2020 (1) TMI 1626 - AT - Central Excise

Valuation - disbursement of Capital Subsidy to the appellant industry, by way of Form 37-B (vouchers) - utilization of such vouchers in discharge of their sales tax liability - amount received from the State Government by way of capital subsidy is required to be added in the assessable value of the excisable goods cleared or not? HELD THAT - The said issue is no longer res integra and the Division Bench of this Tribunal in the case of SHREE CEMENT LTD. SHREE JAIPUR CEMENT LTD. VERSUS CCE, ALWAR 2018 (1) TMI 915 - CESTAT NEW DELHI , has held that the view of the Revenue that VAT liability discharged by utilising the investment subsidy granted through Form 37B vouchers cannot be considered as VAT not paid for the purpose of valuation under Section 4 of the Central Excise Act, 1944. The State Government has, instead of disbursing the capital investment subsidy by cash or cheque, issued Form 37B vouchers, which could be used for the purpose of payment of sales tax liability. It was also held that after setting up of the industry initially the assessee was required to remit the VAT to the Government. As per eligible criteria, the capital investment subsidy is disbursed in Form 37B Challan/Vouchers. Such challans are as good as cash, but can only be used for payment of VAT/Sales Tax in the subsequent period. Such capital investment subsidy cannot form part of the assessable value under Section 4 of the Central Excise Act for calculation of the duty. The impugned order is set aside - Appeal allowed.

Summary

Issues:
1. Whether the disbursement of Capital Subsidy utilized in discharge of sales tax liability is required to be added in the assessable value of excisable goods cleared.

Analysis:
The issue in this appeal revolved around the treatment of Capital Subsidy received by the appellant industry in the form of Form 37-B vouchers from the State Government of Rajasthan. The main question was whether the amount received as capital subsidy, which was utilized by the appellant to discharge their sales tax liability, should be included in the assessable value of the excisable goods cleared by the appellant.

The Tribunal examined the precedent set by a Division Bench in the case of Shree Cement Ltd. Vs. CCE, where it was established that the VAT liability discharged using investment subsidy vouchers like Form 37B cannot be considered as VAT not paid for the purpose of valuation under Section 4 of the Central Excise Act, 1944. The State Government, instead of disbursing the subsidy in cash or cheque, issued Form 37B vouchers specifically for payment of sales tax liability. The vouchers were considered equivalent to cash but restricted for VAT/Sales Tax payment in subsequent periods. It was clarified that the capital investment subsidy received in this manner cannot be included in the assessable value for duty calculation under Section 4 of the Central Excise Act.

Consequently, the Tribunal allowed the appeal, setting aside the impugned order. The appellant was granted consequential benefits as per the law. The judgment reaffirmed the principle that capital subsidy utilized for sales tax liability through designated vouchers does not impact the assessable value for excise duty calculation, aligning with the precedent established in the Shree Cement case.

In conclusion, the Tribunal's decision provided clarity on the treatment of capital subsidy utilized for tax liabilities, emphasizing that such subsidies, when disbursed through specific vouchers for tax payment, do not affect the assessable value of goods for excise duty computation under the Central Excise Act.