap. As per Section 206 C of the Income Tax Act, 1962 and said amount is deposited to the income tax department, therefore the said amount was neither returned by the appellant nor earned by them. The appellant is only complying the provision of the income tax without any gain out of the TCS collected and paid to the department, therefore, the same cannot be considered as a part and parcel of the assessable value.

He also submits that the adjudicating authority in show cause notice invoked Rule 6 of the Central Excise Valuation Rules, for demand of duty. He submits that firstly, the TCS is a tax which has to be deducted from the total value of the goods. Secondly, in terms of Rule 6 any amount which is additional consideration flowing from the buyer to the assesse can only be included. In the present case the amount of TCS is not flowing to the appellant whereas, the said amount is as it is deposited to the income tax department therefore, Rules 6 is also not applicable.

Shri. G. Kirupanandan, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order of Learned Commissioner (Appeals).

Retreating provisions of Income Tax related to TCS, the CESTAT held that “From the pain reading of the Income Tax provisions, it is clear that the amount collected as TCS has nothing to do with the price of the goods but it is a tax collected from the buyer of the scrap and the same is deposited in the income tax department, therefore, the amount collected as TCS is a tax and in terms of Section 4, the tax is not includable in the assessable value.”