2018 (1) TMI 915 - AT - Central Excise

Valuation - includibility of VAT in assessabla value - Revenue was of the view that the VAT liability discharged by utilizing the investment subsidy granted in form 37B cannot be considered as VAT actually paid, for the purpose of Section 4 of the Central Excise Act, 1944 - Held that - for the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax. There is no 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 whether subsidy amounts granted under the Rajasthan Investment Promotion Scheme should be included in the assessable value of goods for VAT liability calculation.

Analysis:
The appeals in question dealt with the issue of whether subsidy amounts received by the appellants under the Rajasthan Investment Promotion Scheme should be considered as part of the assessable value of goods for VAT liability calculation. The appellants, having factories in Rajasthan, were entitled to subsidies under various schemes of the Rajasthan Government. The Revenue argued that the VAT liability discharged using subsidy funds cannot be considered as VAT actually paid, leading to a demand for differential duty, interest, and penalties. The main contention was whether the subsidy amounts should be included in the assessable value of goods as per Section 4 of the Central Excise Act, 1944.

The appellant's counsel argued that the VAT paid using subsidy funds through Challan Form 37B should be considered as actual payment of tax. They emphasized that the Rajasthan Government's scheme did not exempt them from paying VAT but required actual payment. Referring to Section 4(3)(d), the counsel contended that deduction of such VAT paid should be allowed, making the impugned orders unsustainable. They cited a Tribunal decision that distinguished a Supreme Court ruling in a similar case.

On the other hand, the Revenue justified their position, citing the Supreme Court's decision in a specific case and arguing that the refunded VAT by the Rajasthan Government should be included in the assessable value. The Tribunal analyzed both arguments and the relevant legal provisions. They noted that the appellants were required to pay VAT initially, with a portion later refunded as subsidy through Challan 37B, which could be used for subsequent VAT payments. The Tribunal referred to a previous case where subsidy amounts were not included in the assessable value, based on the Gujarat VAT Act, 2003.

Ultimately, the Tribunal found that the subsidy amounts received by the appellants should not be included in the assessable value of goods. They relied on the decision in the previous case to conclude that there was no justification for including VAT amounts paid using Challan Form 37B in the assessable value. Consequently, the impugned orders were set aside, and the appeals were allowed.