S. 11D Inapplicable Where No Excise Duty Shown or Collected During SSI Exemption: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bengaluru, has quashed multiple excise duty demands raised against a manufacturer of cement concrete pavers and kerb stones, holding that Section 11D of the Central Excise Act, 1944 cannot be invoked unless an amount is explicitly collected as representing excise duty. The bench of Dr. D.M. Misra, Member (Judicial) and Pullela Nageswara Rao (Technical Member) ruled that freight and transportation charges cannot be added to assessable value when sales are made on an ex-factory basis, and set aside penalties and interest imposed by the department. The case arose from an investigation conducted by the Central Excise department against a Tumkur-based manufacturer engaged in producing cement concrete interlock pavers and kerb stones. The assessee was availing Small Scale Industry (SSI) exemption under Notification No. 8/2003-CE, which allows duty-free clearances up to an aggregate value of ₹1.5 crore in a financial year. Based on intelligence inputs, the department alleged that during the period from November 2010 to December 2014, the manufacturer had collected excise duty amounting to ₹66.83 lakh while availing SSI exemption, recoverable under Section 11D. Short-paid excise duty of Rs. 28.75 lakh by excluding freight and transportation charges from assessable value. Failed to discharge duty of Rs. 17.41 lakh for a subsequent period. Suppressed facts with intent to evade duty, warranting invocation of the extended limitation period and imposition of penalties The Commissioner of Central Excise confirmed the demands along with interest and penalties, prompting the appeals before CESTAT. The Tribunal rejected the department’s primary contention that the assessee had collected excise duty in the guise of an “all-inclusive price” during the SSI exemption period. CESTAT observed that none of the excise invoices issued during the exemption period reflected any amount as excise duty, nor was duty calculated or separately recovered from buyers. Merely describing the price as “inclusive of duties wherever applicable” did not amount to collection of duty as required under Section 11D. The Tribunal held that Section 11D applies only when an amount is collected “as representing duty of excise”, and not where a consolidated price is charged without showing duty separately. It further noted that profiteering by retaining exemption benefits without reducing prices may be a commercial issue but is not covered under Section 11D. Accordingly, the demand of Rs. 66.83 lakh under Section 11D was set aside. On the issue of valuation, the Tribunal examined whether freight, transportation, and loading/unloading charges should form part of assessable value under Section 4 of the Central Excise Act. CESTAT found that, except for limited supplies made to two customers, the majority of clearances were on an ex-factory basis, with transportation arranged on behalf of buyers and charges shown separately in invoices. In such circumstances, transportation costs incurred after removal from the factory gate cannot be included in assessable value. The Tribunal held that the department failed to produce sufficient evidence to generalise isolated FOR-site contracts to all clearances. Consequently, the demand of ₹28.75 lakh on freight inclusion was held to be unsustainable. Regarding the alleged non-payment of duty of ₹17.41 lakh, the Tribunal noted that the duty had already been discharged—partly in cash and partly through CENVAT credit—within the stipulated time. The delay pertained only to the filing of returns, which the assessee attributed to lapses by its Chartered Accountant. Considering the assessee’s status as an SSI unit and the fact that the duty had been appropriated by the department, CESTAT condoned the delay and set aside related penal consequences. The Tribunal also ruled that extended limitation could not be invoked, as there was no suppression or misrepresentation of facts. Transportation charges were disclosed separately in invoices, and duty was paid wherever applicable after crossing the SSI threshold. Since the dispute involved interpretation of valuation and exemption provisions, penalties imposed under the Act were held to be unsustainable. The CESTAT set aside the order in its entirety, quashing all duty demands, interest, and penalties. Case Details Case Title: M/s. Designer Pavings and Tiles Private Limited Versus The Commissioner of Central Excise Bengaluru II Commissionerate Case No.: Central Excise Appeal No. 21053 of 2016 Date: 16.01.2026 Counsel For Appellant: Rajesh Chander Kumar Rohra, Senior Advocate Counsel For Respondent: Maneesh Akhoury, Assistant Commissioner (AR) Click Here To Read Order Read More: Airlines Liable for TDS on Agent Commission, But Only Interest Recoverable if Agent Already Paid Tax: Delhi HC

S. 11D Inapplicable Where No Excise Duty Shown or Collected During SSI Exemption: CESTAT

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