2018 (4) TMI 955 - AT - Central Excise

Valuation - includibility - incentive amounts received by the appellant from the Madhya Pradesh Government as part of the scheme for setting up of new industrial units in backward areas - Held that - Since no part of the VAT collected is retained by the appellant such amounts cannot be included in the assessable value. Identical issue decided in the case of Khanna Polyware (P) Ltd. Versus CCE Jabalpur 2018 (3) TMI 177 - CESTAT NEW DELHI where similar issue has come up before the Tribunal in the case of Shri Cement Ltd. V/s Commissioner 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.

Summary

Issues:
1. Non-payment of an amount equivalent to 6% of the value of exempted goods during July 2014 to March 2015.
2. Suo Moto credit of the extra amount paid on account of turnover discount allowed to buyer.
3. CENVAT credit availed at the time of merger of various entities with the appellant in the year 2009.
4. Demand of differential duty by including amount of incentive received on account of capital subsidy.

Issue 1: Non-payment of 6% of the value of exempted goods:
The appellant changed their option regarding payment under Rule 6(3) of the CENVAT Credit Rules, 2004, from 01.07.2014, contrary to Explanation (I) of the rule. The Tribunal upheld the demand for an amount equivalent to 6% for the period July 2014 to March 2015, as the change could only be effective from 01.04.2015.

Issue 2: Suo Moto credit of the extra amount paid on account of turnover discount:
The appellant deposited the excess amount paid due to turnover discount back into their CENVAT account along with interest upon discovery. The Tribunal found the imposition of a full mandatory penalty unjustified, instead restricting the penalty to 15% of the duty amount paid.

Issue 3: CENVAT credit availed during the merger of entities in 2009:
The appellant availed CENVAT credit from unutilized accounts of merged entities without providing necessary documents. Although the amount was reversed along with interest, a penalty was imposed. The Tribunal set aside the penalty as the credit was reversed in full.

Issue 4: Demand of differential duty for incentive received on capital subsidy:
The dispute centered on whether the incentive received by the appellant under a government scheme should be included in the assessable value for duty payment. The Tribunal ruled in favor of the appellant, following precedent that such incentives, linked to VAT/CST collected and returned to the government, should not be included in the assessable value.

In conclusion, the Tribunal disposed of the appeal based on the analysis of each issue, upholding the demand for non-payment of 6% on exempted goods till March 2015, restricting the penalty for turnover discount credit, setting aside penalties for CENVAT credit during merger, and rejecting the demand for differential duty on incentives received under the government scheme.