2018 (12) TMI 1776 - AT - Central Excise

Valuation - inclusion of reimbursed subsidy amount admissible under the Scheme towards the payment VAT on future sale, in assessable value - HELD THAT - The same issue has been decided by this Hon ble Tribunal in case of SHREE CEMENT LTD. SHREE JAIPUR CEMENT LTD. VERSUS CCE, ALWAR 2018 (1) TMI 915 - CESTAT NEW DELHI where it was held that There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Interpretation of Section 4 of the Central Excise Act, 1944 regarding deduction of VAT from transaction value
- Admissibility of VAT refund received by the assessee from the State Government
- Applicability of previous Tribunal judgments in similar cases

Analysis:
1. Interpretation of Section 4 of the Central Excise Act, 1944: The case involved a dispute regarding the deduction of VAT from the transaction value for charging central excise duty under Section 4 of the Central Excise Act, 1944. The Department contended that the VAT refund received by the assessee needed to be added to the transaction value as per Section 4(3) of the Act. A show cause notice was issued demanding central excise duty, penalty, and interest based on this interpretation.

2. Admissibility of VAT refund: The Department argued that since the assessee received a refund of 75% of VAT paid under the Madhya Pradesh Industrial Policy, the refunded amount should be added to the transaction value for central excise duty calculation. The contention was that the deduction of VAT is only admissible if the amount is actually paid to the State Government, which was not the case due to the refund received.

3. Applicability of previous Tribunal judgments: The Commissioner (Appeals) allowed the assessee's appeal based on the judgment of the Tribunal in the case of M/s Pioneer Engineering Industries and the decision of Shree Cement Ltd. The Tribunal referred to the decision in the case of Shree Cement Ltd. vs. Commissioner of Central Excise, Alwar, where it was held that VAT liability discharged using subsidy challans can be considered as VAT actually paid. The Tribunal concluded that there was no merit in the Department's appeal based on the precedent set by previous judgments.

In conclusion, the Tribunal dismissed the Department's appeal, citing the similarity of facts with previous cases and the interpretation of Section 4 of the Central Excise Act, 1944 as established in previous judgments. The decision reaffirmed that VAT amounts paid using subsidy challans should not be included in the assessable value for central excise duty calculation, based on the legal principles outlined in the relevant statutes and case law.