2022 (6) TMI 1375 - AT - Central Excise

Valuation - inclusion of amount received on account of VAT subsidy shown in notes to the profit and loss account in assessable value - divergence of views - HELD THAT - In view of the difference of opinion between the Members of the Division Bench, the following questions arise for consideration by the ld. Third Member - (A) Whether in the facts and circumstances, the capital/wage subsidy in question reduces the selling price of goods, as held by the Member (Technical). OR As held by the Member (Judicial) that the subsidy in question does not reduce the selling price of the goods. Nor does it amount to indirect flow from the buyer to the seller. (B) The amount of subsidy under dispute is an independent amount of subsidy received from the Government on the basis of the capital investment and employment generation/wages paid and thus, is not an additional sales consideration, as held by the Member (Judicial). OR The amount of subsidy under dispute is not an independent amount received by the appellant. Rather it is computed with reference to the sales tax paid and thus, is an additional consideration for sales, as held by the Member (Technical). (C) The facts in this appeal are similar to the facts in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II VERSUS M/S. SUPER SYNOTEX (INDIA) LTD. AND OTHERS 2014 (3) TMI 42 - SUPREME COURT , as held by the Member (Technical) OR The facts in the present case are difference and hence, ruling of the Apex Court in the case of Super Synotex India Ltd. is not applicable. (D) Under the facts and circumstances, the appellant have received VAT subsidy (directly affecting the selling price of the goods), as held by the Member (Technical) OR It is not a case of VAT subsidy, affecting or depressing the selling price of the goods, as held by the Member (Judicial). (E) The provisions of Section 9 of Rajasthan VAT Act has not been considered in the case of Shree Cement Ltd. 2018 (1) TMI 915 - CESTAT NEW DELHI leading to erroneous judgment in the said case, as held by the Member (Technical) OR The provisions of Section 9 of Rajasthan VAT Act 2003 has got no application in the facts of the present case, as held by the Member (Judicial). (F) It is an appropriate case for reference to the ld. Third Member on the questions framed by the ld. Member (Technical) OR There is no case for reference to the Ld. Third Member and the appeal is fit to be allowed, as held by the Member (Judicial). Registry is directed to place this appeal before the Hon ble President for appropriate orders and/or for appointing the 3rd Member to hear and decide the questions on the difference of opinion between the Members of the Division Bench.

Summary

Issues Involved:
1. Nature and treatment of subsidies under the Rajasthan Investment Promotion Scheme (RIPS) 2003/2010.
2. Inclusion of subsidies in the assessable value for the purpose of Central Excise Duty.
3. Applicability of Supreme Court judgments on similar subsidy schemes.
4. Limitation and penalties imposed.

Issue-wise Detailed Analysis:

1. Nature and Treatment of Subsidies under RIPS 2003/2010:
The Rajasthan Investment Promotion Scheme (RIPS) 2003/2010 provides for Capital Investment Subsidy and Employment Generation (Wage Subsidy). These subsidies are granted based on the investment made and wages paid by the enterprise, with the maximum subsidy being 50% of the total VAT/CST paid. The subsidies are disbursed through VAT-37B challans, which can be used for future VAT payments. This scheme aims to promote investment and employment in Rajasthan.

2. Inclusion of Subsidies in Assessable Value for Central Excise Duty:
The central issue is whether the subsidies received under RIPS should be included in the assessable value for excise duty. The subsidies are linked to the VAT paid by the enterprises, and the appellants argue that these subsidies should not be considered as additional consideration for sales. However, the revenue contends that since the subsidies are linked to the VAT paid, they should be included in the assessable value as additional consideration.

3. Applicability of Supreme Court Judgments:
The tribunal referred to several Supreme Court judgments, including Super Synotex India Ltd., Maruti Suzuki, and National Engineering Industries, which dealt with similar subsidy schemes. In these cases, the Court held that amounts retained by the assessee under subsidy schemes should be included in the assessable value. However, the tribunal noted divergent views in different cases and observed that the facts in the present case differ from those in the Supreme Court judgments, as the subsidies under RIPS are not directly linked to the selling price of the goods.

4. Limitation and Penalties Imposed:
The tribunal also considered the issue of limitation and penalties. The appellants argued that there was no suppression of facts and that the demand for an extended period was not sustainable. The tribunal noted that the issue involved is one of legal interpretation and that there was no evidence of deliberate suppression of facts by the appellants. Consequently, the tribunal held that the extended period of limitation was not applicable, and penalties were not imposable.

Conclusion:
The tribunal observed that the subsidies under RIPS are not directly linked to the selling price of the goods and should not be considered as additional consideration for sales. However, due to divergent views and the need for a consistent approach, the tribunal referred the matter to a larger bench for a definitive resolution on the inclusion of such subsidies in the assessable value for excise duty. The tribunal also held that the extended period of limitation and penalties were not applicable in this case.