2018 (4) TMI 220 - AT - Central Excise

Valuation - includibility of VAT in assessable value - Department is of the view that the amount of interest was received from State Government Scheme, 2003 is includible in the assessable of the goods - Held that - identical issue has come up before the Tribunal in the case of Shree Cement Ltd. vs. CCE, Alwar 2018 (1) TMI 915 - CESTAT NEW DELHI , where it was held 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-assessee.

Summary

Issues:
1. Inclusion of interest received from a State Government scheme in the assessable value of goods for excise duty calculation.

Analysis:
The judgment involves an appeal against an Order-in-Original passed by the Commissioner of Central Excise, Jaipur, concerning the inclusion of interest received under "The Rajasthan Investment Promotion Scheme, 2003" in the assessable value of goods cleared by the appellant, a cement manufacturer. The appellant availed subsidies under the scheme, including wage subsidy and interest subsidy, with the Department contending that the interest amount should be included in the assessable value. The Tribunal referred to a similar case involving Shree Cement Ltd., where it was established that subsidies received by the appellants under the Rajasthan Government's schemes, which are utilized to discharge VAT liabilities, should not be included in the assessable value as they constitute legal payments of tax. The Tribunal distinguished between actual payment of VAT and subsidies utilized for VAT payments, emphasizing that subsidies in the form of Challans are equivalent to cash and constitute legal tax payments. Citing precedents like the Welspun Corporation Ltd. case, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal.

This judgment clarifies the treatment of subsidies received under government schemes for tax purposes, emphasizing that subsidies utilized to discharge tax liabilities should not be considered as part of the assessable value for excise duty calculation. The Tribunal highlighted the legal nature of subsidies in the form of Challans, equating them to cash payments and affirming their validity as legal tax payments. By referencing previous decisions and distinguishing between actual tax payments and subsidies utilized for tax payments, the Tribunal provided a clear rationale for excluding such subsidies from the assessable value, ensuring consistency in tax treatment across similar cases. The judgment underscores the importance of legal clarity and adherence to statutory provisions in determining the assessable value for excise duty calculation, thereby providing guidance on interpreting tax laws in the context of government subsidy schemes.

This judgment serves to protect the rights of taxpayers availing subsidies under government schemes by ensuring that such subsidies are appropriately treated for tax purposes. By upholding the legal validity of subsidies utilized for tax payments and excluding them from the assessable value, the Tribunal safeguards the interests of appellants facing similar disputes regarding the inclusion of subsidies in excise duty calculations. The judgment establishes a precedent for interpreting tax laws in cases involving government subsidy schemes, emphasizing the need to differentiate between subsidies utilized for tax payments and other forms of income to accurately determine the assessable value. Overall, the decision contributes to enhancing tax compliance and fairness in tax assessments by providing clarity on the treatment of subsidies received under investment promotion schemes in excise duty calculations.