2018 (2) TMI 1240 - AT - Central Excise

Valuation - includibility - subsidy - 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 CEA 1944 - Held that - it is evident 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. In view of the above Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. The Tribunal in the Welspun Corporation Ltd. 2017 (5) TMI 177 - CESTAT MUMBAI case has concluded that 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:
1. Whether subsidy amounts utilized for VAT liability discharge should be included in assessable value for excise duty calculation.

Analysis:
The case involved an appeal against an Order-in-Original regarding the inclusion of subsidy amounts in the assessable value of goods cleared by the appellants for excise duty calculation. The appellants, operating under Rajasthan Investment Promotion Scheme, were eligible for subsidies upon depositing VAT/CST/SGST with the government. The Revenue contended that utilizing investment subsidies for VAT liability discharge does not constitute actual payment of VAT under Section 4 of the Central Excise Act, leading to a demand for differential duty, interest, and penalties. The crux of the dispute was whether such subsidies should be included in the assessable value. The Tribunal considered the Apex Court's decision in CCE vs. Super Synotex (India) Ltd., emphasizing actual payment of VAT for excise duty benefit.

During arguments, reference was made to the Welspun Corporation Ltd. case where the Tribunal distinguished the Apex Court's decision based on the Gujarat VAT Act, 2003. In that case, subsidies received under a remission of tax scheme were held not to be included in the transaction value. The Tribunal noted that the appellants were required to remit VAT recovered at the time of sale, with a portion refunded as subsidies in Challan 37B, which could only be used for subsequent VAT payments. Such Challans were considered legal tax payments under the Rajasthan Government's scheme, contrary to Revenue's view.

The Tribunal reiterated observations from the Welspun Corporation Ltd. case, emphasizing the direct relation of remission of tax to capital investment in fixed assets. The Tribunal concluded that there was no justification for including VAT amounts paid using VAT 37B Challans in the assessable value. Consequently, the impugned order was set aside, and the appeal was allowed based on previous rulings.