2018 (4) TMI 1445 - AT - Central Excise

Valuation - inclusion of VAT paid - 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 - the identical issue has already 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.

Summary

Issues:
1. Interpretation of whether subsidies received by the appellant in the form of VAT 37B challans can be considered as VAT actually paid for the purpose of Section 4 of the Central Excise Act, 1944.
2. Determination of whether the VAT liability discharged using subsidy challans should be included in the assessable value of goods manufactured by the appellant.

Analysis:
1. The appeal was filed against an order passed by the Commissioner of Central Taxes (Appeals), Jaipur, involving the appellant's eligibility for subsidies under various schemes of the Rajasthan Government. The Revenue contended that the VAT liability discharged using investment subsidies in form 37B challans cannot be considered as VAT actually paid. The Tribunal referred to a similar case involving Shree Cement Ltd. and highlighted the importance of actual payment of VAT for excise duty benefits under Section 4(3)(d) of the Central Excise Act, post-01/07/2000. The Tribunal differentiated between the decision in Super Synotex India Ltd. and Welspun Corporation Ltd., emphasizing that subsidies received in the form of remission of tax need not be included in the transaction value.

2. The Tribunal noted that the appellant, under the Rajasthan Government's scheme, was required to remit VAT recovered at the time of sale, with a portion refunded as subsidy in form 37B challans. These challans were considered legal payments of tax, akin to cash, usable for VAT payment in subsequent periods. Citing the Welspun Corporation Ltd. case, the Tribunal concluded that inclusion of VAT amounts paid using VAT 37B challans in the assessable value was unjustified. The decision was based on the direct relationship between remission of tax and capital investment, with specific conditions attached to the subsidy scheme, leading to the allowance of the appeal and setting aside of the impugned order.

In conclusion, the judgment delves into the intricacies of subsidy utilization for VAT payments and the impact on the assessable value of goods manufactured by the appellant. By analyzing relevant legal precedents and the specific conditions of the subsidy schemes, the Tribunal determined that the VAT liability discharged through subsidy challans should not be included in the assessable value, aligning with the decision in a similar case and emphasizing the legal validity of using such challans for VAT payment.