Chargeability

Whether Central Excise Duty (CED) accrued during the years when Central Excise Act , 1944 (repealed enactment) ['CEA 1944'] was in force could be recovered under the provisions of Federal Excise Act, 2005 (repealing enactment) ['FEA 2005'], especially in absence of any saving clause in the FEA, 2005?

Contention of the appellant / taxpayer was that recovery of CED relating to prior tax periods through show cause under FEA, 2005 was absolutely illegal as the same could not be done in the absence of any saving clause in the FEA, 2005

Held: Notifications or orders under the repealed Act continued if not inconsistent with the new Act, unless expressly superseded

By application of S. 6 of the General Clauses Act 1897, the repealing of CEA, 1944 by FEA, 2005 did not affect any liability incurred upon the appellant and notifications and orders issued under the repealed CEA, 1944 shall remain active and alive irrespective of its repeal through FEA, 2005 unless specifically rescinded

Provision of Art. 264 of the Constitution, provided that any legal proceedings may be instituted, continued or enforced under the repealed enactment as if the law had not been repealed

Thus, under the provisions of Art. 264 of the Constitution and S. 6 of the General Clauses Act, 1897, the liability of CED incurred upon the appellant under the repealed CEA, 1944 was not affected by the enactment of repealing Act of 2005 even in the absence of any saving clause in the FEA, 2005

Initiation of proceedings for recovery of the CED incurred on the appellant under CEA, 1944 could be initiated even after the repealing of CEA, 1944 by FEA, 2005, but the same, by virtue of Art. 264 of the Constitution, had to be initiated under the provisions of repealed law (CEA, 1944) in a manner as if the law had not been repealed provided that other legal formalities were properly complied with.

Argument of the Department was that, during scrutiny, it found Registered Person (Electricity Supply Company / DISCO) to have claimed / adjusted inadmissible input tax during four tax periods on purchase of certain items (office equipment, mineral water, travel sets, soaps and sugar)

Registered person filed appeal before the Appellate Tribunal Inland Revenue as the Commissioner maintained Order-in-Original for recovery of amount along with default and penalty

Validity

Inland Officer failed to establish as to how the items purchased by the appellant fell within the categories of goods permanently attached to immovable property, or building material, or goods for personal use etc., or any of the specific category listed in Cls. (a), (f), (g), (h) and (i) of S. 8(1) of the Sales Tax Act, 1990

Initial burden to prove chargeability was on the Department, which did not appear to have been discharged in the present case

While examining details of goods and services provided by the appellant along with the details of utilization in the taxable activities which was placed on the record, Appellate Tribunal Inland Revenue Land that the same did not come within the ambit of said provisions of the Sales Tax Act, 1990, and the Officer Inland Revenue failed to substantiate and correlate the disallowance of input tax with the said provisions of the Sales Tax Act, 1990

Provisions of S.8(1)(a) of the Sales Tax Act, 1990, authorize deduction for all such input tax that relates to goods that contribute directly or indirectly, and even remotely, in furtherance of taxable activity

Thus, assessment order as well as appellate order in respect of adjustment of input tax were passed on the basis of wrong assumption and application of law and incorrect appreciation of facts

Appellate Tribunal Inland Revenue set-aside the impugned orders and allowed the appeal filed by the registered person.

Issue regarding chargeability of sales tax on fixed assets/scrap etc. had since been .decided by the Supreme Court in favour of the Revenue, finding of the Collector regarding sales of empty drums were upheld by the Appellate Tribunal.