2018 (5) TMI 2058 - AT - Central Excise

Valuation - inclusion of subsidy amounts in the value of the goods cleared by the appellants - appellant was required to deposit VAT/CST/SGST as per the applicable rate and in terms of Rajasthan Investment Promotion Scheme - HELD THAT - An identical issue has came up before the Tribunal in a number of cases including GREENLAM INDUSTRIES LTD, MARUDHAR POLYSACKS PVT LTD, VAISHNO WIRE PVT LTD, MAHARAJA CABLES, WELLMAC PLASTICS PRIVATE LIMITED, SRV INTERNATIONAL PVT LTD, STAR GLOBAL ENDURA LTD, ALLIANCE POLYSACKS PVT LTD. VERSUS COMMISSIONER OF CGST CENTRAL EXCISE-JAIPUR-I, C.C.E. S.T. JAIPUR-I 2018 (4) TMI 1787 - CESTAT NEW DELHI where it was held that there is no others justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of investment subsidy scheme under Rajasthan Government for VAT liability and its impact on assessable value under Central Excise Act.

Analysis:
The appeal dealt with the issue of whether subsidies received under the Rajasthan Investment Promotion Scheme, specifically in the form of VAT 37B challans, should be included in the assessable value of goods manufactured by the appellants under the Central Excise Act. The appellants contended that the subsidy amounts received should not be included in the assessable value as they were considered legal payments of tax under the scheme. The Revenue, on the other hand, argued that such subsidies should be considered as part of the value of goods cleared by the appellants, leading to a demand for the difference in duty payment.

Upon hearing both parties and examining the relevant material, the Tribunal referred to similar cases, including M/s Greenlam Industries Ltd. and Shree Cements Ltd., to analyze the issue at hand. The Tribunal noted that the appellants were required to discharge their VAT liability under the Rajasthan Government schemes, with a portion of the VAT being disbursed back to them in the form of subsidies through VAT 37B challans. The crux of the dispute revolved around whether these subsidy amounts should be included in the assessable value of goods as per Section 4 of the Central Excise Act.

The Tribunal considered the decision of the Apex Court in the case of Super Synotex India Ltd., which emphasized that unless sales tax/VAT is actually paid, no benefit towards excise duty can be granted. However, the Tribunal distinguished this based on the Welspun Corporation Ltd. case, where it was held that subsidy amounts received under a remission of tax scheme were not required to be included in the transaction value. The Tribunal further emphasized that in the present case, the VAT liability discharged using subsidy challans was considered legal tax payments under the Rajasthan Government scheme, thus rejecting the Revenue's view.

By following the precedent set in the Welspun Corporation Ltd. case, the Tribunal concluded that there was no justification for including VAT amounts paid using VAT 37B challans in the assessable value. Consequently, the impugned orders were set aside, and the appeals were allowed, ruling in favor of the appellants.

In conclusion, the Tribunal's decision clarified the treatment of subsidies received under the Rajasthan Investment Promotion Scheme in relation to VAT liability and assessable value under the Central Excise Act, providing a detailed analysis based on legal precedents and scheme provisions.