As per Section 11D(1) of Central excise Act 1944, brought under the statute book w.e.f. 20.9.1991, every person, who is liable to pay duty under the Act and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under the Act from the buyer of such goods in any manner as representing duty of excise is required to pay the amount so collected to the credit of the Central Govt.
A plain reading of the provisions of Section 11D(1), it is clear that if a manufacturer collects any amount on any excisable goods,in excess of the duty assessed or determined and paid, “representing as duty of excise” is required to pay the same to the Govt. exchequer.
sub-section (1A) was inserted into Section 11D, effective 10 May 2008 according to which “every person, who has collected any amount in excess of the duty assessed or determined and paid on any excisable goods or has collected any amount as representing duty of excise on any excisable goods which are wholly exempt or are chargeable to NIL rate of duty from any person in any manner, is required to pay forthwith such excess collected amount to the credit of the Central Govt.
Sub-section (1A) of Section 11D can be bifurcated into two categories of person:
i) a person, who collects any amount in excess of the duty assessed or determined and paid on any excisable goods;
ii) a person (who) collects any amount as representing duty of excise on any excisable goods which are wholly exempt or are chargeable to NIL rate of duty:
There could be one school of thought that although sub-section (1A) of Section 11Dwould be applicable to the manufacturers’ depots, dealers, etc., any excess amount so collected must “represent as duty of excise” to get the mischief of Section11D(1A) attracted. In other words, to invoke the provisions of Section 11D(1A), invoices issued by the depots, dealers etc. must show the value of the goods and element of excise duty separately. If a composite price is shown in the invoice, there is no representation as “duty of excise” and, hence, sub-section (1A) could not be made applicable,
However, there could be another school of thought that the phrase “representing duty of excise” would be applicable only to the cases where a person collects any amount on any excisable goods which are wholly exempt or are chargeable to NIL rate of duty. This is because of a possible interpretation that the word ‘OR’ used in sub-section (1A) of Section 11D should be read as a disjunctive and, accordingly, the sentence breaks into two parts and, therefore, the phrase “representing duty of excise”would be applicable to second part only.Such an interpretation may lead to an absurd situation, which may not be legislative intention.
Where,in case of first part of Sec 11D(1A), the invoice doesn’t show any excise duty it cannot be established that excess excise duty has been recovered from Buyer.However, Department may claim that they are in a position to prove recovery of excess amount representing as duty from the costing/internal workings/internal Pricing circulars etc. Strictly speaking, ”Excise duty” must be there in the document which a purchaser gets from the seller i.e. invoice/bill/delivery challan etc. While there is no court ruling on 11D(1A) to vindicate the position, ratio of SC decision dealing with similar issue in the context of Sales Tax Laws in DEPUTY COMMISSIONER OF COMMERCIAL TAXES (VIGILANCE) V/S. M/s HINDUSTAN LEVER LTD reported in 2016-TIOL-94-SC-CT is quite relevant. SC held that merely the practice of charging uniform price cannot be considered as a valid ground to hold that the assesse was charging sales tax on a sale price of the goods manufactured and cleared from the exempt unit. It was further held that when the seller passes on his tax liability to the buyer, the amount recovered by the dealer is really part of the entire consideration paid by the buyer and the distinction between the two amounts, tax and price, losses all significance.
Let us hope the Court interprets Sec 11D (1A) soon and ambiguity of Excise Duty liability is done away with.